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CPM Assignment Individual

Topic: Performance Base Management (PBM) & Value Based Management (VBM)
Selected Company: NDTV Convergence Ltd
Industry Type: Digital Media

Submitted By: Debashis Ganguly

Roll Number: EPGP011

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Performance management is the practice of actively using performance data to

improve an organizations performance. It involves strategic use of performance
measures and standards to establish performance targets and goals.
The performance management cycle refers to the whole set of management processes
that starts with strategy formulation and is followed by alignment of corporate objectives
and measures across levels. This is followed by performance analysis, reviews and
based on the resultant business insights, strategy refinement measures are adopted.

Performance management measures within evolving Indian Media:

Media as an industry falls under the ambit of the service sector and is generally
associated and recognized for the sectoral traits of creativity, communication and
people to people skills. The sustainability of the industry depends much on the feasibility
of free speech in the working environment and to that extent the democratic fabric of
India has contributed significantly to the growth of a thriving media ecosystem which
plays an important role in shaping and communicating the aspirations and concerns of
the nation. There are various format plays within the sector and these dominant
platforms being:
1.
2.
3.
4.
5.
6.

Print Newspapers and Magazines

Television
Radio
Outdoor
Cinema
And Digital Media

As the industry moved along the industry life cycle, it has witnessed significant infusion
of technology and that has dramatically altered the resource views and resource
allocations for the participant firms. As a result, performance measurement across this
sector has undergone significant changes in line with the evolving business strategy. In
order to achieve continued viability in business operations, many of the traditional media

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houses has been embracing digital media as they identified digital to be the future
growth driver. The impact of this strategic shift meant many of these traditional players
becoming multi-media conglomerates with business interests splitting across various
domains simultaneously. Managing performance measurements in such a state of flux
poses complex organizational challenge and firms are thereby adopting separate
measures for individual group businesses to align the divisional focus with the specific
and unique environments within which they continue to serve.
In the above context, the emerging digital media is evolving into a unique media ecosystem and that is forcing firms to adopt high degree of flexibility and creative
intelligence in terms of identifying and institutionalizing relevant performance appraisal
objectives and measurement parameters. The attempt of this assignment is to identify
one such company, namely, NDTV Convergence Ltd which is the digital arm of the
NDTV Group and to understand the approach of performance measure as instituted by
the company over the years.

NDTV Ltd and NDTV Convergence Ltd:Vision To be the most trusted global Indian media brand
Mission To serve the society through broadcasting and programming excellence in
honest, unbiased, fearless journalism
In keeping with the vision to be a contemporary and globally relevant media brand,
NDTV extended its services into digital play and thus emerged the digital wing of the
group- NDTV Convergence Ltd, which controls all NDTV websites, including
NDTV.com, the number one News website and the fifth most popular portal in India.
NDTV Convergence is now expanding into TV and online synergies with the launch of
NDTV Active, Indias first full service, user aware mobile channel.
The digital business primarily constituted its business model based on digital advertising
revenue monetization and this led to a divisional structure with dedicated focus on
creating and maintaining digital content infrastructure backed by a robust IT backend.

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The business strategy of the group was to operate in the premium branded content
space of general news, business and lifestyle segments. This differentiated play was
adequately backed with premium pricing policy with the aim to generate high
profitability.
Thus the major thrust areas of the group were delineated in the following terms:
Defining Task Objectives:
1. High operational profitability
2. High quality content mix in text, video and mobile app formats (IOS and Android
operating systems)
3. In house direct sales team with the responsibility of generating premium display
revenue (pricing structure excluded the option of performance based pricing
model which is otherwise one of the dominant pricing formats in the industry)
4. Partnership with specialist teams on minimum revenue guarantee model
5. Ensuring low content development cost through freelance outsourcing as well as
leveraging the in-house content (videos and transcripts) from flagship television
business

Alignment and Execution Planning:

With the above set of strategic value drivers in place, the company then
communicates the corporate strategy broadly to the two business sub-units namely
-Advertising and mobile value-added services (or VAS) and goes about defining the
annual revenue targets and the measures to quantify and implement the operational
plans for each of the units. That exercise is jointly accomplished through
involvement of the business heads of each of the verticals. Key strategic initiatives
are identified basis the target in hand and resource planning is accordingly done for
effective execution of the stretched targets.

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Measure and Analysis:

Divisional targets are next set at individual region levels and then further down to
individual executive levels. Sales opportunities are mapped against operational
forecasts and product level forecasts and all of these data are collated and rolled-up
to arrive at the macro corporate level business forecasts.

Review and Planning:

NDTV Convergence being a digital play, it has to continuously scan the external
business environment to understand the merging opportunities and options for
scaling up. Thus by the very design of the organization, attempts have been made to
embrace dynamic performance management approach. Performance reviews are
therefore done quarter on quarter basis. Reviews and business insights are derived
on a continuous basis both on financial and operational basis and based on the
emerging trends prescriptive actions are implemented for necessary course
corrections.
Thus the entire management architecture conforms to the classical CPM approach
to bring about systematic and integrated improvements across the performance
management cycle. The entire architecture is modeled on Balanced Scorecard
methodology wherein accountability is fixed and quantified at individual levels across
the entire organization matrix.

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Value Based Management:

The value of a company is determined by its discounted future cash flows. Value is
created only when companies invest capital at returns that exceed the cost of that
capital. VBM extends these concepts by focusing on how companies use them to
make both major strategic and everyday operating decisions. Properly executed, it is
an approach to management that aligns a company's overall aspirations, analytical
techniques, and management processes to focus management decision making on
the key drivers of value. (Source: McKinsey&Company)
The value mindset
The first step in VBM is embracing value maximization as the ultimate financial
objective for a company. Traditional financial performance measures, such as
earnings or earnings growth, are not always good proxies for value creation. To
focus more directly on creating value, companies should set goals in terms of
discounted cash flow value, the most direct measure of value creation. Such targets

targets.

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also need to be translated into shorter-term, more objective financial performance

Companies also need nonfinancial goalsgoals concerning customer satisfaction,

product innovation, and employee satisfaction, for exampleto inspire and guide the
entire organization. Such objectives do not contradict value maximization. On the
contrary, the most prosperous companies are usually the ones that excel in precisely
these areas. Nonfinancial goals must, however, be carefully considered in light of a
company's financial circumstances.
Objectives must also be tailored to the different levels within an organization. For the
head of a business unit, the objective may be explicit value creation measured in
financial terms. A functional manager's goals could be expressed in terms of
customer service, market share, product quality, or productivity. A manufacturing
manager might focus on cost per unit, cycle time, or defect rate. In product
development, the issues might be the time it takes to develop a new product, the
number of products developed, and their performance compared with the
competition.
Exhibit 2

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Exhibit 2 compares various measures of corporate performance along two

dimensions: the need to take a long-term view and the need to manage the
company's balance sheet. Only discounted cash flow valuation handles both
adequately. Companies that focus on this year's net income or on return on sales
are myopic and may overlook major balance sheet opportunities, such as working
capital improvement or capital expenditure efficiency.

Finding Value Drivers: The critical step

An important part of VBM is a deep understanding of the performance variables that
will actually create the value of the businessthe key value drivers. Such an
understanding is essential because an organization cannot act directly on value. It
has to act on things it can influencecustomer satisfaction, cost, capital
expenditures, and so on. Moreover, it is through these drivers of value that senior
management learns to understand the rest of the organization and to establish a
dialogue about what it expects to be accomplished.
A value driver is any variable that affects the value of the company. To be useful,
however, value drivers need to be organized so that managers can identify which
have the greatest impact on value and assign responsibility for them to individuals
who can help the organization meet its targets.
Value drivers must be defined at a level of detail consistent with the decision
variables that are directly under the control of line management. Generic value
drivers, such as sales growth, operating margins, and capital turns, might apply to
most business units, but they lack specificity and cannot be used well at the grass
roots level.

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Exhibit 3

Exhibit 3 shows that value drivers can be useful at three levels: generic, where
operating margins and invested capital are combined to compute ROIC; business
unit, where variables such as customer mix are particularly relevant; and grass
roots, where value drivers are precisely defined and tied to specific decisions that
front-line managers have under their control.

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VBM practiced at NDTV Convergence Ltd:

Reflecting back on the constructs of the VBM approach and the practice adopted at
NDTV Convergence, the findings throw up an interesting reading. Major highlights of
the company practices are summarized below:1. Convergence is the evolving digital play for the group, which has been identified
to be a robust growth engine for the future.
2. The measures of operational and financial efficiency was set against achieving Yo-Y profitability and growth in positive cash flow from the operation
3.

The effectiveness of the VBM model is aptly captured below:- (Source: Fin Results)

NDTV Convergence Ltd

A. Statement of Profit & Loss
Income
Revenue from operations
Other income
Total revenue (I)

(in Rs.million)
Year ended
Year ended
Mar 31, 2015
Mar 31, 2015
1003.29
62.3
1065.59

642.67
80.51
723.18

Expenses
Cost of Services
Employee Benefit Expense
Operations & Administrative Expenses
Marketing, Distribution and Promotion
Expenses
Depreciation and Amortization Expense
Finance Costs
Total (II)

327.47
271.57
131.77

220.45
170.22
192.22

111.68
10.46
10.16
863.11

19.48
9.35
2.02
613.74

Earnings before exceptional and extra

ordinary items and tax (I) - (II)

202.48

109.44

60.91
26.65
87.56

63.65
-0.16
-27.25
36.24

Tax expenses
Current tax
Tax on earlier years
Deferred tax
Total tax expense

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114.92

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Profit for the year

NDTV Convergence Ltd

B. Components of cash and cash
equivalents

Cash on hand
With banks on current account
on deposit account
Total cash and cash equivalent

As at
March 31,
201 201
5
4
0.02 0.01
5.86 0.31
20.0 20.0
0
0
25.
20.
88
32

NDTV Convergence Ltd

C. Reserves and Surplus

(in Rs.
Million)
As at
March 31,
201
201
5
4

Securities premium account

Opening Balance
Closing Balance

236.
35
236.
35

236.
35
236.
35

33.8
7
11.5
4
22.3
3

33.8
7
30.6
6

Employee share purchase outstanding

Compensation for options granted till date
Less: deferred employee stock compensaion
Closing Balance
Surplus/ (deficit) in the Statement of
Profit and Loss

3.21

73.2

Total reserves and surplus

437.
35

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Balance as at the end of the year

63.7
6
114.
91
178.
67

Profit for the year

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Balance as at the beginning of the year

-9.44
73.2
63.7
6
303.
32