Leading Indicators


Published on

Published in: Business, Technology
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Leading Indicators

  1. 1. Performance Measures- Leading Indicators (Activity Drivers) <ul><li>Prepared by Group 4: </li></ul><ul><li>Andrew Molloy </li></ul><ul><li>Amy Miller </li></ul><ul><li>Mike Elicker </li></ul>
  2. 2. Steps to leading performance measures <ul><li>Leading performance measures are based on activity drivers that drive the performance of a company. </li></ul><ul><li>The first step in performance measurement are activity drivers that drive the performance of a company. </li></ul><ul><li>The second step to reaching your overall goal in performance is leading performance indicators. </li></ul><ul><li>The third step to reaching your company’s overall goal are the specific results your company is looking for. </li></ul>
  3. 3. Performance Drivers <ul><li>Performance drivers are structured around trying to achieve a firms overall goals, strategies, and objectives. </li></ul><ul><li>Performance drivers are the: process, learning, and alignment of the employees working toward performance indicators. </li></ul><ul><li>By continuing to develop performance drivers leading toward effectiveness and efficiency a company will be heading toward their overall goal. </li></ul>
  4. 4. Performance Indicators <ul><li>Performance indicators- represent a set of measures focusing on the aspects of organizational performance that are the most often critical for the current and future success of the organization. </li></ul><ul><li>There are several examples of performance indicators that a company might use. Some of these examples include: </li></ul><ul><li>Environmental </li></ul><ul><li>Customer </li></ul><ul><li>Competitor </li></ul><ul><li>Internal </li></ul><ul><li>Human resource </li></ul><ul><li>These indicators will help for a business to categorize their indicators into groups to help them measure and set up their performance drivers to work toward their results and specific goals. </li></ul>
  5. 5. Results <ul><li>The results of the activity drivers and performance indicators are what a company sets their overall goals for. </li></ul><ul><li>Some results that a company might be aiming for are customer satisfaction, cost per resolution, and employee satisfaction. </li></ul><ul><li>These results can be reached when a company has all of these steps in place and fallow them in reaching their overall goal to be a successful business. </li></ul>
  6. 6. Diagram of relationships between Performance drivers, Leading indicators, and results
  7. 7. There are many types of leading indicators throughout a company that affect performance
  8. 8. Company performance includes leading indicators of: <ul><li>Customer Satisfaction </li></ul><ul><li>Growth and Retention </li></ul><ul><li>Internal Operations </li></ul><ul><li>-efficiency, speed, minimizing quality problems </li></ul><ul><li>Human Resource Systems </li></ul>
  9. 9. <ul><li>A further breakdown of leading indicators shows which drivers lead to specific results… </li></ul>
  10. 10. Indicators can be broken down into smaller categories: <ul><li>1. Organizational </li></ul><ul><li>2. Environmental </li></ul><ul><li>3. Group/Departmental </li></ul><ul><li>4. Facility/Individual </li></ul>
  11. 11. Environmental: <ul><li>Outside factors such as government regulations, economic cycle, politics </li></ul><ul><li>Example: Economy is headed for a recession. Company must plan to be ahead of the curve. </li></ul><ul><li>Solution: Address the orders dept. Measure how many orders should be decreased to account for a slowing economy. </li></ul>
  12. 12. Organizational: <ul><li>Company Strategy, Policy, Structure </li></ul><ul><li>Example: Mgmt wants to increase sales of Product A </li></ul><ul><li>Solution: The amount of Research and Development of Product A needs to be measured to determine how many hours to increase by. </li></ul>
  13. 13. Group/Departmental: <ul><li>Group relationships, responsibility, and assignments </li></ul><ul><li>Example: Mgmt wants to increase inter- office group relations. </li></ul><ul><li>Mgmt may determine they want to do this by increasing time spent working in teams. Amount of hours per week increased of working in teams must be measured. </li></ul>
  14. 14. Individual: <ul><li>Management style, skills, behavior </li></ul><ul><li>Example: Mgmt feels productivity will increase if employee skills are higher. </li></ul><ul><li>Solution: Extra training and classes may be required to achieve this. Measurement of hours required to raise employee skills must be conducted. </li></ul>
  15. 15. Key Point: <ul><li>Measures of these drivers must be tied to what the company is trying to accomplish </li></ul>
  16. 16. Other Common Leading Indicators <ul><li>Increase returning customers by 15% this year……gain more market share </li></ul><ul><li>Reduce employee turnover this year……improve efficiency </li></ul><ul><li>Increase sales is a particular department…..boost overall sales </li></ul>
  17. 17. Advantages <ul><li>There is a closer link to long-term organizational strategies </li></ul><ul><ul><li>Example- improving customer relations, market competition, expanding new product development, or expanding organizational capabilities may be important strategic goals, but may hinder short-term accounting performance. </li></ul></ul>
  18. 18. Advantages <ul><li>Critics of traditional measures argue that drivers of success in many industries are “intangible assets,” rather than figures on the balance sheet </li></ul><ul><ul><li>A recently published study found that measures related to company innovation, management capability, employee relations, quantity, and brand value explained a significant proportion of a company’s value, even after factoring in accounting assets and liabilities </li></ul></ul>
  19. 19. Advantages <ul><li>Often times non-financial indicators can be better indicators of future financial performance </li></ul><ul><ul><li>For example, when the ultimate goal is maximizing financial performance, current measures may not capture long-term benefits from decisions currently being made. </li></ul></ul><ul><ul><li>Investments in customer satisfaction can improve future economic performance by increasing revenues and loyalty of existing customers, and attracting new customers. </li></ul></ul>
  20. 20. Drawbacks <ul><li>Time and cost </li></ul><ul><li>No common denominator </li></ul><ul><li>No statistical reliability in the measures chosen </li></ul>
  21. 21. Implementation <ul><li>Good understanding of value drivers </li></ul><ul><ul><li>What contributes to long-term success? </li></ul></ul><ul><ul><li>Principles for translating corporate objectives into measures that guide management’s daily actions </li></ul></ul><ul><ul><li>Many companies go wrong here </li></ul></ul><ul><li>Statistical analysis of leading and lagging indicators of financial performance </li></ul><ul><li>Business model - help determine which measures best predict future financial performance </li></ul><ul><ul><li>Assign weights to measures based on the strengths of statistical relations </li></ul></ul><ul><li>Integration </li></ul>
  22. 22. <ul><li>Questions? </li></ul>