Running header: FINANCIAL PERFORMANCE OF THERMO FISHER SCIENTIFIC
Strategicdevelopment plan enables leaders and managers to addressorganizational, financial, managerial and marketing opportunities andthreats. The plan is aimed at improving the current performance ofthe organization. Therefore, to formulate a strategic plan, anorganization needs to assess its current status and determine whetherare performing well or poorly. The root causes and their appropriateinterventions can be adopted to ensure financial health. This paperevaluates the financial status of Thermo Fisher Scientific andproposes changes and leadership/management decisions the companyneeds to make to improve their performance.
ThermoFisher Scientific is an American multinational company that deals indesigning and development of biotechnology products. The company wasfounded in 2006 following the merger of two companies, ThermoElectron and Fisher Scientific. Since its creation, Thermo FisherScientific has performed several acquisition transactions that havecontributed to its growth over the years.
Profitabilityand liquidity ratios are used to examine the financial stability ofThermo Fisher Scientific. The gross margins of the company from 2012to 2015 are 42%, 42%, 44%, and 46% respectively (NASDAQ). Theincrease in the ratio over the years indicates a stable managementand leadership of the company. According to Karadag H. (2015), thegross margin of above 40% is a sign of financial health. The profitmargin and operating margin of the company have also been increasingduring the four-year period. The profit margins of Thermo FisherScientific from 2012 to 2015 are 9%, 10%, 11%, and 12% respectively(NASDAQ).
Liquidityratios provide insights about the capability of an organization tosettle its obligations. The current ratio measures the ability of afirm to meet their short-term obligations. The current ratios ofThermo Fisher Scientific from 2012 to 2015 are 2.31, 3.16, 1.22 and1.38 respectively (NASDAQ). Although the company at the presentmoment can settle its current liabilities with its current assets,its ability has diminished during the period. Karadag, H. (2015)states that a healthy company is expected to have a current ratio of1.5-2. Based on the data of Thermo Fisher Scientific, the company’sability to meet its long-term obligations as well as access creditservice is limited.
Quickratio excludes inventories. Between 2012 and 2015 Thermo FisherScientific has had quick ratios of 1.62, 2.68, 0.87 and 0.9respectively. The cash ratios of the company during this period are39%, 187%, 25% and 11% respectively (NASDAQ). The relatively low anddecreasing liquidity ratios of the company indicate inefficiencies inthe management of cash.
TheThermo Fisher Scientific has shown an average financial performance.To propel the company’s earnings even further, there are necessaryperformance management strategies that the management can adopt.Bonney S. (2015) proposes business excellence, informationcommunication technology, performance appraisal strategy andperformance aligned incentive strategies.
Toachieve business excellence in a firm, benchmarking should beadopted. It is a business tool to realize business excellence wherethe organization measures and compares the services it offers versusthe best practices in the same industry. In the context of ThermoFisher Scientific, its managers can benchmark their businessprocesses towards innovation in comparison to its competitors.Knowledge and effective research are also vital for the improvementof financial performance.
Secondly,an appraisal helps improves financial performance. In this strategy,the management designs a performance appraisal system for theworkers. Targets are set, monitored and evaluated at appropriatetimes. Using information communication technology assists in theappraisal process. Each department comes up with its strategiesrelevant to the overall organizational goal at the beginning of theyear, drafts the quarterly or annual targets after taking intoaccount all the requirements needed. The quarterly evaluation assistsin the annual financial report and thus helps in improving financialperformance (Bonney, S., 2015).
Thirdly,incorporating an incentives system in the firm is essential inbettering financial outcomes. An incentive strategy that is alignedto the performance is a way of rewarding employees based on theoutcomes of their work. First, targets are set for each department,managers and down to the workers. The bonuses motivate employees toput extra efforts resulting in the improvement of financialperformance.
Additionally,Bonney S. (2015) posits that information communication technology isa financial performance improvement strategy. The technologicaltransformation helps managers to make a decision easily and faster byusing avenues like teleconferencing. All the costs that could beincurred in traveling and accommodation expenses for anorganizational meeting are saved through teleconferencing. Further,data is easily received, stored and retrieved. Sharing the same datais also made simpler by the technological advancement. The managementof Thermo Fisher Scientific should install a state-of-the-arttechnology in their offices will assist in their overall financialperformance. An existence of software enabling departmental as wellas the overall database will help managers monitor, evaluate andreport company activities effectively.
Informationcommunication technology assists in the creation of the culture ofsharing among workers and the management, which can be extended tothe customers. Easy access to information improves accountability andtransparency. Customers and other stakeholders would, in turn,improve their trust in the activities of the firm, hence investingmore which in turn improves the financial performance.
Leadership and management styles
Successfulcompanies manage their businesses differently, led by unique leaders,no one-size-fits-all types. For more optimal choices, disruptiveleadership style would be applicable. This is where the leaderbecomes bold in doing the unexpected things to spark positivetransformations in business. Similarly, improving businesses call forcollaborative management. It is about going against the traditionalstyles of ordering people around the workplace. Teams and workgroupsare built to storm over ideas as well as coming up with uniqueinsights. Such discussions lead to new product development. Thelong-term outcomes are improved transparency and exceptionalperformance and growth (Crossan, M et al, 2015)
Charismaticleadership has a big role to play in management. Charisma assists infree engagement with employees, customers, and stakeholders at large.Charismatic leaders draw others to their visions through persuasionand effective communication. Their passion for the vision attractsco-workers to join their cause. This kind of leaders is not the sameas the loudest one who does not keep to their desks. One can becharismatic and also described as quiet. They value work rather thanfanfare, action to talking and always motivating employees to thinkbefore acting then motivates them (Bonney S., 2015)
Employees are the core of the productivity in a firm. People-centricleadership ensures that employees are put first. This is because allthe huge profits realized by the organization are due to thecontinued inputs of workers. Therefore, leaders who pay livable wagesaccompanied with better bonuses in the forms of motivation steer thefirm forwards. Employees, in turn, puts all their efforts theirduties with little or no supervision.
Makingideal choices needs transformational leadership style. This styleputs concerted efforts in intellectual stimulation, idealizedinfluence an individual worker consideration. It also makes effortsin the inspirational motivation of employees and customers. What ismore, transformational management adheres to rules and norms of theorganization. Leaders apply the norms create an organizationalculture that is easily followed across the board. Furthermore, thisleadership styles assures cultural competence and succession planning(Crossan, M., 2015).
Bonney, S. (2015). Strategies to Improve the Financial Performance ofState-Owned Enterprises in Ghana.
Crossan, M., Seijts, G., & Gandz, J. (2015). Developingleadership character. Routledge.
Karadag, H. (2015). Strategic financial management for smalland medium sized companies. Bingley, Emerald
NASDAQ, Thermo Fisher Scientific Inc. (TMO) Key Financial Ratios,retrieved fromhttp://www.nasdaq.com/symbol/tmo/financials?query=ratioson October 9, 2016