CREATING

PERFORMANCE
MEASURES
I NG. SUSA NA SOR I A NO

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 I defined performance objectives as
concise statements that describe the
What Are specific things we must perform well if
we are to implement our strategy
Performance successfully.

Measures?
We use performance measures to
de termine whether we are meeting our
o bjectives and moving toward the
successful implementation of our
strategy.

We may describe measures as

quantifiable (normally, but not always)
sta ndards used to evaluate and
co mmunicate performance against
e x pected results.

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What are Performance Measures?
Me a sures communicate value creation in ways even the most charismatic CEO's speeches never
can.

They function as a tool to drive desired action, show all employees how they can help contribute to
the organization's overall goals, and supply management with a tool to determine overall progress
toward strategic goals.

Measures are critically important to the Balanced Scorecard, but generating performance
measures may not be as si mple as you think. The ability to define and agree upon measures” was
the most frequent barrier to implementing or revising a performance measurement system.?

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Your Balanced Scorecard should contain a mix of leading and lagging indicators.

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Lag and Lead Performance
Measures

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MEASURES FOR THE
FINANCIAL PERSPECTIVE
With each perspective of the Balanced
Scorecard, the measures we choose should
a ct a s direct translations of the objectives
we chose to comprise our Strategy Map,
which themselves were faithfully translated
from the organization's differentiating
strategy.

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MEASURES FOR
THE FINANCIAL PERSPECTIVE
Reducing costs and improving the utilization of assets currently in place.

Possible measures for these objectives include co st versus budget, expenses as a percentage of
sa l es, and asset utilization.

Measures of sha re price and market valuation are often found on Balanced Scorecards.

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MEASURES FOR
THE FINANCIAL
PERSPECTIVE

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 Return on equity https://youtu.be/XLcKalVivlI
(ROE)

Activity Return on capital employed (ROCE)

Watch the videos and take note of
the special formulas for
calculating financial indicators
Return on https://youtu.be/0ebr8Lduw
ac
investment (ROI)

Economic value https://youtu.be/-

1nLlYdv5yE
added (EVA)

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Product Leadership Measures
Product leaders succeed by providing their
customers with new and innovative products
that offer unique functionality not available
in competitors” offerings.

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 Product Leadership Measures
Getting the word out is a must. Product leaders
aggressively pursue the buzz that often accompanies
a breakaway new product. Thus we might expect to
see “brand image” or “brand awareness” gracing
their Balanced Scorecard.
Given their penchant for pushing the envelope of
innovation, product leaders might also measure
“help line calls per product” to determine the amount
of interest, and possibly confusion, in their latest
development.
F unctionality. Product leaders, those on the
cutting edge of design, style, and
functionality, must employ metrics that allow
them to gauge their penetration of our
needs. Expect to see measures such as
“number of customer needs satisfied” and
“number of new features offered” appearing
within their Balanced Scorecards.
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Measures for
Customer
Intimacy
By providing an unparalleled mix of
superior services that offer a total
solution, the customer-intimate
organization is able to move beyond
simply providing a product or service
to cultivating a lasting relationship
with their clients.

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Customer
satisfaction
Customer satisfaction may be the
most popular measure in the
Customer perspectives of
Balanced Scorecards around the
world.
Most will turn to surveys as the primary means of data
collection.
A number of tips to keep in mind when developing and
administering surveys follow:
1. Sur vey a variety of customers. Your current
customers know you the best and are most likely to
provide positive responses when asked about their
experiences with your firm. To balance this bias,
survey past customers, those you know have left, and
competitors” customers to learn more about their
buying habits.
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Customer satisfaction
Tips to keep in mind when
developing and administering
surveys
2. Ask about the specifics of their experience. To know if customers
are generally satis fied or not satisfied is directionally helpful, but to
really ascertain what makes them tick, dig deeper to get their
reaction to the many specific attributes of your products and
services.
3. Ask about competitors. Henry Ford's dictum not withstanding,
customers have plenty of choices. Satis faction with your products is
part of an overall spectrum of relative satisfaction based on their
use of yours and competing products and services.
4, Ensure the survey is administered by the head office or a third
party. A lot is riding on the results of these surveys, including
financial incentives and resource perks. Unscrupulous employees
may be tempted to deliberately manipulate results in their favor.
Eliminate that possibility by using either head office staff or a third
party to administer your survey.
5. Keep it simple. The longer and more complicated the survey is,
the lower the response rate.
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Other Sources of Customer
Measures
The customer's voice. The Internet is an
incredibly powerful medium for spreading
customer perceptions about your products
and services, good or bad. Message boards
and targeted sites across the vast universe
of the Web likely contain a host of
references to your company and its
offerings. Take advantage of this opportunity
by listening to what your customers have to
say about you and then proactively defining
yourse

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 Other Sources of
Customer Measures
Mo ments of truth. Any point at which a
customer comes in contact with a business
defines a moment of truth. The interaction
can be either favorable or unfavorable and
can have a great impact on future business.
Mapping these moments of truth provides
you with an opportunity to isolate the
differentiating features you offer and design
metrics to track your success.

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Other Sources
of Customer Measures
Look to your channels. Today's organization may serve customers
in a number of ways, each with unique processes. Take the
example of a retailer. It may offer shopping over the Internet, in
retail stores, and/or by catalog. Each of these channels has
specific processes and will entail different performance
measures.

instance, when measuring checkout efficiency and speed in retail

stores, error rates in keying items/prices into the register and the
average length of a transaction might be monitored. Online, the
same organization could monitor transaction ease by examining
the number of fields into which the customer must enter
information or the number of abandoned transactions. A catalog
transaction would examine the number of rings it takes customer
service representatives to answer calls and how long it takes to
place the order.

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 Measures for Customer Intimacy
It is very important to include both lag and lead indicators in your customer perspective and in the entire
Scorecard for that matter

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Sample
Customer
Measures

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 Operations Management
Measures
You will recall that operations management refers to the basic, routine, and day-to-day processes
necessary to keep the engines of commerce humming at your company.

The measures you choose will, naturally, be organization specific. For example, if yours is a
mortgage lending company, you don´t produce a physical product.

Nevertheless, that does not preclude you from including operations management metrics. “Cycle
time from application to funding” or “number of loans closed per employee” may appear on your
Scorecard. Manufacturers, meanwhile, may focus rightly on “yield” or “throughput” for this
perspective.

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Customer Management Measures
Five critical subprocesses comprise customer management:

(1) selecting target customers

(2) acquiring them by proactively communicating our value proposition

(3) understanding their needs

(4) retaining customers

(5) deepening our relationship with them. A simple yet powerful measure may accompany each
subprocess on the Balanced Scorecard.

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Customer Management Measures
For example, s election of customers may be tracked
by “customer segmentation” or classification.
Ac quisition is often monitored by metrics of
marketing effectiveness, demonstrating whether our
investments in communicating what we have to offer
are reaching our target audience.
“N umber of customer profiles” may act as a suitable
proxy for understanding c ustomer needs as we
attempt to ferret out the eccentricities and
peculiarities of our buyers. Retention should not be
complicated; just measure retention!

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Innovation
Measures
Among the myriad performance
measures that may fit the bill
under the heading of innovation
are:
Dollars spent on research and development
Employee hours on research and development
Number of employee affinity groups
Number of new product joint ventures
Number of new products or services in the pipeline
Number of new products or services introduced
New product or service cycle time (length of time from
conception to introduction),
Revenue from new products or services
New product sales by channel.
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Regulatory and Social Measures
Prominent measures on a Balanced Scorecard, especially if it is ultimately shared with external
stakeholders, can help allay the diatribes of rabid critics by clearly displaying the metrics being
monitored and actions taken in support of these vital issues. Among the measures that may be
pursued in this arena are

❑compliance with environmental regulations

❑number of audit findings

❑employee volunteer hours

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Internal Process Measures

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 Example:
B usiness objectives Me asures Ta r get
a nd strategy map
Financial Increase Revenue Net profit Increase in 3% yearly
Decrease Operation Operation cost Diminish in 2% yearly
cost
Customer Improve user Customer Satisfaction
experience
Improve market Market chare
perception
Internal Process Improve information Brand awareness score
services
Improve offering Increasing of sales fron
selection to clients new products

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 Class Activity
Ne tflix Mission Statement

Our core strategy is to grow our streaming subscription business domestically and globally. We are
continuously improving the customer experience with a focus on expanding our streaming content,
enhancing our user interface and extending our streaming service to even more internet-
connected devices, while staying within the parameters of our consolidated net income and
operating segment contribution profit targets.
Ne tflix Vision Statement

Becoming the best global entertainment distribution service. Licensing entertainment content
around the world, creating markets that are accessible to film makers and helping content
creators around the world to find a global audience.’ The brand promise is a quest;

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 Class Activity
According to Netflix mission and vision, create:

2 objectives to financial perspective, and 2 measures

2 objectives to Customer perspective, and 2 measures

2 objectives to Internal Process, and 2 measures

Remember your participation will allow you to earn an extra point for your homework grade for this
third period.

To earn the point you have to participate in class , answers in English are required.

Class activity in group of 3.

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