Chapter 7- Managerial analytics

One of the most common ways to communicate a variety of KPIs is through a __________ _____________.

digital dashboard.

Once the measures have been determined, the data that are necessary to showcase those measures need to be identified. You are able to do with through the ETL (extract, transform, and load) process. What are 2 other questions you should consider when obtaining data & evaluating their quality?

-How often do the data get updated in the system? This will help you be aware of how up-to-date your metrics are so that you interpret the changes over time appropriately. - how often do you need to see updated data? If the data in the system are updated on a near-real-time basis, it may not be necessary for you to have new updates pushed to your scorecard as frequently. For example, if your team will assess their progress only in a once-a-week meeting, there is no need to have a constantly updating scorecard

Managers rely on a combination of: descriptive analytics to ?, diagnostic analytics to ?, predictive analytics to , prescriptive analytics to?

1. compute the results of an initiative 2. compare those results to a benchmark (such as a budget) 3. plan for future periods 4. guide the controlling process.

True or False? Every performance metric is a KPI?

False! not every performance metric is a KPI- but every KPI is a specific type of performance metric

What are some Financial Performance KPIs?

Net Profit Net Profit Margin Gross Profit Margin Operating Profit Margin EBITDA Revenue Growth Rate Total Shareholder Return (TSR) Economic Value Added (EVA) Return on Investment (ROI) Return on Capital Employed (ROCE) Return on Assets (ROA) Return on Equity (ROE) Debt-to-Equity (D/E) Ratio Cash Conversion Cycle (CCC) Working Capital Ratio Operating Expense Ratio (OER) CAPEX to Sales Ratio Price-to-Earnings Ratio (P/E Ratio)

What are KPIs that measure customers?

Net Promoter Score (NPS) Customer Retention Rate Customer Satisfaction Index Customer Profitability Score Customer Lifetime Value Customer Turnover Rate Customer Engagement Customer Complaints

What is this an example of? Managers evaluate mixed costs to predict the portion of fixed and variable costs for a given period. Predictive analytics, such as regression analysis, might evaluate actual production volume and total costs to estimate the mixed cost line equation

Regression analysis of mixed cost to show the cost behavior

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 examples of relevant data that would be useful in this calculation? Irrelevant data?

Relevant data: net sales, variable costs, types of customers & sentiment toward the product, products that are sold in conjunction with product & market share Irrelevant data: shared or allocated costs

What are key performance indicators (KPIs)?

The quantifiable metrics a company uses to evaluate progress toward critical success factors

True or False? The measures of each category of the balanced scorecard affects other categories & all four should be directly related to the strategic objectives of an organization.

True

What does a Variance analysis allow managers to do with KPIs?

allows managers to evaluate the KPIs and how far they vary from the expected outcome.

What does KPI stand for? a. Key performance index b. Key performance indicator c. Key paired index d. Key paired indicator

b. Key performance indicator

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

On a Balanced Scorecard, which is not included as a component? a. Financial Performance b. Customer/Stakeholder c. Internal Process d. Employee Capacity

d. Employee Capacity

What are the four components that the balanced scorecard is comprised of?

financial (or stewardship), customer (or stakeholder), internal process, and organizational capacity (or learning and growth).

One digital dashboard is the balanced scorecard. How does a Balanced Scorecard help companies?

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.

For each of the four components, _____________,______________,_______________,&___________ are identified.

objectives, measures, targets, and initiatives

there is always a trade-off between the cost of collecting that information and the incremental value of the analysis. Be careful not to include the _________________________________________while considering the opportunity cost of not utilizing data to make profitable business decisions.

sunk cost of data that has already been collected

How often are dashboards monitored?

tend to be monitored on a daily (or even more frequent) basis, communication with all of the users is imperative to ensure that the identified metrics are appropriate and useful.

Some questions that would be helpful in determining how the dashboard could be refined are the following:

-Which metric are you using most frequently to help you make decisions? -Are you downloading the data to do any additional analysis after working with the dashboard, and if so, can the dashboard be improved to save those extra steps? -Are there any metrics that you do not use? If so, why aren't they helpful? -Are there any metrics that should be available on the dashboard to help you with decision making?

In a balanced scorecard, each component should focus on how many KPIs?

3 or 4

What advantages 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.

Specifically for digital dashboards, the format of your dashboard can follow the pattern of a?

Balanced Scorecard with a strategy map, or it can take on a different format

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 KPIs that are 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.

Why do managers need to understand cost behavior?

By understanding what is driving the costs & profits for the future and apply to budgets or use as an input for lean accounting processes

How do KPIs help the organization prepare and carry out its goal of being the "first in and last out"?

By using Data analytics to refine its strategy & assign measurable performance metrics to their company goals, companies can feel confident that its everyday activities were linked to measurable goals that would help the organization reach its goals & maintain a strong positive reputation & impact through its service

What are KPIs that measure environmental & Social Sustainability?

Carbon Footprint Water Footprint Energy Consumption Saving Levels Due to Conservation and Improvement Efforts Supply Chain Miles Waste Reduction Rate Waste Recycling Rate Product Recycling Rate

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 closer to its goal? Do you believe it helps the organization accomplish its goals?

Helps by seeing how far away they are from achieving a zero waste future and by using KPIs, people are more inclined to focus their work & their project on initiatives that are being paid attention to & measured- so yes I do believe that KPIs help an organization accomplish its goals

What are KPIs that measure employees' performance?

Human Capital Value Added (HCVA) Revenue per Employee Employee Satisfaction Index Employee Engagement Level Staff Advocacy Score Employee Churn Rate Average Employee Tenure Absenteeism Bradford Factor 360-Degree Feedback Score Salary Competitiveness Ratio (SCR) Time to Hire Training Return on Investment

How can management identify useful KPIs? How could Data Analytics help with that?

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 question to tracking outcomes—will be helpful in getting the necessary data.

What are KPIs that measure marketing?

Market Growth Rate Market Share Brand Equity Cost per Lead Conversion Rate Search Engine Rankings (by keyword) and Click-Through Rate Page Views and Bounce Rate Customer Online Engagement Level Online Share of Voice (OSOV) Social Networking Footprint Klout Score

If you have multiple audiences who use dashboards can you use the same dashboard for everyone?

No! If there are multiple audiences who use dashboards, then either different dashboards should be created, or the dashboard should provide different views and ways to filter the information so users can customize their experience and see exactly the metrics they need for decision making and monitoring.

Do the four components interact to answer the same type of questions?

No, the four components interact to answer different types of questions and meet different strategic goals is critical when it comes to identifying the right measures to include in the dashboard, as well as using those measures to help with decision making. Creating a Balanced Scorecard or any type of digital dashboard to present KPIs for decision making follows the IMPACT model.

What are some Operational KPIs?

Six Sigma Level Capacity Utilization Rate (CUR) Process Waste Level Order Fulfillment Cycle Time Delivery in Full, on Time (DIFOT) Rate Inventory Shrinkage Rate (ISR) Project Schedule Variance (PSV) Project Cost Variance (PCV) Earned Value (EV) Metric Innovation Pipeline Strength (IPS) Return on Innovation Investment (ROI2) Time to Market First-Pass Yield (FPY) Rework Level Quality Index Overall Equipment Effectiveness (OEE) Process or Machine Downtime Level First Contact Resolution (FCR)

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?

The frequency of updating KPIs is always a good question. 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.

What is this an example of? Managers compare actual results to budgeted results to determine whether a variance is favorable or unfavorable. The ability to use these types of bullet charts to not only identify the benchmark, but also to see the relative distance from the goal helps managers identify root causes of the variance (e.g., the price we pay for a raw material or the increased volume of sales) and drill-down to determine the good performance to replicate and the poor performance to eliminate.

Variance analysis

Can certain objectives relate to other objectives in the Balanced Scorecard?

Yes, for example- if the organization increases process efficiency (in the internal process component row), that should help with the objective of lowering cost in the financial component row.

What would you consider to be marketing KPIs? a. Conversion Rate b. Six Sigma Level c. Employee Churn Rate d. Time to Market

a. Conversion Rate

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

Digital dashboards provide interesting information, but their value is maximized when the metrics provided on the dashboard are used to _________________________________.

affect decision making and action.

The adage "what gets measured, gets done" shows the motivation behind ?

aligning strategy statements with KPIs—people are more inclined to focus their work and their projects on initiatives that are being paid attention to and measured.

What are Performance metrics?

any number used to measure performance at a company

What is defined as an 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

c. Order Process

The most important KPIs should be placed in the ________________ corner of the page even if we are not following a strategy map template. a. bottom right b. bottom left c. top left d. top right

c. top left

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 the 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 least costly to collect?

While the data for calculating KPIs are likely stored in the company's enterprise system or accounting information system, the digital dashboard containing the KPIs for data analysis should be created in a?

data visualization tool, such as Excel or Tableau.

the most effective way to communicate the results of any data analysis project is through?

data visualization.

Just like any performance metric, a KPI should help managers keep track of performance and strategic objectives, but the KPIs are performance metrics that stand out as the most important—that is, "key" metrics that influence decision making and strategy. Nearly every organization can use data to create the same performance metrics (although, of course, with different results), but it is dependent upon?

each organization's particular strategy which performance metrics that organization would deem to be a KPI.

targets should be achievable _____________________________________________.

goals toward which to move the metric.

What is a digital dashboard?

interactive report showing the most important metrics to help users understand how a company or an organization is performing.

measures are the KPIs that show how well the organization is doing at meeting its?

its objective

Initiatives should be the actions that an organization can take to move its specified metrics in the direction of their?

of their stated target goal.

Regression and other predictive techniques help managers identify ___________,____________&______________so they can act accordingly. They also rely on more observations so the prediction is much more accurate than other rudimentary accounting calculations, such as the High-Low method. These same trend analyses inform the master budget from sales to cash and can be combined with sensitivity or what-if analyses to predict a range of values.

outliers, anomalies, and poor performers

Without tracking performance and measuring results, the strategy is only?

symbolic.

Once the dashboard is in use, an active communication plan should be implemented to ensure that the dashboard's metrics are?

the dashboard's metrics are meeting the needs of the business and the users.

Including all 75 of these metrics in a given dashboard would be overwhelming and difficult to manage, how does a company decide with metrics to use?

they should decide by looking into the strategy of the company and the initiatives that are chosen as focal points, any of the KPIs may be optimal for measuring (and ultimately improving) performance.

What is the purpose for creating a digital dashboard?

to communicate how the organization is performing so decision makers can improve their judgment and decisions and so workers can understand where to place their priority in their day-to-day jobs and projects.

If the dashboard is not following the strategy map template, the most important KPIs should be placed in what place of the dashboard?

top left corner, as our eyes are most naturally drawn to that part of any page that we are reading.

Objectives should be aligned with?

with strategic goals of the organization,