Ch 7
A bullet chart (as show in exhibit 7-2) uses a reference line to show actual performance relative to a benchmark. What advantage does a bullet graph have over a gauge, such as a fan with red, yellow, and green zones and a needle pointing to the current value?
- A bullet graph uses a small amount of space to evaluate a large number of metrics. - Gauges are more visually engaging and easier to understand, but waste a lot of space.
How often would you need to see the KPI of Waste Recycling Rate to know if you are making progress? Any different for the KPI of ROA?
- One determinant will be how often the data get updated in the system, and the second determinant is how often the data will be considered by those looking at the data. - Whichever of those two determinants takes longer is probably correct frequency for updating KPIs
How can management identify useful KPIs? How could Data Analytics help with that?
- The KPIs that are the most helpful are those that are consistent with the company's strategy and measure how well the company is doing in meeting its goals. - Data Analytics will help gather and report the necessary data to report on the KPIs. The data analytics IMPACT model introduced in Chapter 1 from identifying the quest to tracking outcomes- will be helpful in getting the necessary data.
Variance Analysis
- allows managers to evaluate KPIS and how far they vary from the expected outcome - can ID root causes of variance and performance needed to elim variance
If a manager is trying to decide whether to discontinue a product or division, he or she would look at the contribution margin of that object. What are some example of relevant data that would be useful in this calculation? Irrelevant data?
- contribution margin includes the revenues and variable costs that are traceable to that division or product. That data would be relevant. - Other relevant data may be the types of customers and sentiment toward the product, products that are sold in conjunction with that product, or market size. Shared or allocated costs.
Management decisions rely on interpretation of _________________ and ___________ costs
- cost classification - relevant costs
Like any other performance metric, how does a KPI help managers
- keep track of performance and strategic objectives - KPIs stand out as the most important
What do regression and other predictive techniques help managers identify?
- outliers - anomalies - poor performers - allows them to act accordingly - can be combined with sensitivity or what if analyses to predict a wide range of values
4 components of the balanced score card
-financial (or stewardship)-customer (or stakeholder)-internal process-organization capacity (learning and growth)-measures in each category affect other categories and all 4 should be directly related to the strategic objectives of an organization
balanced scorecard
-iteration of a digital dashboard -created by Robert S Kaplan and David P Norton in 1966 -to help companies turn their strategic goals into action by identifying the most important metrics to measure, as well as identifying target goals to compare metrics against
In addition to working through the same ETL process, there are two other questions to consider when obtaining data and evaluating their quality
1. How often do the data get updated in the system2. Additionally, how often do you need to see updated data?
Financial Performance KPIs
1. Net Profit 2. Net Profit Margin 3. Gross Profit Margin 4. Operating Profit Margin 5. EBITDA 6. Revenue Growth Rate 7. Total Shareholder Return (TSR) 8. Economic Value Added (EVA) 9. Return on Investment (ROI) 10. Return on Capital Employed (ROCE) 11. Return on Assets (ROA) 12. Return on Equity (ROE) 13. Debt-to-Equity (D/E) Ratio 14. Cash Conversion Cycle (CCC) 15. Working Capital Ratio 16. Operating Expense Ratio (OER) 17. CAPEX to Sales Ratio 18. Price Earnings Ratio (P/E Ratio)
Some questions that would be helpful in determining how the dashboard could be refined are the following
1. Which metrics are you using most frequently to help you make decisions? 2. Are you downloading the data to do any additional analysis after working with the dashboard, and if so, can the dashbaord be improved to save those extra steps? 3. Are there any metrics that you do not use? If so, why aren't they helpful? 4. Are there any metrics that should be available on the dashboard to help you with decision making?
Customer KPIs
19. Net Promoter Score (NPS) 20. Customer Retention Rate 21. Customer Satisfaction Index 22. Customer Profitability Score 23. Customer Lifetime Value 24. Customer Turnover Rate 25. Customer Engagement 26. Customer Complaints
Marketing KPIs
27. Market Growth Rate 28. Market Share 29. Brand Equity 30. Cost per Lead 31. Conversion Rate 32. Search Engine Rankings (by keyword) and click-through rate 33. Page Views and Bounce Rate 34. Customer Online Engagement Level 35. Online Share of Voice (OSOV) 36. Social Networking Footprint 37. Klout Score
In balanced score card, each component should focus on how many KPIs
3 or 4
Operational KPIs
38. Six Sigma Level 39. Capacity Utilisation Rate (CUR) 40. Process Waste Level 41. Order Fulfilment Cycle Time 42. Delivery In Full, On Time (DIFOT) Rate 43. Inventory Shrinkage Rate (ISR) 44. Project Schedule Variance (PSV) 45. Project Cost Variance (PCV) 46. Earned Value (EV) Metric 47. Innovation Pipeline Strength (IPS) 48. Return on Innovation Investment (ROI2) 49. Time to Market 50. First Pass Yield (FPY) 51. Rework Level 52. Quality Index 53. Overall Equipment Effectiveness (OEE) 54. Process or Machine Downtime Level 55. First Contact Resolution (FCR)
Employee Performance KPIs
56. Human Capital Value Added (HCVA) 57. Revenue Per Employee 58. Employee Satisfaction Index 59. Employee Engagement Level 60. Staff Advocacy Score 61. Employee Churn Rate 62. Average Employee Tenure 63. Absenteeism Bradford Factor 64. 360-Degree Feedback Score 65. Salary Competitiveness Ratio (SCR) 66. Time to Hire 67. Training Return on Investment
Environmental and Social Sustainability KPIs
68. Carbon Footprint 69. Water Footprint 70. Energy Consumption 71. Saving Levels Due to Conservation and Improvement Efforts 72. Supply Chain Miles 73. Waste Reduction Rate 74. Waste Recycling Rate 75. Product Recycling Rate
Bernard Marr identified how many KPIs
75
What would you consider to be marketing KPIs? A) Conversion rate B) Six sigma level C) Employee churn rate D) Customer engagement
A) Conversion rate
What is defined as any calculation measuring how an organization is performing, particularly when that measure is compared to a baseline? A) KPI B) Performance metric C) Digital dashboard D) Balanced scorecard
B) Performance metric
Why are digital dashboards for KPIs an effective way to address and refine results, as well as communicate insights and track outcomes?
By identifying the KPs that are the most important to corporate strategy and finding the necessary data to support them and then reporting on them in a digital dashboard, decision makers will have the necessary information to make effective decisions and track outcomes
What is defined as a interactive report showing the most important metrics to help users understand how a company or an organization is performing? A) KPI B) Performance metric C) Digital dashboard D) Balanced scorecard
C) Digital dashboard
On a balanced scorecard, which is not included as a component? A) Financial performance B) Customer/stakeholder C) Order process D) Organizational capacity
D) Organizational capacity
According to the text, which of these are not helpful in refining a dashboard? A) Which metric are you using most frequently to help you make decisions? B) Are you downloading data to do any additional analysis after working with the dashboard, and if so, can the dashboard be improved to save those extra steps? C) Are there any metrics that you do not use? If so, why aren't they helpful? D) Which data are the easiest to access or least costly to collect?
D) Which data are the easiest to access or at least costly to collect?
To illustrate what KPIs emphasize in "what gets measured, gets done," Walmart has a goal of a "zero waste future." How does reporting Walmart's waste recycling rate help the organization figure out if it is getting close to its goal? Do you believe it helps the organization accomplish its goals?
If a waste reduction is an important goal for Walmart, having a KPI and, potentially, a digital dashboard that reports how well the organization is doing will likely be useful in helping it accomplish its goal. Using a digital dashboard helps an organization to see if, indeed, it is making progress.
measures
KPIs that show how well the organization is doing at meeting its objective
T/F: Creating a balanced scorecard or any type of digital dashboard to present KPIs for decision making follows the IMPACT model
T
key performance indicator
a particular type or performance metric that an org deems most important and influential on decision making
What would you consider to be an Operational KPI? A) Inventory shrinkage rate B) Brand equity C) CAPEX to sales ratio D) Revenue per employee
a) inventory shrinkage rate
What would you consider to be Financial Performance KPIs? A) Total shareholder return B) Customer Profitability score C) Market growth rate D) Klout score
a) total shareholder return
Once the dashboard is in use, what is the next step?
an active communication plan should be implemented to ensure that the dashboard's metrics are meeting the needs of the business and the users
performance metrics
any calculation measuring how an organization is performing, particularly when that measure is compared to a baseline
Where are the data for calculating KPIs stored
company's EPS or AIS system
What is the most effective way to communicate results of data analysis project
data visualization
one of the most common ways to communicate a variety of KPIs
digital dashboard
real-time data
help with planning, management, and controlling of firm resources
Where should the digital dashboard containing the KPIs for data analysis be created
in a data visualization tool, such as Excel or Tableau
If the dashboard is not following the strategy map template, the most important KPIs should be placed where?
in the top left corner, as our eyes are most naturally drawn to that part of any pay that we are reading
digital dashboard
interactive report showing the most important metrics to help users understand how a company or an organization is performing. -used to affect decision making and action
One of the primary areas where data analytics helps the decision making process
management accounting
cost behavior
managers must also understand what is driving the costs and profits to plan for the future and apply to budges or use as input for lean accounting processes
why is knowing relevant costs important?
most other mgmt decisions rely on the interpretation of cost classification and which costs are relevant or not
when you evaluate actual production volume and total costs to estimate the mixed cost line equation, this is an example of
predictive analytics
Managers rely on _______ to evaluate the effectiveness of their strategies
real time data
targets
should be achievable goals toward which to move the metric
initiatives
should be the actions that an organization can take to move its specified metrics in the direction of their stated target goals
objectives should be aligned with
the strategic objectives of an organization
what is the purpose of creating a digital dashboard
to communicate how the organization is performing so decision makers cam improve their judgement and decisions and so workers can understand where to place their priority in their day-to-day jobs and projects
In managerial accounting, managers rely on diagnostic analytics for...
to compare those results to a benchmark
In managerial accounting, managers rely on descriptive analytics for...
to compute the results of the initiative
In managerial accounting, managers rely on prescriptive analytics for...
to guide the controlling process
In managerial accounting, managers rely on predictive analytics for...
to plan future periods
when managers compare actual results to budgeted results, this is an example of
variance analysis
a proper growth strategy considers
what a firm does well and how it achieves it
