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Top 25 Cost Analysis KPIs 2018 Online PDF
Top 25 Cost Analysis KPIs 2018 Online PDF
$ Working capital per employee % Cost of the finance function from revenue
$ Cost of goods sold (COGS)% Obsolescence costs from total inventory
% Gross profit margin % Operating costs $ Payroll tax paid by the employer
# Interest cover % Contribution margin ratio % Overhead cost ratio
# Cost improvement plans $ Fixed costs $ Spent on equipment
$ Life cycle cost (LCC) # Sales to general and administrative expenses
$ Operating expenses $ Cost accrual ratio $ Indirect costs
$ Total acquisition cost (TAC) % Wages cost from sales
$ Fixed cost per employee $ Overdue invoices $ Discretionary costs
$ Costs per FTE employee % Cost with employees from the operating revenue
This report is the result of primary research conducted by The KPI Institute. It is available in PDF format on the smartKPIs.com
website. Terms of use available at: http://www.smartkpis.com/terms-of-use.html (‘Premium content terms’).
Indemnity statement
The KPI Institute has taken due care in preparing the analysis contained in this report. However, noting that some of
the data used for the analysis has been provided by third parties, The KPI Institute gives no warranty to the accuracy,
reliability, fitness for purpose, or otherwise of the information. The KPI Institute shall have no liability for errors, omissions
or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are
subject to change without notice. For the latest version of the documentation, smartKPIs Premium should be consulted.
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FOREWORD
Simplicity. Something that is easy to understand or pass practices as organizational structures. So, simplicity…
on forward is simple, as opposed to something arcane and simplicity does not come easy in an organization. Unless,
complicated. How do we arrive at the point when it gets you give it simple tools to work with.
simple organization wise? Of late, a question of particular
interest in both private and public environments. The pure definition of a KPI is “simplicity”. Mathematical
enough to allow logical reasoning, but also easy enough to
Most common also, we found the use of simplification as read through a complicated story, KPIs are in themselves
an organizational strategy. Safe to say, that simplification an auxiliary language. Such a language that it makes it
is the new “it” of organizational practices, most often easier to skim through organizational layers and functions
seen in the streamlining of organizational structures, with the ultimate ability to understand what is happening.
more disciplined operational processes, and improved This clarity, in turn, gives one the opportunity to look
managerial habits nevertheless. beyond the failure and see the causes, to spot the tie-ins
leading the downturn, to decide and communicate future
Our definition of simplicity, however, still remains the actions, to take initiatives in common momentum.
KPI. There is an entire system proven functional, that we
have build on KPIs, not because it guarantees success or There are rewards in learning from failure, and there is
drives profitability levels of the roof, but because it makes simplicity that comes with learning. In more than many
it easier to communicate with one another. Organizations ways, learning organizations are prone to find simplicity
almost never find it simple or easy because they fail a faster than others. This mainly because of their acceptance
lot. They fail at managing change, they fail at structuring of new systems, mechanisms and tools that are designed
their processes, they fail at inspiring employees to build to introduce novel perspectives.
tenure and many more. They fail mostly because they do
not manage to get through the chaos. A measurable expression for the achievement of a
desired level of results, KPIs make objectives quantifiable,
More than a decade of research and experience has and provide visibility into the performance of various
shown us how exceedingly different organizations can organizational functions. KPIs drive accountability
be, amazingly not only compared to competitors or peers, because they are understood by everyone. KPIs enable
but also internally, one organizational layer compared smart decision-making because they speak the language
to another. There can be as many mindsets inside an of decision-makers. KPIs are easy. One just has to learn
organization as departments, as many processes and about them.
Report Structure 7
Report Highlights 8
Section II 10
Section III 16
KPI…Naturally 16
Data Analysis 30
KPI Reporting 32
Section IV 34
% Operating costs 50
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# Interest cover 54
$ Fixed costs 62
$ Spent on equipment 64
$ Operating expenses 70
$ Indirect costs 74
$ Overdue invoices 82
$ Discretionary costs 84
Section V 90
Appendix E: Memberships 96
Appendix F: Subscriptions 97
As much as they are a valuable resource for harvesting The 2018 Edition of the Top 25 KPIs reports presents
Key Performance Indicators for any organization, the Top a two pages’ design of the KPI Documentation Form
25 KPIs Reports are not designated to supply readers with Template. The first page contains updated fields of the KPI
the ultimate solution to establishing the right KPIs for Documentation form as researched and analyzed by The
their organizations. The Top 25 KPIs Reports are merely KPI Institute. The second page of the KPI Documentation
a collection of the most popular KPIs in the functional form includes valuable guidance on KPI Reporting, based
area/industry that the report is intended for. Conveyed on actual exemplification of KPI results and pertinent
from smartKPIs.com.com, the Top 25 KPIs selected for illustrations of Scorecard and Dashboard designs for each
each report, are a collection of the most viewed KPIs of the KPIs included in the report.
in a particular functional area or industry, based on site
statistics and online community readings.
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REPORT STRUCTURE
The Top 25 KPIs Reports are structured to include 5 main sections:
Section I
Introduction: Briefly describes the purpose of the report, as well as, clarifies its structure to the readership.
Section II
Overview of the smartKPIs.com platform: Provides a brief description of the smartKPIs.com community profile, by
country breakdown, organization size, industry affiliation, job title, managerial role, and performance related job titles.
The smartKPIs.com taxonomy, takes the reader further into the functional areas and industries that The KPI Institute
has researched for the last 8 years.
Section III
Insights into the world of KPIs: Ensures a deep understanding of the main stages involved in the process of establishing
KPIs for the organization. The section takes the reader on a compelling journey that starts with the clarification of
the common KPI terminology and moves forward with a description of the KPI selection process, guidelines for KPI
documentation, as well as, a brief tutorial into setting KPI targets. Culminating with the much-anticipated matter of KPI
use for decision-making, this section further introduces the reader to the multiple dimensions of data gathering, data
visualization, analysis and reporting.
Section IV
Top 25 KPIs of the functional area/industry for which the report is intended: Itemizes the Top 25 KPIs of the functional
area/industry for which the report is intended, as per the popularity of the selected indicators on the smartKPIs.com
platform. The section provides the reader with an updated documentation form for every KPI. Additionally, with extended
versions of the reports, actual guidance on KPI reporting, as well as, “in practice” advice on generating the most value
out of the KPIs analyzed, is provided.
Section V
Testimonials and related educational resources: Encompasses an extensive list of motivational beliefs, as well as,
invaluable publications and educational programs that readers can use in their further explorations of the performance
management discipline.
V
I III RELATED
EDUCATIONAL
INTRODUCTION RESOURCES
INSIGHTS INTO
THE WORLD OF IV
II KPIS
TOP 25 KPIS
OVERVIEW OF CATALOGUE
THE SMARTKPIS.
COM PLATFORM
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The Top 25 Cost Analysis KPIs – 2018 Edition report not only 2 pages of detailed documentation for each KPI,
compiles the most popular 25 KPIs used by global cost but also interesting articles on best practices in terms of
analysis divisions throughout 2016 and 2018. The KPI selection and documentation. A new and improved
methodology used to advance this report consisted of collection of the most popular cost analysis KPIs on
ranking the KPI examples documented and published on smartKPIs.com, the Top 25 Cost Analysis KPIs-2018
smartKPIs.com, based on the number of views acquired Edition introduces a distinctive, unprecedented design
in the period mentioned. of the KPI Documentation Form. Specifically developed
to take the reader one step closer to an efficient KPI
One of the most important benefits that this report monitoring and reporting process, the Top 25 Cost
brings is an international perspective on the most Analysis KPIs -2018 Edition makes for a valuable addition
popular Cost Analysis KPIs. They provide quantifiable to any KPI Library used by professionals in the financial
measurement of the main components that lead to field.
a successful financial strategy implementation. The
documentation of KPIs compiles both academic insights By emphasizing the use of KPIs today, The Top 25 Cost
and practitioner experience in working with these Analysis KPIs – 2018 Edition is a valuable resource for any
performance management tools. Furthermore, Top 25 professional looking to refresh an existing performance
Cost Analysis KPIs – 2018 Edition provides a complete measurement system or to promote the use of KPIs in
hands-on experience in working with KPIs as it contains the organization.
REPORT
HIGHLIGHTS
Key Figures
ORGANISATION
2004 12 4
Year of establishment Research Analysts Offices around the globe:
Australia, Malaysia, Romania, United Arab Emirates
RESEARCH
88,085 21,150 14
Organizations assisted through KPI examples published on Years spent on researching
smartkpis.com smartkpis.com performance best practice
EDUCATION
569 78 5
Education programs delivered Countries where we delivered Continents where we served clients
educational programs
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The KPI Institute is considered today the global authority on Key Performance Indicators (KPIs) research and education. It
developed the first KPI Management Framework and operates www.smartKPIs.com, the result of the research program
dedicated to documenting and cataloguing how KPIs are used in practice, an online portal containing the largest collection
of documented KPI examples.
Our Pillars
Research Events
The most comprehensive collection of resources, Conferences, forums and executive meetings
research studies and tools to enable organizations reaching globally that bring new trends and
to be always at the top of the game in their developments, industry best practices and the
industry. most innovating solutions in today’s business
environment.
Publications
In-depth reports, articles and templates that Benchmarking
enable you to keep up to date with industry Benchmarking studies that ensure you stay ahead
trends and leaders. of your competition, identifying opportunities to
maximize results.
Learning
Specialized training programs meant to shed light Awards
on the essential insights and practical tools that The KPI Institute recognizes customers and
improve business performance. partners that have excelled in driving business
value through several award categories.
Certification
Certification Programs designed to support Consulting
professionals to achieve business excellence in By embedding research outcomes and practical
12 different practice domains that range from experience from the business environment, The
strategic planning and performance management KPI Institute offers high quality advisory services
to data visualization and innovation. to guide organizations towards achieving their
ultimate vision.
Networking
Access to a wide Community of Practice Solutions
where professionals share their knowledge and Sustainable technology solutions to support
expertise. The KPI Institute provides the perfect business processes and ensure agility in working
environment to keep up with the latest trends and with data in today’s business environment.
events in the field of performance.
What sets the smartKPIs.com community apart is the profile of its members, as it is a truly global community, with
relatively uniformly spread representation in terms of membership around the world. While the highest number of
members come from English speaking countries, no single country dominates in terms of representation. The same
applies in terms of organizational size, as smartKPIs.com memberships are popular among small size companies (11-100
employees), but also across medium and large organizations (+10,000 employees).
9
4 7
10
2 6 8
1 3
Throughout 2016 and 2018, the smartKPIs.com community has experienced a growth of more than 10%. The increase discloses
a rising demand for performance measurement tools. The fascination with KPIs is also reflected in the increasing number of views
recorded by the site in the period afore-mentioned.
In terms of industry affiliation, the majority of smartKPIs.com community members operate in the Consulting industry. The
Technology and Manufacturing industries closely follow in the hierarchy, which reflects on the steadfast interest for KPIs within
these areas. Throughout 2016 and 2018, we can observe a substantial increase in the number of subscribers affiliated to the
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banking, mortgages and credit, which points to a tendency
Job Title
of transitioning to KPI based management systems in this
industry.
CEO 1.67%
Organization size (by no. of employees)
Student 2.69%
Self-employed 7.90%
The breakdown for the subscribers’ job positions reflects
a higher than average representation for Technology
Industry affiliation and Human Resources managers, while community
membership is dominated by managers, consultants and
Government - Local 1.50%
directors. Overall, the community profile of smartKPIs.
Insurance 1.53% com reveals a diverse and highly qualified membership
base.
Not-for-profit 1.79%
*The figures in brackets represent the number of documented KPI examples available on smartKPIs.com as of 1st of January 2018.
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2018 smartKPIs.com Industries Taxonomy
25 Industries with 100 divisions
Agriculture (308) Healthcare (118)
Crops (123) Tourism (74) Publishing (57)
Forestry and Logging (34) Transportation and Infrastructure (54)
Livestock, Hunting and Fishing (150) Resources and Energy (56)
Foreign Affairs and Trade (11)
Arts and Culture (431) Human / Social Services (45) Real Estate / Property (187)
Event Production and Promotion (26) Employment and Workplace Relations Property Management (83)
Libraries and Archives (356) (95) Real Estate Development (70)
Museums (49) Law and Justice (112) Real Estate Transactions (34)
Law Enforcement/Police (34)
Construction & Capital Works (113) Communications, Multimedia and Resources (458)
Civil Engineering (37) Information (18) Coal and Minerals Mining (336)
Construction of Buildings (76) Sports (16) Oil and Gas (66)
Sustainability / Green Energy (56)
Customs (246) Healthcare (1576)
Border Protection and Enforcement (63) Healthcare Support Services (38) Retail (160)
Compliance and Risk Management (34) Veterinary Medicine (7)
Customs Administration (32) Medical Practice (299) Sport Management (138)
Immigration and Travel (35) Hospitals (1116) Coaching / Training (27)
Revenue Collection (20) Medical Laboratory (30) Sport Club Management (65)
Trade Facilitation (62) Emergency Response / Ambulance Sport Event Organization (46)
Services (34)
Education & Training (745) Preventive Healthcare (35) Sports (147)
Academic Education (258) Pharmaceuticals (17) American Football (12)
Colleges and Universities (177) Badminton (10)
Primary and Secondary Schools / K-12 (254) Hospitality & Tourism (351) Baseball (29)
Training and Other Education (46) Food and Beverage Service (170) Basketball (18)
Hotel / Accommodation (140) Cricket (10)
Financial Institutions (571) Travel Agency (41) Football / Soccer (26)
Banking and Credit (169) Rugby (10)
Insurance (79) Infrastructure Operations (735) Tennis (32)
Investments (91) Airports (344)
Mortgages (162) Ports (291) Telecommunications / Call Center (151)
Pension Funds (70) Railways (26) Call Center (81)
Roads (74) FTTX (27)
Government - Local (891) Telecommunications (43)
General Local Administration (85) Manufacturing (97)
Public Services (174) Transportation (1672)
Economic & Business Affairs (93) Media (153) Airlines (515)
Public Safety (125) Broadcasting (TV and Radio) (63) Land Transport (Road & Rail) (500)
Social Services (143) Film and Music (45) Local Public Transport (372)
Budget and Finance (38) Social Media (45) Marine Transport / Shipping (246)
Culture, Recreation and Entertainment (41) Taxi (39)
Community - Quality of Life (34) Non-profit / Non-governmental (566)
Environment (142) Utilities (994)
Sports (16) Postal and Courier Services (295) Electricity (254)
Natural Gas (462)
Government - State / Federal (1008) Professional Services (495) Water and Sewage (278)
Military, Security and Defense (24) Engineering (42)
General State Administration (113) Recruitment / Employment Activities (55)
Agriculture, Fisheries and Forestry (49) Legal Practice (282)
Education (123) Business Consulting (84)
Finance / Treasury (66) Accounting Services (32)
A major milestone in making the connection between Organizations are echo-systems in their own right.
measuring as a human activity and performance was in They vary in terms of maturity and the environment in
1494, when Luca Pacioli published in Venice ‘Summa de which they operate. As such, their use of performance
arithmetica, geometrica, proportioni et proportionalita’ management systems should reflect their own
(‘Everything on arithmetic, geometry, proportions and “personality”. You can try to build an igloo in Sahara, but
proportionality’). It detailed a practice the Venetian sailors it won’t be sustainable. The performance architecture of
had in place to evaluate the performance of their sailing each organization needs to be unique and to reflect its
expeditions, which became the basis of the double-entry internal and external environment.
accounting system. In time, the subjective nature of
individual performance evaluations and the dominance of Systems thinking provides a much richer context for
financial indicators for evaluating enterprise performance understanding and improving performance. Command-
became stepstones for performance management in and-control worked in time for the army, for increasing
human activities. The industrial revolution added to this productivity of unskilled workers during the industrial
combination the “organization as a machine” metaphor revolution and for managing large organizations (such
that played a major role in driving improvements as the public service). Today, knowledge workers form
in efficiencies and effectiveness. The result was an the majority of the workforce in developed economies,
organizational performance management model based operate in a much more interconnected environment
on mechanistic, command-and-control thinking, driven and have to make decisions at an accelerated pace.
by subjective individual performance assessments and Understanding the systems in which we operate,
financial indicators and crowned by pay for- performance analyzing flow and learning based on data become ever
arrangements. more important today and complement the traditional
simplistic managerial approach of executing orders from
Did it work? above.
To a certain extent, yes. Many organizations flourished KPIs should be used primarily for learning. The role
and matured based on this model. of KPIs should be the one of providing the required
information to assist in navigating towards the desired
Does it have flaws? results. The same principle is used by ants, who leave
Many. And while historical circumstances attenuated pheromone trails to assist each other in navigating
them in time, today’s environment amplifies and exposes towards the food source. Similarly, the nerve impulses
them at an accelerated rate. travel through the different points of the nervous system,
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transmitting information. KPIs results should travel not be restricted to paper reports and computer screens
through the organization, facilitating communication, anymore.
providing a base for analysis / synthesis and ultimately
decision making across all levels of the organization. New philosophy of performance, driven by self-
assessment and purposeful achievement as a mean
Data accuracy in human administration is an elusive to happiness. While happiness means many things to
desideratum. Neils Bohr once said: “Accuracy and clarity of many, a common expression of this feeling is the result
statement are mutually exclusive”. Accuracy is a challenge of the purposeful achievement of a desiderate. Achieving
in exact sciences and even more in human administration. something we want, while shared with others, is about us
Striving to obtain any KPI data is a challenge in itself for and reverberates strongly in our inner self. Transposing
many organizations and data accuracy is an even bigger this powerful catalyst of performance in both our personal
ask. The use of KPIs should acknowledge this aspect and and organizational life is facilitated by a new paradigm:
be oriented towards making the most out of existent data, Happiness is driven by achievement. Achievement
oftentimes by using variance intervals. This approach is is an expression of performance. If we want to be in
used by the human body. If the temperature drops under control of our happiness, we should be in control of our
a safe limit, we shiver. If the temperature increases, we performance. Self-assessment of performance results is
sweat. Both are performance improvement initiatives of not easy. However, if more emphasis is placed on building
the body, aimed to regulate its temperature back to safe this capability in each employee, organizations can
limits. The KPI here is the temperature. While it is not a benefit by creating a rewarding environment conducive
constant, its trend is good when within certain safe limits. to happiness. In this environment, managers can focus on
understanding and improving the working system, while
The use of KPIs for rewards and punishment should employees can focus on self-assessment of the results’
be limited and driven by self-assessment. Purposeful achievement, learning and communicating. Purposeful
oriented behavior is a characteristic of living organisms. achievement of results in a well-structured working
For humans and many other species, this behavior is system would bring both individuals and organization
amplified by rewards and punishment. Along with this much closer to happiness and fulfilment compared to the
amplification, risks are amplified, too. Gaming of results, payment of bonuses in the current command-and-control
lack of cooperation, decreased morale and work accidents driven dominant paradigm.
are some of the undesired consequences. On the other
hand, the majority of nerve impulses in the human body
transmit general information. Only in particular situations
“KPIs are here to stay. The question we
pleasure or pain signals. Similarly, the use of KPIs for
rewards and punishment should be the exception to the
have to answer is how do we want to use
rule, rather than the norm. them: mechanistically or naturally?”
METRICS
FOR MEASUREMENT
ANALYTICS
FOR DECISION MAKING
METRIC
It has its roots in the word “metron”, used in ancient Greece to reflect measurement. Metrics refer to something
we can measure, a value, or a quantity. Examples of metrics are: # Air temperature, # Air quality, # Water depth,
# Height, # Weight or # Employees. When metrics reflect the achievement of a desired state, they become Key
Performance Indicators. Oftentimes, metrics represent the subordinated measures used for calculating a KPI.
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KEY RISK INDICATOR (KRI)
A metric that provides an early warning regarding an increased risk exposure in a certain area of operations. For
example, a high level of % Clients experiencing financial difficulties can indicate the risk of not being able to
collect all debts and will negatively impact $ Write-off accounts. By monitoring KRIs, managers are able to take
a proactive approach in risk management by preventing incidents or diminishing their impact, when they occur.
ANALYTICS
Consists in a data analysis of KPI results, meant to determine trends and data patterns in order to provide
valuable information for better decision making. Analytics offer a better understanding of how the business
works, and the interdependencies between KPIs. Predictive analytics can provide valuable insights in regards to
our customers’ purchasing habits, the best time to launch a product, or how internal processes can be optimized.
Main reasons for KPI use and performance improvement in the organization:
The annual research conducted by the KPI Institute on improvement in terms of management behavior and
the “State of Performance Improvement and KPIs” reveals improvement in quantifiable results.
the reasons KPIs are used in organizations worldwide
while emphasizing the main trends in KPI use over time. Having been confirmed as one of the main reasons
For the last years the survey reveals a shift in the 3 main for which organizations use KPIs and performance
arguments used by professionals to promote and justify management systems in the organization, effective
the use of KPIs: from clarity, improvement and focus to communication seems to be another important driver
engagement, improvement and communication. for performance improvement. Interesting enough, focus
comes as second last in the survey responses. Whereas
A top issue and most controversial item on the agenda KPIs used to be considered an important tool to drive
of both public and private organizations nowadays, clarity and focus, it seems like KPIs are now seen as more
engagement is stated as one of the main reason for KPI of an edge in prompting engagement and communication
use and performance improvement. Two other reasons within the organization.
participants in the survey considered well important are,
Before embarking on the KPI selection journey, The KPI Institute recommends to have in mind the following guidelines:
KPI SELECTION
INPUT
ANNUAL COMPETITORS
REPORTS REPORTS
OPERATIONS ONLINE
REPORTS CATALOGUES
INTERNAL EXTERNAL
FRONT-LINE
RESEARCH RESEARCH
EMPLOYEES
EXPERTS
INPUTS
BOARD AND
SUPPLIERS AND
MANAGERS CUSTOMERS
INPUTS
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Value drivers and business objectives manage the business, such as dashboards or scorecards.
By presenting the objectives, KPIs and performance results
For a relevant KPI selection it is essential to start the associated into some visual dynamic tool managers can
process by identifying what drives most value for the easily grasp the pulse of the business and take actions.
business and where resources are most worth invested.
The business strategy should be built around value drivers. Context
KPIs serve as tools to monitor strategy implementation.
The realities of organizational activity and business
They are just one component of the value creation
environments should be embedded in your KPIs.
chain and of the performance management system. In
Each organization is different, operating in different
this context, KPIs should be directly liked to business
environment, with different guiding principles. Hence the
objectives. They create the connection between strategic
KPIs used need to reflect the specifics of each organization
objectives and actions (initiatives), and when KPI targets
first and industry/functional area characteristics second.
are not achieved, decisions must be taken to improve
results. No measuring for the sake of
measurement
KPI selection workshop
Some aspects may not be worth measuring or monitoring
This is the preferred format to deploy an effective selection
because they are not important, while others may be
process because it provides the adequate environment to
relevant for the business, but collecting data can be too
analyze all sources of information, as well as, brings key
costly. In both situations, it makes no sense to waste
stakeholders to the same table. It is important to involve
resources on gathering data that has no economic
KPI owners or even data custodians in the workshop, in
justification.
order to inspire stronger commitment towards the new
KPI framework. We can also have external stakeholders, Regular review
namely, major clients, business partners, suppliers
contributing to the KPI selection. In this way, we can Check the KPI relevance regularly. If new KPIs are required,
ensure that all relevant inputs are considered. Information they can be established at any time. An essential aspect
coming from the external business environment can be of double loop learning is connected to using KPIs. It is
integrated into the workshop with no physical presence not only about achieving targets and objectives, but also
required from stakeholders. Inputs can be collected about ensuring the objectives and targets were the right
through an interview / discussion. ones to be set in the first place and the KPIs used to track
their achievement were the appropriate ones.
During this workshop, participants should be engaged
into applying different KPI selection techniques, such An active KPI is better than an inactive
as, the value flow analysis, KPI balancing and clustering, KPI
in order to generate insights into the multiple facets of
If after more performance measurement cycles certain
measuring an objective or process. This event should
KPIs keep on being inactive due to various reasons:
also be explored as an opportunity to promote the use
infrastructure, technology or competence, it is better to
of KPIs within the entity, to consolidate a performance
eliminate of replace them. Instead of waiting to build the
management team and to educate stakeholders in
adequate system to measure # Customer satisfaction
managing performance.
index, you can start with a simpler KPI to monitor clients’
Scorecards and Dashboards satisfaction like # Complaints received.
As an instrument, the KPI documentation form is The existence of KPI documentation forms within
very effective in terms of knowledge management. an entity creates an internal library of KPIs, that
It captures the know-how, enables constant employees can access to learn how to collect data
updating, transfer and retrieval of information. or to better understand performance results.
Through a standardized template, communication Even if the content of a KPI documentation form
becomes more reliable and effective. It provides can vary from one entity to another, there are
the necessary guidance to measure a KPI and some critical pieces of information which are
ensures consistency from one data collection essential in the process of activating KPIs and
period to another. can include: KPI definition, calculation formula
and targets.
The annual research conducted by the KPI Institute on the “State of Performance Improvement and KPIs” reveals mostly
moderate familiarity with KPI Documentation Forms in organizations worldwide. Another 34% of respondents seem to
be less familiar with standardized KPI documentation forms, as they stated that they only scarcely use this tool, if at all,
to get full comprehension of their KPIs. The regular, full use of standardized KPI documentation forms is common for the
least part of the professionals partaking in the survey – 29%.
Interesting enough, organizations seem to be least mature in areas such as KPI documentation. Learning from performance
results is most certainly obstructed due to the fact that performance results are analyzed in an isolated manner, without
minding context. Little maturity in regard to KPI documentation is mostly due to scant familiarity with standardized KPI
documentation forms and seldom revision and update of the KPI documentation process.
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Another study conducted by The KPI Institute in 2015, focused on analyzing over 50 examples of KPI documentation
forms encountered in practice, has identified more than 50 fields used in various configurations of this tool. The most
popular fields revealed by the study are listed in the graphic below:
Overall notes 16 Data Profile outlines the data sources, accountability for
data, KPI limitations and reporting frequency.
Unit type 16
Targets are established through consultations with staff members who are responsible to reach the
targets and who are familiar with the data collection process:
The targets established seem to create a motivating working environment for employees:
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The implications of inadequate target-setting are result in a dangerous combination of human greed and
immeasurable. Easy targets cannot be incentivizing mechanistic behavior. Inappropriate targets can ultimately
enough to motivate performance. Stretch targets, harm customers and generate risks. In order to avoid
otherwise known as the targets pushing the boundaries tunnel behavior, lack of ethics, or risky decisions, it is
on what can realistically be achieved, can reach such a important to conduct an efficient target setting process:
high level of demotivation that they negatively impact
employee retention. Targets for control in many instances
Thinking of profitability when setting targets does not necessarily lead to the desired outcomes. If it comes to the point
that stretch targets are necessary, they should be about human excellence and not solely about financial success.
Some of the main data gathering issues encountered by organizations are related to five main themes, namely:
ACCURACY CONSISTENCY
Indicates the extent to which data reflects on the Refers to delivering consistent data across
realities measured. Inaccuracy can be reflected by different reports. It implies a synchronization of
incorrect values, whether numbers or descriptive data across the organization.
data (gender, location, preferences etc.), as well
UNIQUENESS
as, other information that has not been updated.
Points out that there should be no data
COMPLETENESS
duplicates reported. Each data record should be
Refers to whether all available data is present. unique, otherwise the risk of accessing outdated
Unavailable data does fall short of completeness. information increases.
TIMELINESS
Indicates whether the data was submitted in due
time, as per the data gathering deadline
COMPLETENESS
ACCURACY TIMELINESS
DATA
QUALITY
UNIQUENESS CONSISTENCY
As the decision making process is significantly impacted by the performance data furnished in monthly reports, providing
unreliable information might severely damage the organization, by influencing key factors towards making the wrong
decisions. In order for the data gathering process to run smoothly, there are a few meaningful components to consider:
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Data custodians Data gathering process map
Identify those employees who will become responsible for A flow chart will provide data custodians with a more
gathering the data. The profile of a data custodian should transparent data collection process, as well as, with clear
include hands-on measurement practice, KPI reporting deadlines for data availability.
abilities, technological skills (business intelligence tools
or Microsoft Excel), insights into the processes assessed, KPI Documentation Form
access to data, as well as, an ethical commitment to This document will ensure consistency in the
preserving the integrity of data. Some companies may measurement of individual KPIs, by presenting details
choose to outsource data analysis expertise, while other such as KPI definitions, calculation formulas, data sources
organizations might choose to name data custodians and measurement limitations. A well-documented KPI
among existing employees. library will significantly impact the quality of the KPI
Expertise measurement process.
The guiding principles hereby presented can aid the data gathering process by streamlining its main components and
providing reliable data for decision making.
PROCESSING
DATA
Data visualization adds value to the performance reporting process when it manages to communicate the data in an
elegant, comprehensive manner. Proficient data visualization improves the performance reporting process by optimizing
the time required for data analysis and helping the user gain valuable insight into the decision-making process. When
inadequately done, it creates confusion and ambiguity rather than provide desired answers.
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Bar charts are a simple and discrete way to convey
ranking and comparison. Bar charts are the ideal tool for
the visual representation of performance data, especially
% Net Promoter score
because they are great in comparing values. M1 74%
M2 76%
Line charts are optimal for revealing trends over time.
With performance data, line charts provide a historical M3 72%
view on the most relevant key performance indicators,
by consolidating the reporting frequency (X axis) with the M4 69%
KPI results (Y axis). M5 51%
Dashboards are the preferred tools for performance data M6 49%
visualization. They make the best use of data to provide
an integrated view on an organization’s performance.
The flexibility in working with Dashboards allows for
the use of various graphic representations to reflect on
performance. The use of both bar charts and line charts
% Net Promoter score
amplifies the meaning of the data by disclosing its multiple 74% 76%
patterns. While bar charts are better at establishing and 72%
69%
comparing values for different KPIs, line charts can be
extremely articulate in revealing KPI trends.
$ Sales
1000 567 678 896 3223 334 445 444 334 2345 2345 2356
January February March April May June July August September October November December
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vary. In some cases, managers may not have the ability or An effective data management and analysis system can be
skill to ask the right questions and verify what lies beyond set up, despite all challenges but it needs to be connected
the numbers, in order to get a true understanding of to the organization’s value drivers, to the organization’s
what is happening. It is a dangerous trap not to question strategy. To avoid drowning in data, the strategy should
the underlying assumptions based on which data was be able to define what is important for the organization
generated. Just because data was produced by the latest through clearly articulated goals and objectives. To ensure
analytics model does not mean it is unquestionable. that objectives are reached, the company should identify
several KPIs for each objective. The latter refer to tracking
Data gaming key processes within the organization that are conducive
While taking advantage of one’s lack of expertise, it seems to the successful achievement of the objectives set.
very easy to also manipulate data. One has no interest Scorecards and dashboards help validate the key figures
in presenting data that is not working in their interest, decisions are based upon, and they make it easier to
therefore it is important to ensure the reporting process verify the reliability of the data, as well as, to ensure a
is structured as such, that it enables the mitigation data proper KPI measurement and reporting process.
gaming risks. Reported data may be engineered to serve
one’s interests, but the person in charge with decision It is barely enough to design and implement a
making should have the ability to see beyond a beguiling performance management system. In the era of Big Data,
presentation. an organization must also develop the capability to work
with data. Key stakeholders need to be trained into how
Resilient focus on past performance to collect data, how to report on data, how to analyze
Reporting is retrospective and many performance review and take decisions based on the information provided in
meetings have become an opportunity for managers performance reports.
to present the data they need to justify their actions. By blending in these components: a performance
There should be more interest towards moving forward, management system, the right technological infrastructure
towards planning next steps and identifying key areas of and an organizational capability that specializes in working
action that will ensure the progress of the organization. with data, one can see their organization overcome the
disillusion of the data mirage, while it proceeds to finding
and building on the true value of data.
# Customers
January February March April May June July August September October November December
Common issues in reporting are the overload of information, which makes it hard to focus on what is important, the
unavailability of information in due time or the inaccuracy of data.
By following these 10 pieces of advice, you can solve the above-mentioned problems, ensure a better reporting and,
consequently, improve the decision making process.
REPORTING
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Report compilation process
PROCESS
DATA
REVIEW DATA
PROCESSED
CHECK DATA
QUALITY
DATA
ANALYSIS
COMMUNICATE
REPORT
GENERATE
REPORT
Stay on track
Keep it short, by assigning a meeting coordinator to keep
discussions on the right track! A performance review
meeting should not last for more than 2 hours.
Divisions
Given the variety of activities that Accounting functions Planning and Reporting divisions relate to budgeting
serve in an organization, a different set of KPIs is identified financial results.
for each of these functions. The 6 functions hereby
presented cover the most prominent facets of Accounting
Transactions / Accounts Payable / Accounts Receivable
divisions:
capabilities enable the precise measurement of invoicing,
payments, and transactions that ultimately reflect on the
Accounting Systems capabilities concern themselves consolidation of all accounts.
with the functionality of the accounting infrastructure as
well as, the technological aspects of bookkeeping.
Accounting Professional Associations
Cash Management divisions deliver necessary insight
into the status of cash reserves relative to short-term
spending. Chartered Institute of Management Accountants
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TOP 25 COST ANALYS I S KPIS OF 2016-2018
sK3333 % Cost with employees from the operating revenue Cost Analysis
Description Calculation
6 Definition Measures the deviation between the actual 9 Subordinate metrics A = $ Realized budget
costs and the planned (budgeted) costs B = $ Planned budget
for the same period. It can be applied at
organizational, team, project or individual level. 10 Calculation formula [(A-B)/B]*100
Targets
19 Threshold examples 20 Target setting notes
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1 Name: 13 BSC perspective:
Name of the KPI, a brief representation of its role. Standard Balanced Scorecard perspective where the KPI
2 fits best.
Functional Area:
Organizational capability or department that fulfils a
14 Objective measured:
specific business function. A sample objective that reflects on the organizational
purpose for the KPI being measured.
3 Sub-categories:
Sub-grouping of the industry or functional area.
15 Data capture period:
Period for which the results of the KPI have been
4 KPI Record:
measured.
Key performance Indicator (KPI) example unique
16 Standard reporting frequency:
identification number assigned automatically when
entered in the database. Frequency of reporting performance results for the KPI.
5 Industry: 17 Data collection method:
Aggregate of organizations operating in a particular field, The sources and techniques that support the data
often named after its principal product or service. gathering process.
6 Definition: 18 Limitations:
Succinct description of the KPI, clarifying its name in Other limitations (data or reporting system related) to be
business terms. considered during the use of the KPI.
7 Variation: 19 Threshold examples:
Other versions of the KPI name used in practice. Thresholds outlining the limits for positive and negative
results, as well as, the tolerance level.
8 Related KPIs:
20 Target setting notes:
List of other related KPIs in the database, either upstream
(influenced by this KPI), or downstream (with influence Additional information related to the target setting for
on this KPI). this KPI.
9 Subordinate metrics: 21 Overall notes:
Names of the metrics used in calculating the KPI (if General remarks about the use of this KPI.
applicable). 22 Additional resources:
10 Calculation formula: Other recommended online and offline resources for
Expresses the mathematical calculation of the KPI by use understanding and using this KPI.
of subordinate metrics. 23 References:
11 Trend is good when: List of resources reviewed as part of the documentation
Direction in which the results of the KPI need to progress, process.
for positive outcomes.
12 Purpose:
Explanation of the reason or business justification for
using the KPI.
Scorecard Outlook 24
Perspective Financial
Strategic Objective Maintain financial discipline
Dashboard Outlook 25
KPI Results
% Budget variance % Budget variance
5% 5%
M1 5%
4% 4%
M2 5%
3%
M3 4%
2%
M4 3%
M5 4%
M6 2%
M1 M2 M3 M4 M5 M6
In Practice Recommendations 26
Planning is an essential part of financial management, as % Budget variance can be both positive and negative.
well as budget spending. Companies develop budgets The unfavorable variance that concerns organizations
as part of their financial strategy. However, progressing is indicated by positive results (such as +7%) because
towards desired company goals, while also maintaining they outline that expenses have exceeded the budget.
financial discipline is sometimes easier said than done. On the other hand, negative values (such as -7%) raise
Some recommendations on effectively managing budget questions about the accuracy of planning or reliability
spending include: of budget execution. There is an increasing interest for
budget deviations, as companies worldwide are more and
Linking budget to strategy; more concerned with budget execution and accuracy of
Efficient allocation of resources; forecast and planning.
The use of KPIs to track financial progress;
Connecting cost management to budget;
Streamlining cash flow processes;
Built-in flexibility for unexpected spending.
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The second page of the documentation form was specifically developed to take the reader one step closer to an efficient
KPI monitoring and reporting process. The second page of the KPI documentation form is structured to befit the reporting
requirements of any KPI. It is comprised of 2 sections which are intended to provide guidance on KPI reporting, as well as,
enhance the empirical use of KPIs in day to day life. With extended editions of the Top 25 KPIs reports, the 3rd section provides
in practice recommendations to assist professionals with positioning KPIs in real life contexts.
Description Calculation
Definition Measures the amount of the company’s Subordinate metrics A = $ Working capital
working capital available in relation to its B = # Headcount
employees
Calculation formula A/B
Variations $ Net working capital per employee
Trend is good when Increasing
Related KPIs $ Shareholders funds per employee
Targets
Page 40 www.kpiinstitute.org
Additional resources
https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f...
References
1. CERC (2013), Comments on working capital, available at: http://www.cercind.gov.in/2013/regulation/Comments/IOWC.pdf
2. Danske Bank (2009), Working capital management, available at: https://danskebank.se/PDF/Foretag/Rapporter/Report-
Working-Capital-Management-2009.pdf
3. J.P. Morgan (2015), Optimizing cash flow: How to manage working capital, available at: https://www.jpmorgan.com/
jpmpdf/1320675884489.pdf
Scorecard Outlook
Perspective Financial
Strategic Objective Increase working capital productivity
Dashboard Outlook
KPI Results
$ Working capital per employee
M1 18000
20000
M2 15000 19000
18000
16000
M3 16000 16000
15000
M4 19000
M5 20000
M6 16000 M1 M2 M3 M4 M5 M6
Description Calculation
Definition Measures the amount spent with financial Subordinate metrics A = $ Expenses with the finance
and accounting activities as a proportion and accounting function
of the total revenue generated B = $ Revenue
by the company.
Calculation formula (A/B)*100
Variations % Finance department costs
% Accounting department costs Trend is good when Decreasing
Targets
Overall notes
How much is the cost of the finance function as a percentage of total revenues? ‘The average is around 1.4%, says Charles
Tilley, chief executive of the Chartered Institute of Management Accountants (CIMA). ‘That of well-run companies is
somewhere between 0.6% and 0.7%.’ The finance function’s accounting operations can be more efficient if centralised
Page 42 www.kpiinstitute.org
so that processes can be standardised and economies of scale realised. Whether in-house or outsourced, these shared
service centres can be centres of excellence where expertise is concentrated. Through investment in technology and
skills development, the role of shared service centres in accounts and finance is expanding to include higher value
services such as reporting and analysis. Other support services, especially information technology (IT), human resources
(HR) and procurement may be provided too.
Additional resources
http://www.cimaglobal.com/Documents/ImportedDocuments/cid_execrep_finance_business_partners_Jul09.pdf
References
1. Fabozzy, F. J. (2004), Financial management and analysis, Second Edition. New Jersey: John Wiley & Sons, available at: https://
leseprobe.buch.de/images-adb/cc/b8/ccb8098b-7bc7-4b3a-98fa-312e98e9b2e8.pdf?
2. Ogilvie, J. (2009), Management accounting: Financial strategy. Oxford: Elsevier, available at: https://www.bookdepository.com/
Management-Accounting-Financial-Strategy-John-Ogilvie/9780750687157?
3. Bacani, C. (2010), Finance-function cost: The 0.6% solution, available at: http://www.cfoinnovation.com/content/finance-
function-cost-06-solution
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
% Cost of the finance function from revenue
6%
M1 4% 5%
4% 4%
M2 6%
3% 3%
M3 3%
M4 3%
M5 4%
M1 M2 M3 M4 M5 M6
M6 5%
Description Calculation
Definition Measures the cost of the merchandise Subordinate metrics A = $ Beginning inventory (at the
sold within a given time period. beginning of the period)
B = $ Net purchases (period
Variations $ Cost of sales purchases less discounts,
Related KPIs $ Beginning inventory (BI) returns and allowances) plus
$ Ending inventory freight in
% Overhead cost ratio C = $ Ending inventory (at the
$ Cost of services delivered end of the period)
% Value of unaccounted stock Calculation formula A+B-C
$ Packaging cost
Trend is good when Decreasing
Targets
Page 44 www.kpiinstitute.org
Analysis and Resources
Overall notes
It is the largest single expense of most businesses that sell merchandise. It includes only costs directly linked to
the production/ acquisition of the products the company sells. A retailer’s cost of goods sold includes the cost
from its supplier, plus any additional costs necessary to get the merchandise into inventory and ready for sale.
Additional resources
http://www.stephenlnelson.com/MBAxlch12.pdf
http://www.swlearning.com/accounting/porteralt3e/instructor/im/pn_chap06.pdf
References
1. Day, J. W. (2008), Cost of goods sold, available at: http://www.reallifeaccounting.com/pubs/Article_Theme_Cost_of_
Goods_Sold.pdf
2. Association of Certified Fraud Examiners (n.d.), How to detect and prevent financial statement fraud, available at:
https://www.acfe.com/uploadedFiles/Shared_Content/Products/Self-Study_CPE/How%20to%20Detect%20and%20
Prevent%20Financial%20Statement%20Fraud%202013_Chapter%20Excerpt.pdf
3. Hoeksema, A. (2012), 3 Ways to Reduce Cost of Goods Sold, available at: http://blog.projectionhub.com/3-ways-to-
reduce-cost-of-goods-sold/
Scorecard Outlook
Perspective Financial
Strategic Objective Optimize costs
Dashboard Outlook
KPI Results
$ Cost of goods sold (COGS)
28000
M1 27000 27000
M2 28000 22000
19000
M3 22000 17500
16500
M4 19000
M5 17500
M6 16500 M1 M2 M3 M4 M5 M6
Description Calculation
Definition Measures inventory obsolescence costs (cost Subordinate metrics A = $ Obsolescence costs
of inventory when no longer deployable to B = $ Inventory
customer) as a percentage of total inventory.
It indicates the effectiveness of the inventory Calculation formula (A/B)*100
management process. Trend is good when Decreasing
Variations % Obsolescence inventory costs
Related KPIs % Obsolete items in inventory
Targets
Page 46 www.kpiinstitute.org
Additional resources
http://www.ism.ws/files/Pubs/Proceedings/BCHarding.pdf
http://www.remassoc.com/portals/0/remprecc.pdf
References
1. Ray, R. (2010), Supply chain management for retailing. New Delhi: Tata McGraw Hill, available at: https://www.amazon.com/
Supply-Chain-Management-Retailing-1E/dp/0070682100
2. Timme, S. G. and Williams-Timme, C. (2003), The real cost of holding inventory, Reed Elsevier, available at: http://www.
mcasolutions.com/pdf/Cost_of_Inventory.pdf
3. Longenecker, J. G., Moore, C. W., Palich, L. E. and Petty, J. W. (2006), Small business management: An entrepreneurial emphasis,
Thirteen Edition. Ohio: South-Western, available at: https://www.amazon.com/Small- Business-Management-Entrepreneurial-
Emphasis/dp/032406554X
Scorecard Outlook
Perspective Financial
Strategic Objective Optimize costs
Dashboard Outlook
KPI Results
% Obsolescence costs from total inventory
20%
M1 10%
17%
M2 17%
12% 12%
10%
M3 20%
9%
M4 12%
M5 12%
M1 M2 M3 M4 M5 M6
M6 9%
Description Calculation
Definition Measures the percentage of projects that are Subordinate metrics A = $ Revenue (sales)
clearly connected to business objectives and B = $ Cost of goods sold
strategies out of the total projects. C = $ Gross income (A-B)
Variations % Gross margin Calculation formula [(A-B)/A]*100 or (C/A)*100
Related KPIs % Predictability of the construction Trend is good when Increasing
project profit
$ Operating margin
Targets
Page 48 www.kpiinstitute.org
Additional resources
http://yourbusiness.azcentral.com/causes-decline-gross-profit-margin-5298.html
References
1. Queensland Government (n.d.), Calculating profit margins, available at: http://www.business.qld.gov.au/business/running/
making-and-managing-money/making-your-business-moreprofitable/calculating-profit-margins
2. Kokemuller, N. (2013), Why does revenue increase when the gross profit margin decreases?, available at: http://yourbusiness.
azcentral.com/revenue-increase-gross-profit-margin-decreases-2954.html
3. Wibowo, H. (2006), The importance of gross profit margin, available at: http://www.eioba.com/a10648/the_importance_of_
gross_profit_margin
Scorecard Outlook
Perspective Financial
Strategic Objective Increase profitability
Dashboard Outlook
KPI Results
% Gross profit margin
40%
M1 14% 30%
25%
20%
M2 25%
14%
12%
M3 12%
M4 20%
M5 40%
M1 M2 M3 M4 M5 M6
M6 30%
Description Calculation
Targets
Page 50 www.kpiinstitute.org
Additional resources
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/566567/BEIS_
Electricity_Generation_Cost_Report.pdf
References
1. Government of Canada (2009), Appendix B: Shelter-cost-to-income-ratio (STIR) and the affordability standard, available at:
http://www.statcan.gc.ca/pub/75f0002m/2008001/aB-eng.htm
2. U.S. Department of State (2010), Summary and highlights: Fiscal year 2010 budget request, available at: http://www.state.gov/
documents/organization/122513.pdf
3. National Transit Database, Federal Transit Administration (2000), National transit summaries and trends: Operating costs and
performance measures, available at: http://www.ntdprogram.gov/ntdprogram/pubs/NTST/00NTST.pdfhttps://www.amazon.
com/gp/search?index=books&linkCode=qs&keywords=9780749466091
3. Omidvar, H. (2008), Project budget & cost management, available at: http://www.montgomerycountymd.gov/omb/resources/
files/omb/pdfs/costestimation/presentation1.pdf
Scorecard Outlook
Perspective Financial
Strategic Objective Maintain financial discipline
Dashboard Outlook
KPI Results
% Operating costs
80%
M1 30% 70%
60%
M2 50%
50% 40%
M3 70% 30%
M4 80%
M5 60%
M6 40% M1 M2 M3 M4 M5 M6
Description Calculation
Definition Measures the amount of money spent on Subordinate metrics Ai = $ Payroll tax paid by the
taxes from the employer’s own funds for organization for employee ‘i’, where
each employee, that can be either fixed or i=1 to n
proportionally linked to an employee’s pay. n = # Employees
Variations $ Payroll tax paid by the organization Calculation formula (A1+A2+...+An)/n
Related KPIs $ Payroll expense per employee Trend is good when Decreasing
Targets
Page 52 www.kpiinstitute.org
Additional resources
http://www.accountingcoach.com/payroll-accounting/explanation/4
https://data.oecd.org/tax/tax-on-payroll.htm
References
1. Organization for Economic Co-operation and Development (n.d.), Employer versus employee taxation: The impact of employment,
available at: http://www.oecd.org/els/emp/4343154.pdf
2. Brealey, R. A. (2006), Fundamentals of corporate finance, McGraw-Hill Ryerson, available at: http://www.untagsmd.ac.id/files/
Perpustakaan_Digital_1/CORPORATE%20FINANCE%20Fundamentals%20of%20Co...
3. QFinance (2013), Payroll tax, available at: http://www.qfinance.com/dictionary/payroll-tax
Scorecard Outlook
Perspective Financial
Strategic Objective Increase financial efficiency
Dashboard Outlook
KPI Results
$ Payroll tax paid by the employer
130
120
120
S1 100 45%
100
S2 120
S3 130
S4 120
S1 S2 S3 S4
Description Calculation
Definition Measures whether the company’s profits can Subordinate metrics A = $ Earnings Before Interest
cover the interest cost on debt. and Taxes (EBIT)
B = $ Net interest paid
Variations # Interest coverage c = $ Interest expense
# Times interest earned
Calculation formula A/B or A/C
Related KPIs # Preferred dividend coverage ratio
# Times interest earned Trend is good when Increasing
$ Net interest income (NII)
Targets
Page 54 www.kpiinstitute.org
Additional resources
http://www.nersa.org.za/Admin/Document/Editor/file/PetroleumPipelines/Tariffs/Interest%20Cover%20Rat...
https://data.worldbank.org/indicator/GC.XPN.INTP.RV.ZS?view=chart?http://www.burningtrees.org/2012/09/30/
the-united-states-interest-coverage-ratio/?
References
1. Australia and New Zealand Banking Group Limited (2011), Interest cover, available at: http://www.anz.com/aus/Small-Business/
Tools-Forms-And-Guides/Benchmark-Your-Business/Interest-Cover/default.asp
2. Bized.com.uk (2003), Financial ratio analysis: Interest cover, available at: http://www.bized.co.uk/compfact/ratios/investor15.
htm
3. Moneyterms.co.uk (2011), Interest cover, available at: http://moneyterms.co.uk/interest_cover/
Scorecard Outlook
Perspective Financial
Strategic Objective Increase profitability
Dashboard Outlook
KPI Results
# Interest cover 2.3
2.1 2.1
M1 1.1 1.8 1.7
M2 1.8
M3 2.1 1.1
M4 2.3
M5 1.7
M1 M2 M3 M4 M5 M6
M6 2.1
Description Calculation
Definition Measures the contribution margin of goods/ Subordinate metrics A = $ Revenue (sales)
services sold relative to revenue. B = $ Variable costs
Variations % Contribution margin to sales Calculation formula [(A-B)/A]*100
Related KPIs $ Variable costs Trend is good when Increasing
$ Contribution margin
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References
1. Carty, S.-L. (2014), What happens if the contribution margin ratio increases?, available at: http://smallbusiness.chron.com/
happens-contribution-margin-ratio-increases-24781.html
2. Australian National Training Authority (2003), Undertake financial planning: Formulas for costing and pricing calculations, available
at: https://www.dlsweb.rmit.edu.au/toolbox/smllbusmang/content/03_underfinplan/download/ufp_formulasforcosting.pdf
3. Carty, S.-L. (2014), How the contribution margin decreases the break-even point, available at: http://smallbusiness.chron.com/
contribution-margin-decreases-breakeven-point-24036.html
Scorecard Outlook
Perspective Financial
Strategic Objective Increase profitability
Dashboard Outlook
KPI Results
23%
% Contribution margin ratio
20%
M1 10%
M2 7%
10% 8% 10%
M3 20% 7%
M4 8%
M5 23%
M1 M2 M3 M4 M5 M6
M6 10%
Description Calculation
Definition Measures the amount represented by the Subordinate metrics A = $ Overhead costs
overhead costs, as a percentage of the cost B = $ Cost of goods sold
of goods sold. Overhead costs refer to the
ongoing expenses needed to operate the Calculation formula (A/B)*100
business (such as rent, salaries and so forth). Trend is good when Decreasing
Variations % Overhead to cost of sales ratio
Related KPIs $ Cost of goods sold (COGS)
Targets
Page 58 www.kpiinstitute.org
Additional resources
http://nccsdataweb.urban.org/FAQ/index.php?category=40
http://www.rand.org/content/dam/rand/pubs/monograph_reports/MR1325/MR1325.ch9.pdff?
References
1. Kenkel, P. (n.d.), Understanding, allocating, and controlling overhead costs, Oklahoma Cooperative Extension Service, available
at: http://www.altfeldinc.com/pdfs/GreatInfo!.pdf
2. Kim, Y.-W. and Ballard, G. (2002), Case study: Overhead costs analysis, available at: http://www.leanconstruction.org/media/
docs/IGLC02Kim-Ballard.pdf
3. Bragg, S. M. (2003), Business ratios and formulas: A comprehensive guide. New Jersey: John Wiley & Sons, available at:
http://160592857366.free.fr/joe/ebooks/tech/Wiley%20Business%20Ratios%20and%20Formulas%20A%20Compreh...?
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
% Overhead cost ratio 40%
35%
M1 20%
25%
25%
M2 25%
20% 20%
M3 35%
M4 20%
M5 25%
M6 40% M1 M2 M3 M4 M5 M6
Description Calculation
Definition Measures the total number of cost Subordinate metrics A = # Cost improvement plans
improvement plans development by the
organization during the measurement period. Calculation formula A
Targets
Page 60 www.kpiinstitute.org
Additional resources
http://www.kmpt.nhs.uk/Downloads/whats-happening/Trust%20Board%2026%20April%202012/att6%20-%20
Cost%20Improvement%20Programme%202012-13%20to%202014-15%20trust%20board%2026%20apr%20
2012.pdf
http://www.scrivenerpublishing.com/pdfs/Berk_sample_chapter.pdf
References
1. Simpson, P. (2013), Cost improvement plans: Quality impact assessment (QIA), Healthcare NHS Trust, available at: http://
www.surreyandsussex.nhs.uk/wp-content/uploads/2013/02/3.2-Cost-Improvement-Plans-QIA.pdf
2. City of Hutto (2013), Capital improvements plan FY 2013-2022, available at: http://www.huttotx.gov/documentcenter/
view/3998
3. Gloucestershire Care Services NHS Trust (2013), Cost improvement programme (CIP) strategy 2013-18, available at:
http://www.glos-care.nhs.uk/images/AI-14.2_App_2_CIP_Strategy_v0.6.pdf
Scorecard Outlook
Dashboard Outlook
KPI Results
# Cost improvement plans 11
Q1 11
7
Q2 7 5
4
Q3 5
Q4 4
Q1 Q2 Q3 Q4
Description Calculation
Definition Measures the amount of expenses that are
incurred independent of the company's Subordinate metrics A = $ Rent
output. B = $ Depreciation
C = $ Insurance
Variations $ Costs that are fixed D = $ Property taxes
E = $ Administrative salaries and
Related KPIs $ Fixed cost per employee on-cost
$ Life cycle cost (LCC)
Calculation formula A+B+C+D+E
Trend is good when Decreasing
Targets
Threshold examples Target setting notes
Fixed costs targets vary depending on company profile,
size and industry.
Red: >250,000 Yellow: 200,000- Green: <200,000
250,000
Overall notes
Measuring fixed costs can be done in several contexts suMeasuring fixed costs can be done in several contexts such as the
ongoing monthly activity of one company, an investment project and so forth. A fixed cost is a cost that remains the same
with changes in sales volume orboperational activity. Fixed costs can include: amortization, depreciation, insurance, interest
expense, property taxes, rent, salaries, utilities. It may be that a business deliberately structures its fixed costs to be higher
than the variable costs so that it generates more profit per unit produces i.e software companies. Financial management will
look into fixed costs as a most important component of business continuity and sustainability.
Page 62 www.kpiinstitute.org
Additional resources
http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P06_7510
http://www.thetimes100.co.uk/theory/theory--fixed-variable-costs-break-even--122.php
http://cob.nmu.edu/amtmann/Lavras%20Course%20Materials/Fixed%20and%20Variable%20Costs.pdf
References
1. Abel, A. B. and Eberly, J. C. (2002), Investment and q with fixed costs: An empirical analysis, available at: http://www.kellogg.
northwestern.edu/faculty/eberly/htm/research/invest13.pdf
2. Reiss, B. (2010), Outsoucing turns fixed costs into variable costs, available at: http://www.entrepreneur.com/article/217487
3. Spence, M. (n.d.), Product selection, fixed costs and monopolistic competition, available at: http://www.stern.nyu.edu/
networks/phdcourse/Spence_Product_selection.pdfmanagement guideline, available at:
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Fixed costs
M1 200000 220000
230000
200000
M2 150000
150000
M3 220000 150000 150000
M4 230000
M5 150000
M1 M2 M3 M4 M5 M6
M6 150000
Description Calculation
Definition Measures the value of the investment made Subordinate metrics A = $ Equipment related
in operational equipment, both for acquisition expenses in a given period
and maintenance.
Calculation formula A
Variations $ Equipment expenses
Trend is good when Within range
Related KPIs # Weight of linen laundered per day
Targets
Page 64 www.kpiinstitute.org
Additional resources
http://eu.wiley.com/WileyCDA/WileyTitle/productCd-EHEP002981.html?
References
1. Drysdale, J. A. (2009), Restaurant food service equipment, Prentice Hall, available at: https://www.amazon.com/
Restaurant-Food-Service-Equipment-Drysdale/dp/0135017882/?
2. Martin, I. M. and Martin, W. E. (2009), The greening of Long Beach restaurants, College of Business Administration,
California State University, available at: http://www.csulb.edu/colleges/cba/dean/news/documents/Greening_of_LB_
Restaurant_Industry_Report.pdf
3. Katsigris, C. and Thomas, C. (2008), Design and equipment for restaurants and foodservice: A management view,
Third Edition, John Wiley & Sons, available at: http://books.google.com/books?id=IRW5xjtG5UAC&printsec=frontcover
&hl=ro&source=gbs_ge_su...
Scorecard Outlook
Dashboard Outlook
KPI Results
$ Spent on equipment
8000
Q1 6000 6000
Q2 3000 5000
3000
Q3 5000
Q4 8000
Q1 Q2 Q3 Q4
Description Calculation
Definition Measures the aggregated cost of owning an Subordinate metrics A = $ Costs for purchase and
asset or equipment over its life cycle. installation
B = $ Other costs during the
Variations $ Whole of life (WOL) cost whole life of the asset,
$ WOL e.g. depreciation, fuel,
Related KPIs $ Fixed costs maintenance, repairs, etc.
Calculation formula A+B
Trend is good when Decreasing
Targets
Overall notes
Life cycle costing is a process to determine the sum of all the costs associated with an asset or part thereof, including
acquisition, installation, operation, maintenance, refurbishment and disposal costs. It is therefore pivotal to the asset
management process. This KPI is commonly used for large investments such as buildings, equipment and systems.
Page 66 www.kpiinstitute.org
Additional resources
http://www.clemson.edu/ces/arts/LCCAARPM.pdf
References
1. Heidler, C. D. (1994), Life cycle costing: Getting approval for the budget you need, Clarion University of Pennsylvania, available
at: http://www.passhe.edu/inside/anf/Fac/Documents/Facilities%20Manual/Apx-6d-1.pdf
2. Stanford University (2005), Guidelines for life cycle cost analysis, available at: http://lbre.stanford.edu/sites/all/lbre-shared/
files/docs_public/LCCA121405.pdf
3. Office of Industrial Technologies (2001), Pump life cycle costs: A guide to LCC analysis for pumping systems, available at:
https://www1.eere.energy.gov/manufacturing/tech_assistance/pdfs/pumplcc_1001.pdf
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Life cycle cost (LCC)
22000 22000
21000
Y1 19000
19000
Y2 22000
Y3 22000
Y4 21000
Y1 Y2 Y3 Y4
Description Calculation
Definition Measures the general and administrative Subordinate metrics A = $ Net sales
expenses in relation to the total sales revenue. B = $ General and administrative
expenses
Variations # Sales to administrative expenses
Calculation formula A/B
Related KPIs $ Selling, general and administrative expenses
(SG&A expenses) Trend is good when Increasing
Data Profile
Targets
Page 68 www.kpiinstitute.org
References
1. Bragg, S., M. (2006), Business ratios and formulas, Second Edition, John Wiley & Sons
2. Kang, P. and Hu, Z. (2009), Organization cost, sales, general and administrative expenses and management cost, Innovation
Management and Industrial Engineering, Vol. 26-27, Pages 243-249
3. Accountingtools.com (2014), What is selling, general and administrative expense, available at: http://www.accountingtools.
com/questions-and-answers/what-is-the-selling-general-and-administrativeexpense.html
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
# Sales to general and administrative expenses 25
24
M1 20 20 19
18
16
M2 18
M3 16
M4 19
M5 25
M1 M2 M3 M4 M5 M6
M6 24
Description Calculation
Focus Targets
Page 70 www.kpiinstitute.org
Additional resources
http://beginnersinvest.about.com/od/incomestatementanalysis/a/operating-expense.htm
References
1. Agile BI Melbourne (2008), Developing performance metrics that drive decision making, available at: http://www.slideshare.
net/victorholman/developing-metrics-that-drive-performance-success
2. Alpar, P. & Kim, M. (1990), A microeconomic approach to the measurement of information technology value, journal of
management information systems, Vol. 7, No. 2, pp. 55-69
3. Horngren, C., T., Harrison, W., T. & Bamber, L., S. (2003), “Accounting”, 6th Edition, Prentice Hall
4. KPI Drafting Group (2001), Working paper: cost effectiveness and productivity KPIs, available at: http://www.eurocontrol.int/
prc/gallery/content/public/Docs/kpi.pdf
5. Vodafone (2008), Annual report 2008, available at: http://www.vodafone.com/content/annualreport/annual_report08/
performance/kpis/strategic_kpis.html
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Operating expenses
M1 12000 12000 12000
11500
11000
M2 10000 10000 10400
M3 11500
M4 10400
M5 12000
M1 M2 M3 M4 M5 M6
M6 11000
Description Calculation
Definition Measures the average cost per person for a Subordinate metrics A = $ Personnel costs
given unit of time (for example, cost per day of B = # Persons
one individual). C = # Unit of time
Variations $ Cost accrual Calculation formula A/B/C
Related KPIs % Wages cost from sales Trend is good when Decreasing
Purpose To assess the costs incurred with Data capture period Day
the company’s personnel.
Standard reporting Monthly
BSC perspective Financial frequency
Targets
Threshold examples Target setting notes
Page 72 www.kpiinstitute.org
worked for total employee compensation in December 2013. Wages and salaries averaged $20.76 per hour worked. Regarding
the paid leave costs in private industry, employer costs for paid leave benefits averaged $2.05 per hour worked.
Additional resources
http://www.aiu.edu/publications/student/english/Financial-Risk-Management.html
http://www.tsheets.com/resources/determine-the-true-cost-of-an-employee
References
1. Bureau of Labor Statistics, U.S. Department of Labor (2014), Employer costs for employee compensation - December 2013,
available at: http://www.bls.gov/news.release/pdf/ecec.pdf
2. Center for Advanced Human Resources Studies, Cornell University (2010), Employee compensation: Know the true costs of
employment and optimize them to benefit employers, employees, Number 8, available at: http://digitalcommons.ilr.cornell.edu/
cgi/viewcontent.cgi?article=1015&context=cahrs_researchlink
3. Clifford, C. (2010), Why a $14/hour employee costs $20, available at: http://money.cnn.com/2010/03/26/smallbusiness/
employee_costs/
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Cost accrual ratio
26
M1 22 25
22
M2 25 20 20
M3 20 17
M4 17
M5 20
M1 M2 M3 M4 M5 M6
M6 26
Description Calculation
Targets
Page 74 www.kpiinstitute.org
Analysis and Resources
Overall notes
Indirect costs are costs that cannot be attributed to specif cost objects, however they are considered fixed costs
nonetheless. Indirect costs that are related to production processes are known as production overhead, while costs
associated with general and administrative areas are commonly known as administrative overhead. A business will
identify its indirect costs in order to exclude them from short term pricing decisions and have a complete overview on
financial operations.
Indirect costs can include: utilities, rent, audit and legal, administrative staff, equipment rental.
Additional resources
http://www2.ed.gov/about/offices/list/ocfo/intro.html
References
1. Bill and Melinda Gates Foundation (2012), Indirect cost policy for project grants and contracts for applicant organizations,
available at: https://docs.gatesfoundation.org/Documents/Indirect_Cost_Policy.pdf
2. United States Department of Labor (2012), A guide to indirect cost rate determination, available at: http://www.dol.gov/
oasam/programs/boc/costdeterminationguide/cdg.pdf
3. Charles Stewart Mott Foundation (n.d.), Indirect versus direct costs, available at: http://www.mott.org/grantsandguidelines/
ForGrantees/accounting/indirectvsdirect
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Indirect costs 1500 1500
1200
Q1 1000
1000
Q2 1500
Q3 1500
Q4 1200
Q1 Q2 Q3 Q4
Description Calculation
Definition Measures the entire costs associated with Subordinate metrics A = $ Customer order entry and
the delivery of a product or service. processing
B = $ Acquisition of bought in
Variations $ Asset acquisition cost materials and services
C = $ Supplier's raw material and
internal costs
D = $ Quality costs
Focus E = $ Assembly or conversion
F = $ Freight - inbound and
Purpose To identify and eliminate/ minimize outbound
all non-value added activities in G = $ Administration
the supply chain for a nominated H = $ Cost to receive and make
product. ready
BSC perspective Financial Calculation formula A+B+C+D+E+F+G+H
Objective measured Reduce operating costs Trend is good when Decreasing
Overall notes
Measuring the TAC for products and services requires a view of the market as global, highly competitive and dynamic
with a big chance of dramatic changes in supply chain behavior driven by rapid technical innovation and changing
capacity. Understanding and monitoring these forces is probably the best way to monitor and control the TAC.
Page 76 www.kpiinstitute.org
Additional resources
http://www.supplymanagement.com/resources/q-and-a/2004/measuring-total-acquisition-cost/
http://www.supplychainexcellence.co.uk/PDFs/TotalAcquisitionCostprocess.pdf
http://www.rand.org/content/dam/rand/pubs/monograph_reports/MR1362/MR1362.ch5.pdf
References
1. Song, N., Platts, K. and Bance, D. (n.d.), Total acquisition cost of overseas outsourcing/sourcing: A framework and a
case study, Journal of Manufacturing Technology Management, 18(7): 858-875, available at: http://www.researchgate.net/
publication/242343485_Total_acquisition_cost_of_overseas_outsourcingsourcing_a_framework_and_a_case_study
2. Chakravarty, C. A. and Naware, C. S. (2008), Cost-effectiveness analysis for technology acquisition, available at: http://
medind.nic.in/maa/t08/i1/maat08i1p46.pdf
3. Macroplan Australia (2010), A benefit cost analysis: Outsourcing of acquisitions, cataloguing and processing in NSW
Public Libraries, available at: http://www.sl.nsw.gov.au/services/public_libraries/docs/benefit_cost_analysis.pdf
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Total acquisition cost (TAC) 200
170
150
M1 130
150 140
M2 150 130
M3 170
M4 140
M5 200
M1 M2 M3 M4 M5 M6
M6 150
Description Calculation
Definition Measures the amount of money needed to Subordinate metrics A = $ Wages cost
cover wages and salaries from the total sales B = $ Sales revenue
revenue.
Calculation formula (A/B)*100
Variations % Salary cost from total sales
% Wage expense from total sales Trend is good when Decreasing
Targets
Page 78 www.kpiinstitute.org
Additional resources
http://www.oldandsold.com/articles11/distribution-19.shtml
References
1. Meager, N. and Speckesser, S. (2011), Wages, productivity and employment: A review of theory and international
data, Institute for Employment Studies, available at: http://www.eu-employmentobservatory.net/resources/reports/
WagesProductivityandEmployment.pdf
2. Cascio, W. F. (2006), The high cost of low wages, Harvard Business Review, available at: http://hbr.org/2006/12/the-high-
cost-of-low-wages/ar/1
3. M&T Bank (n.d.), Understanding where you stand: A simple guide to your company’s financial statements, available at:
https://www.mtb.com/business/businessresourcecenter/Documents/brc_finstatement.pdf
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
% Wages cost from sales 50%
M1 30%
30% 30%
M2 50%
20% 20%
M3 30% 10%
M4 20%
M5 10%
M1 M2 M3 M4 M5 M6
M6 20%
Description Calculation
Purpose To indicate the level of fixed costs, Data capture period Month
independent of the level of output
Standard reporting Monthly
generated by the business.
frequency
BSC perspective Financial Data collecion method Financial statements
Objective measured Reduce operating costs Limitations Accurate data gathering requires a
sound financial system to capture
the relevant data.
Targets
Page 80 www.kpiinstitute.org
Additional resources
http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P06_7510
References
1. NC State of University (n.d.), Costs and decision making, available at: http://www4.ncsu.edu/~rsawyers/webpage/acc220/
Chapter5.pdf
2. Hofstrand, D. (2007), Managerial costs, available at: http://www.agmrc.org/business_development/getting_
preparedbusiness_and_economic_concepts_and_principles/managerial-costs/
3. Rural Women’s Network (2006), Start your own business: Business viability, available at: http://www.ruralwomen.org.uk/
pdfs/book4businessviability.pdf
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Fixed cost per employee
700
M1 700 650
600
M2 550 550
450
420
M3 420
M4 650
M5 600
M6 450 M1 M2 M3 M4 M5 M6
Description Calculation
Definition Measures the average value of all the Subordinate metrics A = $ Overdue invoices value
invoices not paid in due time. B = # Overdue invoices
Variations $ Average value of invoices not paid in due Calculation formula A/B
time
Trend is good when Decreasing
Related KPIs $ Invoice value
# Overdue invoices
Page 82 www.kpiinstitute.org
References
1. Skinner, D. E. (2011), How to get your overdue invoices paid by lighting a fire under the customer, available at: http://www.
avvo.com/legal-guides/ugc/how-to-get-your-overdue-invoices-paid-by-lighting-a-fire-under-thecustomer
2. Transverse (2014), Invoice overdue report, available at: http://tract.gotransverse.com/Invoice-Overdue-Report
3. The Accounts Payable Accounts (2008), The importance of AP in managing cash flow, Volume 1, Number 3, available at: http://
www.theaccountspayablenetwork.com/html/library/newsletters/apmonthly_1108.pdf
Scorecard Outlook
Perspective Financial
Strategic Objective Increase financial efficiency
Dashboard Outlook
KPI Results
$ Overdue invoices 90000
M1 55000
72000
70000
M2 65000 65000
55000
M3 90000 55000
M4 72000
M5 55000
M6 70000 M1 M2 M3 M4 M5 M6
Description Calculation
Definition Measures the value of costs that can Subordinate metrics A = $ Discretionary costs
be curtailed or even eliminated in the
short term without having an immediate Calculation formula A
impact on the short-term profitability of Trend is good when Decreasing
a business.
Variations $ Discretionary expenditure
$ Managed costs Data Profile
Related KPIs % Discretionary costs from sales Data capture period Month
Standard reporting Monthly
Focus frequency
Data collection Financial statements
Purpose To indicate the company’s efforts
method
to control its spending and
increase profits. Limitations Accurate data gathering requires a
sound financial system to capture
BSC perspective Financial the relevant data. Finance experts
Objective measured Reduce operating costs may also use budgets to track the
company’s expenses.
Targets
Page 84 www.kpiinstitute.org
Additional resources
https://www.transportation.gov/sites/dot.gov/files/docs/mission/office-policy/transportation-policy/284031/
benefit-cost-analysis-guidance-2018_0.pdf
http://www.krantcents.com/how-do-you-track-your-expensesf
References
1. Bragg, S. (2010), What is a discretionary cost?, available at: http://www.accountingtools.com/questions-andanswers/what-is-a-
discretionary-cost.html
2. Government of Nova Scotia (2008), Budgeting and financial management manual: Discretionary spending, available at: http://www.
novascotia.ca/treasuryboard/manuals/PDF/200/20304-04.pdf
3. Financial ConsumerAgency of Canada (2014), Expenses, available at: http://www.fcacacfc.gc.ca/Eng/resources/educationalPrograms/
ft-of/Pages/ieb-3-5.aspx
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Discretionary costs 900
800 860
M1 800 750
750
650
M2 900
M3 650
M4 750
M5 860
M1 M2 M3 M4 M5 M6
M6 750
Description Calculation
Targets
Overall notes
The KPI indicates the total costs as represented by financial compensation and benefits paid to a full time equivalent over
a pre-determined period of time. Wage expense is generally the largest operating expense in terms of human capital, and
productivity is expected as a return on that investment. Most companies keep close track of costs with full time equivalents
to monitor the manner in which expenses are managed.
Page 86 www.kpiinstitute.org
Additional resources
https://vpsc.vic.gov.au/html-resources/a-dictionary-of-people-metrics/33-total-compensation-expense-...?
http://www.community.nsw.gov.au/annual_report09/improve_workforce.htm?https://nces.ed.gov/fastfacts/display.
asp?id=75?
References
1. Society for Human Resource Management (2016), Human capital benchmarking report, available at: https://www.shrm.org/
hr-today/trends-and-forecasting/research-and-surveys/Documents/2016-Human-Capit...?
2. European Commission (2017), ?Unit costs for direct personnel costs, available at: http://ec.europa.eu/eurostat/
documents/10186/7970019/Guideline-unit-costs.pdf
3. State Higher Education Executive Officers Association (2010), Degree production and cost trends, available at: http://www.
sheeo.org/sites/default/files/publications/Degree_Production_and_Cost_Trends.pdf?
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
$ Costs per FTE employee
2000
M1 1500
1750
1500
M2 1300 1500
1350
M3 1350 1300
M4 2000
M5 1500
M1 M2 M3 M4 M5 M6
M6 1750
Description Calculation
Definition Measures the value of staff costs Subordinate metrics A = $ Employees costs
(wages, bonuses etc.), as a percentage of B = $ Operating revenue
the total operating revenue.
Calculation formula (A/B)*100
Variations % Employees costs from the operating
revenue Trend is good when Within range
% Workforce costs from the operating
revenue
Related KPIs $ Operating revenue per employee Data Profile
Targets
Overall notes
According to a 2006 SHRM survey of 700 companies, including a significant number of Fortune 500 companies, total human
capital costs also known as total cost of workforce, average nearly 70% of operating expenses.
Page 88 www.kpiinstitute.org
Additional resources
http://www.shrm.org/research/articles/articles/pages/metricofthemonthsalariesaspercentageofoperatingexpense.
aspx
http://www.orgplan.eu/OrgPlanPDF.php.
References
1. Human Capital Management Institute (n.d.), Managing an organization’s biggest cost: The workforce, available at: http://www.
hcminst.com/files/OrgPlus_Total_Cost_Workforce_.pdf
2. Appelblad, A. S. and Lonn, S. (2004), A study of workforce management, IT University of Goteborg, available at: https://gupea.
ub.gu.se/bitstream/2077/1172/1/Nr_13_AS,SL.pdf
3. National Industry Skills Committee (2008), Good practice workforce strategies: Case studies, available at: http://education.qld.
gov.au/staff/development/performance/resources/readings/good-practices-guides.pdf
Scorecard Outlook
Perspective Financial
Strategic Objective Reduce operating costs
Dashboard Outlook
KPI Results
% Cost with employees from the operating revenue 60%
55% 55%
M1 40%
50%
M2 60% 45%
40%
M3 45%
M4 55%
M5 50%
M6 55% M1 M2 M3 M4 M5 M6
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Page 90 www.kpiinstitute.org
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KEY BENEFITS
Integration: a complete set of tools for implementing a Performance Management System
Hands-on approach: a ready-to-use toolkit, containing pre-populated templates
Advice and learning: all templates are filled in with relevant data, requiring limited effort for customization
Complete documentation: all KPIs are fully documented
Toolkits by Industry
Managing and measuring performance is now easier with prepopulated templates
Call Center Performance Medical Practice Performance Real Estate Agency Performance Recruitment Agency
Management System Toolkit Management System Toolkit System Toolkit Performance Management
System Toolkit
DISCOVER ALL
TOOLKITS
IN OUR RESEARCH
LIBRARY!
Page 94 www.kpiinstitute.org
APPENDIX D: PERFORMANCE MAGAZINES
Keeping professionals updated with the latest performance management trends and
developments
Special Editions
The Performance Management in 2014 Special Editions are The KPI Institute’s exclusive publications that provide
in-depth analysis on Performance Management within the Gulf Cooperation Council and the Member States of the
Association of Southeast Asian Nations.
GET ACCESS TO
Portraits of renown performance experts across the globe
Interviews with prominent professionals in the field
Articles offering valuable insights on numerous performance related topics
Reviews of software and hardware solutions
Resources and other recommendations
Get exclusive resources as a member of The KPI Institute! Find out more by
visiting kpiinstitute.org/membership
GO PREMIUM
Page 96 www.kpiinstitute.org
APPENDIX E: SUBSCRIPTION OPTIONS
Explore the world of KPIs
Whether you want to implement a performance measurement system or you need to improve your current framework,
you can choose the best subscription plan to help you inform your KPI Selection.
BENEFITS
Find relevant KPI examples for your context
Obtain high quality KPI documentation
Use the KPI documentation form example to design your own
template
Export documented KPI examples and instantly create your own
library
Receive assistance from experts on matters related to performance
measurement
Page 98 www.kpiinstitute.org
THE KPI INSTITUTE OFFERS A VARIETY OF CUTTING-EDGE TRAINING PROGRAMS TO MEET YOUR NEEDS
Non-certification Courses
Discover practical solutions, expert-vetted content and tools you can immediately use at the workplace.
KPI FRAMEWORK
These courses focus on the mastery of a higher performance by deploying the best KPI measurement techniques
and performance improvement initiatives.
KPI BY INDUSTRIES
Focused on a comprehensive approach to successfully implement a KPI Performance Management Architecture
for certain industries.
BALANCED SCORECARD
These courses are focused on attaining the desired state of organizational evolution by structuring the Balanced
Scorecard implementation process.
Browse programs that focus on the subjects you want to master by visiting EXPLORE TRAINING
store.kpiinstitute.org/training-catalogue PROGRAMS
A C A D E M Y
IMPROVED SKILLS
IMPROVED PERFORMANCE
TKI Skills Academy offers progressive training programs and our proprietory eLearning platform, participants to our
focused on enhancing personal and professional growth. courses receive more than a simple classroom based course.
Our courses, developed within global standards, are adapted All our courses combine classroom and online delivery.
to the market’s needs and professionals’ actual learning More importanly, all course participants are assessed at the
expectations. beginning and at the end of each course, their learning being
evaluated and validated through a certification credential.
We created the Academy to help organisations reach peak
performance through better skilled professionals operating We are always open to establishing partnerships with key
more mature organisational capabiltiies. Skills and overall institutions belonging to the vocational education area
business acumen such as effective communication, data in order to expand upon strategies that better fit market
analysis, emotional intelligence, risk management, and needs. This contributes to skills development as we
innovation are a proven ingredients of professional and generate research studies and reports, as well as encourages
organisational success. entrepreneurship initiatives.
We offer a multitude of educational tools and techniques to By using education as an outstanding tool for continuous
maximise learning outcomes. From case studies, exercises, development, TKI Skills Academy forms the leading authority
toolkits, reading bricks and video content, to online databases on vocational education and training systems.
85,000+ 2,400+ 37 29
Members in our Client organizations Industries we work across Countries where we
online communities delivered trainings
PERSONALISED UPDATED
Up-to date content, combining both time
Content is customized according to the
tested concepts and emerging trend
participant’s profile (industry, functional
area and country) “The content of the course was rich and up-to-
date! I’d like to take this opportunity to thank the
“The courses are worth the investment because
entire team and look forward to work with you
they are customized to the participant`s needs
soon.”
and they include examples from the industry of
interest.” Performance Analyst, Qatar International
Petroleum, Doha
Senior Instructor, Saudi Civil Aviation Academy,
Jeddah
BENCHMARKED
EXPERIENTIAL Instructional design and delivery
Participants engage actively in case aligned with the Association for Talent
studies, exercises and discussions Development’s (ATD) best practices
“The experience of being involved in each session “Excellent job of developing the courses framework
was a great way of interacting with our peers. in a very detailed fashion, which reflect the best
I felt a lot of energy and enthusiasm during the practices in the field. I look forward to adopt this
exercises.” knowledge in my organization.”
Supply Chain Manager, Yamama Cement, Riyadh Founder and CEO, MILE, KSA
OUR APPROACH
GPAUnit.org
CHARACTERISTICS
BENEFITS
CONFIGURATION
Choose the perfect tool for measuring performance in your organization and get a free 30 days trial. Order the software
package that most suits you, in terms of price and requirements.
Is an on-line platform dedicated to performance measurement. It contains more than 21,100 KPI examples, with
over 8,000 being either published or premium documented. The smartKPIs.com platform joins together examples
of KPIs which are specific to the business environment whether at industry or functional area level. A wide range
of KPIs found on the platform are of interest at global level, such as macroeconomic indicators, social and health
indicators or environment and sustainability related KPIs. Other examples of KPIs can be used by individuals to
track productivity, time management, life-work balance, health and budget management.
HUNDREDS OF RESOURCES,
ONLY ONE CLICK AWAY
The KPI Institute’s Research library is the meeting platform of all
professionals interested in accessing first-hand performance
related research, from 12 practice domains!
Books Reports