Professional Documents
Culture Documents
Accompanying the book 'The Performance Prism - The Scorecard for Managing and
Measuring Stakeholder Relationships'
The Catalogue of Performance Measures contains over 200 different measures applicable
to all parts of an organisation.
They have been classified according to which facet of the Performance Prism they apply to.
Entries for individual measures can be found by following the Performance Prism facets in
the left hand column. Alternatively there is a search facility, enabling navigation of the
catalogue by keyword search. Refer to the '
How to use the catalogue' section for more information.
The catalogue was created by the Centre for Business Performance, Cranfield School of
Management in conjunction with the Centre for Process Excellence, Accenture (formerly
Andersen Consulting).
Purchase of the book entitles the purchaser to a single user licence for the Catalogue of
Performance Measures.
To register for information on future updates of the catalogue, to obtain further licences and
if you have any queries contact Dr Mike Kennerley at the Centre for Business Performance
(m.kennerley@cranfield.ac.uk).
Telephone: +44 1234 754919
Fax: +44 1234 757409
http://www.cranfield.ac.co.uk/som/cbp
The authors of the catalogue are grateful for the financial support of the Engineering and
Physical Sciences Research Council (EPSRC) (under grant number GR/K88637) and
Accenture (formerly Andersen Consulting).
Stakeholder
Satisfaction
Customer Satisfaction
Employee Satisfaction
Investor Satisfaction
Regulator and Community Satisfaction
Supplier Satisfaction
Strategies
Corporate Strategy
Business Unit Strategy
Brand Product & Service Strategy
Operating Strategy
Processes
Capabilities
Infrastructure
People
Practices
Technology
Stakeholder
Contribution
Customer Contribution
Employee Contribution
Investor Contribution
Regulator and Community Contribution
Supplier Contribution
Those of you who are seeking measures of Customer Satisfaction double click on
Stakeholder Satisfaction in the left hand column, then double click on Customer Satisfaction.
This will reveal a list of Customer Satisfaction measures. Clicking on a measure will reveal
detailed information regarding why and how to design that measure.
(ii) The search facility
Regardless of the framework or process used to identify the measures to be used by the
organisation, the search facility can be used to identify measures within the catalogue. To
use the search facility, select the search tab at the top of the left hand column. Enter a key
word and click on 'list topics' to produce a list of the entries that contain these terms.
For example entering the search term product development will identify all of the entries in
the measure that contain the term product and the term development. Entering the term in
quotation marks ("product development") will identify all entries in the catalogue that contain
the entire term.
Capabilities
- In the Performance Prism the capabilities of an organisation are regarded as its
competencies what it is capable of achieving. They are therefore determined by the
resources available.
Catalogue
(see Measures Catalogue)
Formula
- The defined means of measurement. For each measure in the Measures Catalogue there
is at least one suggested metric for the measure. For example the metric for Dividend
Performance may be "% increase in dividends per share per year".
Measure
- The means for assessing the performance of an organisation by using quantitative
features.
Measures Catalogue
- A comprehensive list of Measures applicable to most industries, each with a definition, a
formula and a synopsis. It underlies the Navigator and can be referenced at most stages of
the application.
Measures Tree
- A graphical representation of the key linkages between the measures of an organisation.
Each facet and the stakeholders are linked in the following order: Stakeholders SWANs
Strategies Processes Capabilities OWANs. Each facet component is listed with its
measure (red text) and its priority rating. Links between the facet components are shown.
Metric
- (see Formula)
OWAN
- Organisation Wants and Needs, termed as Stakeholder Contribution on the Performance
Prism are those things, both implicitly and explicitly, required by the organisation from the
stakeholders. For example an organisation may expect access to capital and credit from its
investor stakeholders, whereas product quality may be expected from the suppliers.
Performance Prism
- An advanced measurement model and framework to aid the identification and selection of
appropriate measures for any business or organisation. Each facet of the Prism represents
a different feature of an organisation: Stakeholder Satisfaction, Strategies, Processes,
Capabilities and Stakeholder Contribution.
Prism
- (see Performance Prism)
Processes
- Processes are methods or systems employed in an organisation. These are usually
dynamic in their nature, taking place over a period of time and involve an input and an
output. They can also be cross functional.
Regulators
- One of the five stakeholders, they include government and non-governmental
organisations, the legal system and the local community.
Sponsor
- Key individual or group within the organisation that is committed to achieving the
introduction of the performance measurement system and is the key contact between the
consultant and the organisation. It is usual for the sponsor to be a senior executive within
the organisation. They need to be in a position to make decisions and co-erse other
members within the organisation to buy into the strategy.
Sponsor Goal
- The overriding aim or objective of the project to which the measure design process is
being applied.
Stakeholders
- Those to whom the organisation is accountable to or responsible for. The Performance
Prism defines five types of stakeholders: Investors, Customers, Employees, Regulators and
Suppliers. The Navigator allows further specification of stakeholders within these
categories.
Strategies
- The definition of an organization's direction and intent. Strategies exist at many levels
within an organization, Corporate, Business Unit, Brands/Products/Services, and Operating.
SWAN
- Stakeholder Wants and Needs, termed as Stakeholder Satisfaction in the Performance
Prism are those things, both implicitly and explicitly, expected from the organisation by the
stakeholders. For example Investor Stakeholders may expect dividends or payment of loan
interest, whereas Employees may want a comparatively high salary.
Customer Satisfaction
Why should we measure it?
Measurement of customer satisfaction has received considerable interest in recent years. It is an
important measure as customers must be satisfied if they are to repurchase or recommend the
organisation to others.
RESENT RESEARCH - A survey by Xerox found that very satisfied customers are six times more
likely to repurchase product within the next 18 months than customer who are simply satisfied. This
suggests the importance of distinguishing between customers who are satisfied and those who are
very satisfied.
The satisfaction of customers is not an end in itself, for the next issues to consider are customer
attitudes and behaviour. Are customers, for example, sufficiently satisfied to repurchase the same
product or service or will they try a competitor's product or service next time? Are customers
sufficiently satisfied to recommend the organisation or its products and services to friends and
colleagues? Are customers sufficiently satisfied that they would be willing to pay a price premium for
the product or service? These are key considerations when designing the customer satisfaction survey
tool. Questions should be included to collect data on such attitudes and behaviours. Ultimately
organisations should use the measurement of customer satisfaction to identify the drivers of customer
satisfaction and loyalty so that they can develop long-term managed relationships with their
customers.
An important point to note is that perceptions of performance are often more important than the
company's actual performance in determining customer satisfaction. Even though the company's
performance is outstanding, if customers perceive it to be poor or no better than the competition their
satisfaction may well be low. If there is a shortfall between perceived performance and actual
performance, the virtues of performance must be emphasised.
It is also important to consider the importance that customers place on the different dimensions of
performance. It is no good being great at things that do not matter to the customers. The organisation
has to excel at the things that customers care about most.
Although there are surrogate measures of customer satisfaction contained within the catalogue, the
best way of assessing customer satisfaction is by asking customers. This is usually done through a
customer satisfaction survey.
How do we measure it?
Customer satisfaction survey
What do we need to consider when defining the measure?
Customers - those individuals or groups who purchase or consume an organisation's products and/or
services.
There are three main types of customer for the firm to address when measuring satisfaction:
consumers/end users, distribution chain customers, and downstream operations within the
organisation. Each organisation must define the 'customer' that is most important or appropriate to
them. An organisation may use the measure for more than one of the above groups and for different
market segments or products. Greater emphasis on the measurement of satisfaction, and improvement
action, should be placed on the most profitable customers or those who are considered most
important (e.g. for strategic reasons). Two other classes of customers should also be considered if
possible - the customers of the competition (potential customers) and former customers that have left
and are now buying from the competition (past customers). Each group can provide valuable insights
for improvement and potential customer acquisition.
When the customer is an external organisation it is important to identify who the individual customers
are within the organisation. People at different levels of the customer organisation will have different
requirements of the product or service offered. All of these should be considered as they may all
contribute to customer loyalty and willingness to recommend the organisation or its products and
services to others.
Customer satisfaction surveys often provide a numerical value for the level of customer satisfaction, a
percentage for example. Such index numbers indicate trends in satisfaction and allow correlations to
be identified in order to assess the drivers and consequences of customer satisfaction. Considerable
value in assessing customer satisfaction results can be gained from the identification of the drivers of
satisfaction. The customer satisfaction survey should assess the customers' perceptions of the
company's performance in terms of the various drivers of satisfaction and loyalty. Where possible the
drivers of customer satisfaction, which customers consider to be most important, should be converted
into operational measures within the organisation. Typical drivers include product or service cost,
product or service quality, after sales service, value for money, price vs. competition, responsiveness
and on time delivery performance. Measures such as recommendations to others and repeat purchases
also relate to the effect of customer satisfaction.
Analysis of customer satisfaction data should include identification of the drivers of customer
satisfaction and loyalty, identification of the dimensions of performance on which customers place
most importance and satisfaction and loyalty of different types or categories of customer.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Existing customers - customers who have previously ordered from the company within a specified
time period. These customers may be target customers for repeat sales of the same product or new
sales of different, possibly complementary products. Profitable customers are those that should be
targeted, hence should be analysed separately. It is essential that the most profitable customers are
targeted. As a result it is important to consider customer profitability and customer retention together.
Customers - might include the immediate / direct customer and the ultimate consumer of the product.
Active accounts - are customer accounts where customers continue to make orders for products and
services or where contracts have not expired.
Analysis of the data from this measure can separate repeat purchases of the same product from those
who purchase different or complementary products. Organisations should focus this measure on
products and services which compete in particularly competitive markets to assess whether
customers can be retained even though there are many competitive alternatives.
Formula 3 focuses on the rate at which customers are lost to the business. This measure is most
appropriate where contracts or accounts with customers are maintained over a period of time. The
mobile phone market provides an illustrative example, customer retention is an important measure to
identify how many customers are leaving a particular network to join another.
Expected repeat order time scales will be dependent on the characteristics of the industry, including
the life cycle of the product in question, frequency with which new products or product enhancements
are brought to market, etc.
The time period covered by the measure is dependant on the nature of the industry or market.
Selection of the appropriate time period is essential if the measure is to be effective. The time period
must reflect customers' purchase decisions and be sensitive to competitors' promotions. If there are
minimum contract periods or periods covered by incentives and promotions then the time period
should assess the customer retention / loyalty after such periods have elapsed.
Data should be available within the sales order processing system and should allow comparison of
sales to new and existing customers.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Customer Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Generate Demand
consider the lead time that the customer considers, as well as measuring the lead time of internal
operations.
The sales order processing system should provide the data to calculate this measure. The system must
record the date and time of customer order receipt. However, not all systems record the time and date
of delivery, as tracking of orders within systems often stops at the point of despatch.
Use of the measure should include analysis of each separate stage of the lead time to identify which
individual processes take the longest to execute and are most in need of improvement. Each process
can be benchmarked in order to identify improvement opportunities.
When using this measure particular consideration should be given to the unit of time that is used. In
many industries "Just In Time" delivery is required to the nearest hour or to a specified time. In such
circumstances early delivery is considered to be as bad as late delivery.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Sub-Facet 3:
Suggestions / feedback - are contributions made by customers with the objective of improving the
operations of the organisation.
Customers - are those individuals or groups who purchase or consume an organisation's products
and/or services. There are three main types of customer for the firm to consider:
consumers/end users
distribution chain customers (or intermediaries)
downstream operations within the organisation. The organisation should encourage suggestions
and feedback from each type of customer as their requirements are likely to be different.
It is important to distinguish between end users and intermediary customers, as their requirements
from the organisation will be different, as will the processes used to collect their feedback and
suggestions.
Value of suggestions / feedback - is the value of implemented ideas or suggestions to the organisation.
This may be realised through increased competitive advantage (resulting in increased sales) or
improved operating efficiency or effectiveness (resulting in reduced cost). It may be possible to
measure the value of improvements, although it may be necessary to make a subjective assessment of
their value.
Lead time to respond - is the time from receipt of a suggestion or piece of feedback to the time action
is taken. Initially this action should be acknowledgement of receipt and notification of potential time
before action will be taken. There should be a standard benchmark lead time for acknowledgement. It
is important that customers are notified of the progress of their suggestions and are given reasons if
suggestions are not going to be implemented.
The importance placed on the feedback received from customers will depend on the importance of the
customer, based on the size of the account or the strategic importance.
The frequency of suggestions will be related to purchase frequency.
The % of suggestions that are acted upon will depend on how valid or useful the suggestions are.
Data for the calculation of this measure should be collected through the customer suggestion or
customer complaint scheme or that should be used to collect ideas and suggestions. The customer
satisfaction survey can also be used to collect data.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Customer Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Customer complaints - are feedback from customers who are dissatisfied with the product and or
service supplied by the organisation.
Returns - are a specific type of complaint, usually relating to product defects or products that are not
to the required specification.
The given period - will depend on the number of complaints that are received. If a high volume of
complaints is being received this measure should be calculated more frequently, until the number of
complaints falls.
Orders - are the unit of transaction with the customer. This may include orders, financial transactions,
etc.
Analysis of this measure should enable the identification and elimination of the root causes of
complaints and returns. Often this will involve improving the processes that cause them and those
which allow defects to reach the customer. This should allow identification of the processes that need
to be improved.
Analysis should also categorise complaints and defects based on their severity including, the effect on
the satisfaction of the customer (i.e. how important the customer considers the problem to be) and
possible safety implications. Further analysis of severity could also include how noticeable a defect
is or whether it affects the use of the product for its intended purpose, as opposed to being cosmetic,
which allows use until the problem is rectified.
Metric 1 provides a better indication of customer satisfaction as it puts performance in the context of
the volume of customer orders. Metric 2 provides an absolute measure that enables trends in
complaints to be analysed.
If not already in place, the organisation should implement specific business processes for encouraging
and collecting complaints and analysing their causes. It is also important to undertake more proactive
measures of customer satisfaction via, for example, the Customer Satisfaction Survey.
Data sources of complaints may be varied, including telephone calls, written correspondence,
complaint forms, E-mail, the Internet etc. It is necessary to have a tracking system to ensure that all
complaints are logged, resolved and their root cause identified and analysed.
As complaints are an important source of feedback from the customer regarding areas of performance
that should be improved, customers should be encouraged to make complaints. The organisation
should make every effort to make it easy for customers to complain.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Customer complaints and analysis of complaints should allow the processes that need to be improved
to be identified. If not already in place, the organisation should implement specific business
processes for encouraging and collecting complaints and analysing their causes.
Data for calculation of this measure should be collected as part of the service recovery process. The
process should record when complaints are received and when they are successfully resolved.
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Stakeholders
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Customer Contribution
It is important that analysis of the measure identifies whether specific customers are affected by the
same defect or mistake. However, it is just as important that recurring problems are identified if they
are affecting different customers as it indicates whether the organisation is learning from complaints
and defects, identifying root causes and implementing corrective action.
Analysis should also categorise complaints and defects based on their severity including the effect on
the satisfaction of the customer (i.e. how important the customer considers the problem to be) and
possible safety implications. Further analysis of severity could also include how noticeable a defect
is or whether it affects the use of the product for its intended purpose, as opposed to being cosmetic
which allows use until the problem is rectified.
Data for this measure should be collected at all points of contact with the customer. They should be
brought together into a central database, usually housed in the sales / customer relations management
department. There must be close liaison with all areas of the business to ensure that root causes are
identified and corrective action taken.
Data sources of complaints may be varied including telephone calls, written correspondence,
complaint forms, E-mail, the Internet, etc. It is necessary to have a tracking system to ensure that all
complaints are logged, resolved and their root cause identified and analysed.
As complaints are an important source of feedback from the customer regarding areas of performance
that should be improved, customers should be encouraged to make complaints. The organisation
should make every effort to make it easy for customers to complain.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Operations
resolved quickly. It is also important to undertake more proactive measures of customer satisfaction
to assess the effectiveness of the service recovery process and the affect of rapid response to
complaints.
Analysis of complaints should identify and eliminate the root causes of complaints. This will involve
improving the processes that cause unsatisfactory product or service to be delivered in the first place.
Customer complaints and analysis of complaints should allow the processes that need to be improved
to be identified. If not already in place, the organisation should implement specific business
processes for encouraging and collecting complaints and analysing their causes.
Data for calculation of this measure should be collected as part of the service recovery process. The
process should record when complaints are received and when they are successfully resolved.
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Stakeholders
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Customer Contribution
Market Share
Why should we measure it?
Market share measures how successful the organisation has been in obtaining market share in its
chosen markets.
It reflects how competitive the company's products and services are in the market and indicates the
level of market penetration.
It measures the success of strategies designed to increase competitiveness of products in the market
place and provides an indication of customer satisfaction in comparison to that of competitors'
customers.
How do we measure it?
sales turnover as a percentage of total market sales value
What do we need to consider when defining the measure?
Sales Turnover - is the value of sales and should be split into product or market categories to make
appropriate comparison with market data.
Total Market Sales Value - is the total sales turnover of all products sold by all companies in the
market.
Market - the market is that which the company defines as its target or that in which a specific product
competes.
Measurement of market share should be employed for each of the target markets in which the company
competes. Analysis of market share should consider the position held by specific products in relation
to those of competitors.
Analysis of market share trends over time will identify progress that is made towards the achievement
of market share targets. Analysis of these trends should allow understanding of the effectiveness of
specific actions such as promotional campaigns or product launches.
In some cases it might be difficult to define the boundaries of a market in order to define its size and
measure the organisation's share of it.
Total market sales data can be obtained from market research either conducted internally or by market
research companies. Care must be taken when using external data to ensure that it is accurate and
relates to the appropriate market segment.
Prism Facet 1:
Data regarding the size of the forward order book should be available from the sales department
(generate demand process). Capacity availability should be assessed as part of the operations
planning process.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Plan Enterprise
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Customer Satisfaction
mechanism for capturing this information and that separate analysis is made of these circumstances.
The customers' perceived value of the product or service should be obtained through customer
satisfaction surveys. The survey should include specific questions regarding perceived value of
products and whether customers perceive the products and services they purchase to be good value.
Analysis of perceived value for money should be at product level and compared with product(s) in
direct competition within the market place / specific market sector.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
and the new date is met. A stricter measure than the agreed due date could use the date first requested
by the customer, as this will reflect whether the customers' original requirements have been met.
Consideration must be given to the unit of time in which measurement is made (i.e. week, day, hour,
etc.). Larger time units will result in apparent performance improvements even though reliability may
not be satisfactory. In many industries 'Just In Time' delivery is required to the nearest hour or a
specific time. Tolerances should be considered when defining what is meant by 'on time'. This may
include allowance in delivery time. In some industries delivering early is as undesirable as
delivering late.
In full - only orders or transactions that are complete should be considered to be 'on time'. This
prevents delivery of incomplete orders to manipulate the measure and achieve targets.
When designing and using this measure it is important to define the point at which delivery is
considered to have been made. In different circumstances this might be when delivery or installation
is completed, when the product being delivered is fully operational (might include training of users),
when all services have been provided or when payment is made. The way in which deliveries are
confirmed must be considered and agreed. Is the product or service delivered when despatched, when
the customer signs for it, or is confirmation by phone call required? Is it delivered when shipped,
when received or when paid for? Consideration may have to be given to the reliability of external
companies to whom delivery is contracted.
In all cases it is important to consider when the customer considers the product or service to have
been delivered as their perception of performance is what matters.
Data for calculation of this measure should be collected by the sales department. They should record
the due date when the order is taken and received feedback from those delivering the product or
service when delivery is completed. The sales department should use this data to understand actual
lead times so that they can quote and negotiate realistic lead times and due dates.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Sub-Facet 3:
Quality Performance
Why should we measure it?
Quality performance refers to the quality of the product or service that is being purchased by the
customer. Pre and post sales service are considered as a separate measure 'Quality of Service (Pre
and Post Sales)'.
While product quality is often considered in terms of defect rates, this only refers to one dimension of
product quality - conformance to specification. It is commonly acknowledged that there are seven
other dimensions of product quality (performance quality; features; reliability; durability;
serviceability; aesthetics; perception (Garvin, 1987)). Similarly there are considered to be five
dimensions of service quality - tangibles; reliability; responsiveness; assurance; and empathy (Berry
et al., 1988). Hence, while it may be possible to deliver a product that 100% conforms to
specification, it might still be possible to improve the product or service quality with regard to one of
the other dimensions of quality performance.
Shingo distinguishes between 'mistakes' (which are inevitable) and 'defects' (which result when a
mistake reaches a customer). Hence processes or devices should be put in place to ensure that
mistakes are detected internally and do not become defects which are delivered to the customer
(Shingo, 1986). This is the basis of Poke-yoke (mistake proofing). As such the measure of Quality
Performance assesses the performance of internal processes in delivering products which are mistake
free as well as providing an indication of customer satisfaction.
How do we measure it?
% of products / services that are 100% 'Fit for Purpose'
% of products / services delivered to the customer that are defect free
% of products / services that are completed mistake free
What do we need to consider when defining the measure?
Product / service - is the commodity that is delivered to the customer in return for payment.
Customer - are those individuals or groups who purchase or consume an organisation's products
and/or services.
Fit for purpose - fitness for purpose relates to the degree to which the product or service meets the
customer's requirements.
Defects - are a product or service's non-fulfilment of an intended requirement or reasonable
expectation for use or a departure from intended quality level or state. Defects are quality problems
which reach the customer.
Mistakes - are product quality problems that occur during production. If they are not identified before
delivery of the product to the customer they become defects.
Analysis of this measure should identify the root cause of defects or mistakes so that actions can be
taken to rectify it and ensure that it does not occur again. This includes assessment of whether quality
assurance procedures identified the mistake before it becomes a defect which reaches the customer.
Emphasis on the measurement of quality performance should be based on the dimensions of quality
that the customer finds important.
Data for this measure should be collected and analysed by the quality assurance or quality control
department which is responsible for maintaining levels of quality throughout the organisation.
Collection of the data should include feedback from all areas of the business as all individuals should
highlight and report quality problems.
Care must be taken when assigning responsibility for quality problems. If penalties for causing
defects or mistakes are too great it might discourage individuals reporting them, allowing them to
remain in the product until further along the production or service delivery process where they
become more difficult and costly to rectify.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Sub-Facet 3:
Complaints - are feedback from customers who are dissatisfied with the product and or service
supplied by the organisation.
As indicated in formula 1, assessment of service quality is based primarily on the perceptions of
customers. As such assessment of service quality should be included in the customer satisfaction
survey.
The questionnaire should investigate the attributes of customer service that the customer finds
important and include evaluation of performance. There should also be consideration of potential
attributes of service or attributes that are offered by competitors to assess whether their introduction
would enhance the service offered.
The other formulae indicate dimensions of service quality that can be measured internally. Formulae
2 and 3 refer to faults or problems reported by the customer and measure the time it takes to respond,
the time it takes to resolve the problem and the reliability and effectiveness of the problem resolution.
Formula 4 and 5 refer to the availability of spares which is appropriate when there are product
quality problems.
The data required to calculate this measure should be drawn together from a number of sources.
These include feedback from the customer (including complaints, customer satisfaction surveys,
feedback procedures etc.) and feedback from those responsible to providing service. This should be
brought together in a central source by the quality assurance function who should co-ordinate actions
to improve the service offered.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders
There should be analysis of the measure by the value of penalties. Higher penalties imply that non
conformance is more serious and hence likely to have a greater effect on customer and regulator
satisfaction. It is important to focus remedial and improvement actions on those dimensions of non
conformance which are most critical.
Processes should be put in place to ensure that root causes are identified and eliminated to ensure that
SLA achievement improves.
Data from this measure should be used when negotiating new service level agreements to ensure that
realistic conditions are included.
The process for managing relations with regulators and suppliers should include implementation of
measure for assessing whether the conditions of SLAs are achieved.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Regulator & Community Satisfaction
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Supplier Contribution
comparison with the performance of competitor products. Gaps in performance of these criteria
identify where improvement action is required to improve the competitiveness of products and
services in the market.
Data required for this measure must be obtained through market research, including that undertaken by
the organisation and by external agents or companies.
Prism Facet 1:
Strategies Sub-Facet 1: Brand, Product & Service Strategy
Prism Facet 2:
Strategies Sub-Facet 2: Business Unit Strategy
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Customer Satisfaction
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Customer Satisfaction
their perceptions of comparative prices should also be considered, but should be used with caution as
they are always likely to be looking for price reductions.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
The technical parameters - cascade into a few key variables that relate to the performance of the
product/service in the field.
The marketability parameters - relate to key variables that serve as guideposts to successful product
launch (gathered from previous new product/service experience, market research, focus groups,
consulting advice). For example, quality of a vehicle includes both the technical parameters that
define the class of vehicle (size, degree of luxury, weight) and its marketability (ride, handling,
aesthetics), as perceived by the customer.
All defects or complaints from customers should be analysed to identify their cause so that they can
be eliminated to prevent recurrence. Analysis of trends over time will identify specific problem
areas.
There should be quality control processes in place to collect data relating to defects. The organisation
should also proactively seek feedback from customers regarding the new product or service's fitness
for purpose.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Customer Contribution
Parts / materials - are the components which combine to form the products and services produced and
delivered by the organisation.
Bill of material - defines the relationship between materials, components and sub assemblies. The
number of levels of the bill of material indicates the number of sub assemblies and activities that must
be combined to complete the product, indicating complexity.
Although typically this measure is used to assess product complexity, it should be possible to define
'features' that apply to services, which allows measurement of the complexity of services.
Analysis of product complexity should be compared to products offered by competitors or other
organisations in the market or market sector in which the organisation competes.
Analysis of complexity by product and by customer will provide insight into the competitive
advantage gained by increases in complexity, especially when considering sales on products or
services of varying complexity.
Measurement of complexity should always include consideration of the features that are demanded
and valued by the customer. If the addition of features that are not valued by the customer will
increase the cost, lead time and general difficulty of delivering products and services.
Data for calculation of this measure should be available from a number of sources. The number of
features requires subjective assessment undertaken by product design and sales and marketing
personnel. Numbers of parts and bill of material complexity should also be identified by product
designers or by the purchasing department who are responsible for acquiring parts and materials.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Customer Satisfaction
Product Standardisation
Why should we measure it?
The measure of product standardisation provides an indication of the variety of products or product
variants that are offered by an organisation. It assesses the amount of the product that is standard, as
opposed to the number of product variants or products that are customer specific. This is an important
measure of the attractiveness of the products offered to the market and also has a significant impact on
the operations of the organisation.
Provision of products or services that are standard can reduce the variety of features that are offered
by the organisation reducing product quality and potential customer satisfaction.
As with measurement of product complexity, while increasing the variation of products and services
offered (reducing standardisation) might increase product quality and customer satisfaction it can also
reduce responsiveness and increase cost of delivering products and services.
Increasing variation of products and services can be achieved by producing standard core products or
services which can be customised later in the production or service delivery process. This will
contain the costs and difficulties of increased product complexity while also allowing increased
variation in the products offered to the customer. This will be achieved by designing the product or
service and the production or delivery processes in a way which enables the production and
modification of standard products or services. This might include taking a modular approach to
production.
Although typically such a measure would be applied to products, it is also possible to define
standardisation in a way which allows measurement of services.
This measure should be used where there are variations in the requirements of specific products and
wherever customisation of products or services is necessary. When standardising products there is a
need to ensure that the customer is still getting the product that is required and that their choice is not
reduced.
In order to increase responsiveness to customer requirements the amount of standardisation should be
as great as possible and where possible customisation of standard products should be undertaken as
late as possible. This enables an inventory of standard products to be built, with customisation taking
as little time and resources as possible.
How do we measure it?
% of products that are standard
% of products that are customer specific
number of product variants offered
% of production lead time / production process / parts that are standard
average lead time / cost / manufacturing process for the skeleton product
criteria to allow measurement. Examples of such definitions might include defect parts per million,
days lead time, etc.
Winning quotation - refers to the quotation submitted by the successful contractor. It is important to
compare the appropriate order winning criteria in order to indicate where performance should be
improved.
Causal analysis of failures is essential to understanding short falls in performance so that action can
be taken to improve. Causal analysis of individual quotations will allow understanding of why that
order was or was not won. More importantly analysis of causes over time will provide an indication
of recurring causes of failure and areas of performance in which the organisation is not competitive.
This indicates areas in which improvement effort should be focused.
Comparison of proposal success rate / quotation conversion rate with that of competitors and other
organisations in the industry is crucial if competitiveness is to be understood. The organisation should
be quoting for the same jobs as its competitors, as a result it should have an understanding of the
conversion rate of its competitors and the standard for the industry.
CAUTION - when using this measure it is important to consider actual performance against that
quoted. Orders can be won based on unrealistic quotes. However failure to deliver the conditions
stated in the quotation, upon which the order was won, will result in poor actual performance,
resulting in penalties imposed by customers and reducing the likelihood of future orders.
The data for this measure should be collected, analysed and reported as part of the 'generate demand'
process, which should record all quotations made, the success rate and reasons for failure.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Brand, Product & Service Strategy
As with the definition of 'new accounts', the given period for this measure will depend on the industry
or market sector in which the organisation competes. Where there is high customer turnover or there
is frequent introduction of new products the measure should be analysed over a short time period to
identify changing trends.
Analysis should compare different markets and market sectors in order to identify those that are most
profitable or valuable. This will help to identify where future efforts should be focused.
Data for calculation of this measure should be available from the accounting information system.
However additional analysis might be necessary to identify the costs and revenues that are
attributable to new accounts (as opposed to existing accounts). This additional analysis should be
carried out as part of the sales / generate demand process and based on customer account records.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Sub-Facet 3:
added as a cost.
Comparison of mis-selling claims with sales revenue provides an interesting insight into the value of
sales that is lost as a result of unrepresentative marketing.
Causal analysis should be undertaken into the reasons mis-selling was allowed to take place,
including identification of those responsible. Such causes might include lack of understanding of the
customer's requirements, lack of understanding of the implications of the product or service for the
customer, lack of control over product/service documentation, deliberate mis-selling, etc. In each
case corrective action should be undertaken to ensure that mis-selling, and the associated costs do not
recur.
Data for this measure should be collected and analysed by the sales department who are responsible
for managing relations with customers in conjunction with those responsible for managing relations
with regulators.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Regulator & Community Satisfaction
Analysis of this measure should include comparison of the value of lost accounts with the value of
new accounts that are generated as this will determine the affect of losing accounts and customers on
overall sales turnover. Comparison should also be made of the profitability of lost customers with
that of new customers.
It is crucial that the cause of all lost accounts are considered and that analysis is undertaken to
identify where numerous customers are lost for the same reason. Corrective action should be taken to
eliminate the root causes of lost customers. This should focus most attention on the causes that occur
most frequently, especially when these causes lead profitable customers to defect. Even where the
loss of customers is not of great concern to the organisation (e.g. if the customer is not profitable) it is
important that the causes of the loss custom are understood and rectified so that loss of customers that
are profitable can be avoided.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Sub-Facet 3:
additional sales.
Sales turnover - is the total revenue generated from the sale of all products to all customers.
As with the definition of 'existing accounts', the given period for this measure will depend on the
industry and market sector in which the organisation competes. Where there is high customer turnover
or there is frequent introduction of new products, the measure should be analysed over a short time
period to identify changing trends.
Consideration should be given to the value of new accounts when using this measure. This will
provide an understanding of the advantage that can be gained from maintaining the current customer
base by increasing customer retention and loyalty.
Analysis should compare different markets and market sectors in order to identify those that are most
profitable or valuable. This will help to identify where future efforts should be focused.
Data for calculation of this measure should be available from the accounting information system,
however additional analysis might be necessary to identify the costs and revenues that are attributable
to existing accounts (as opposed to new accounts). This additional analysis should be done in the
sales / generate demand process based on their customer account records. The type of information /
data required for this measure may be more readily available where customer records are routinely
maintained - such as in the telecommunications sector. In other industries, such as the retail food
sector, more indirect methods such as club cards or loyalty cards are used in order to maintain
adequate data.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Customer Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Sub-Facet 3:
Each project should include a project cost monitoring process to ensure targets are achieved and
performance can be analysed following completion.
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Operations
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Sub-Facet 3:
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Customer Satisfaction
Prism Facet 3:
Sub-Facet 3:
Prism Facet 3:
Sub-Facet 3:
Analysis of this measure should include consideration of different stakeholders in the organisation i.e. investors, customers, employees, suppliers, regulators and communities. Each of the stakeholder
groups and individual stakeholders within these groups, will have different information requirements
and communication with them should be considered separately.
The data for this performance measure should be collected as part of the process within the
organisation responsible for communication with stakeholders (Manage Relations with Stakeholders).
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Stakeholders
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: All Stakeholders
Prism Facet 3:
Strategies Sub-Facet 3: All Strategies
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Stakeholders
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: All Stakeholders
Prism Facet 3:
Strategies Sub-Facet 3: All Strategies
Employee Satisfaction
Why should we measure it?
Several research studies have shown the importance of increasing employee satisfaction. They
highlight the contribution that increasing employee satisfaction can make to increasing customer
satisfaction and financial performance.
A survey by Gallup based on twelve work-place audit statements regarding employee
satisfaction shows that businesses where responses indicate that high employee satisfaction outperform rivals on traditional hard measures of:
Productivity by 22%; Customer Satisfaction by 38%; Profitability by 27%; and Employee
Retention by 22%
Sears, Roebuck and Company found that a 5 point improvement in employee attitudes will drive
a 1.3 point improvement in customer satisfaction, which in turn will drive a 0.5 % improvement
in revenue growth.
Research at the University of Sheffield shows that 12% of the variation between companies in
their profitability can be explained by job satisfaction.
These pieces of research indicate the effect on the organisation's performance of increased employee
satisfaction. In addition employee satisfaction is necessary to maintain a loyal work force increasing
employee retention, which in turn reduces the cost of recruitment.
Although there are surrogate measures of employee satisfaction provided within the catalogue, the
best way of assessing employee satisfaction is by asking the employees. This is usually done through
an employee satisfaction survey.
How do we measure it?
Employee Satisfaction Survey
What do we need to consider when defining the measure?
Employee satisfaction surveys often provide a numerical value for the level of employee satisfaction,
a percentage for example. Where multiple surveys are carried out over a period of time, such index
numbers indicate trends in satisfaction and allow correlations to be identified to assess the drivers
and consequences of employee satisfaction.
Great value in assessing employee satisfaction is derived from the identification of the drivers of
satisfaction. Where possible, the drivers of employee satisfaction that employees consider most
important, should be converted into operational measures within the organisation. Such drivers might
include salary or benefit benchmarks, spend on training, working hours, working practices, health and
safety considerations, etc.
Perceptions of performance are more important than actual performance in relation to employee
satisfaction. For example, even though pay levels might be higher than that in other organisations, if
the employees don't realise that this is the case employee satisfaction will not be improved. It is
important therefore to consider and manage employees' perceptions when attempting to improve
employee satisfaction.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Employee Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
overall levels of satisfaction. Most substantial leavers debriefs should also be considered if key
people are leaving as they are likely to possess a significant amount of intellectual capital which the
organisation would like to identify and retain. If common and recurring reasons for leaving are
reported, operational measures should be implemented to track whether specific action can reduce
employee turnover. One example would be 'Average increase in salary on leaving', which should be
analysed by job or skill type.
The benchmark level of employee turnover will vary between industries and skill types. For example,
the benchmark for call centres, where skill levels are not high and substitute labour is readily
available, is in the region of 40%.
Formula 3 allows analysis of the proportion of employees that are within a particular age range or
who have been with the organisation for a certain period of time. This can be important when
planning recruitment to cover for retirement.
Where individual employees have important knowledge expertise or skills, consideration should be
given to the impact of losing those skills, especially if they are lost to a competitor. As a result some
organisations have classified their employees according to their value to the organisation. High
valued employees are managed differently and are offered significant incentives to encourage them to
stay. Analysis of the measure should reflect this categorisation of employees.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Employee Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Capabilities Sub-Facet 3: People
This might improve the efficiency of the process and improve the recruitment of appropriate people
for the organisation.
Analysis should also identify the skill level of those joining the organisation following a
recommendation. This will identify whether current employees understand the skills requirements that
need to be filled within the organisation and whether they have developed a network of contacts that
enables them to recommend someone to fill vacancies or skills gaps.
Willingness to recommend data should be obtained from the employee satisfaction evaluation, i.e.
from the employee satisfaction survey, by including a question of whether employees would
recommend the organisation as an employer. Data regarding actual recommendations should be
obtained via the recruitment process by identifying where applicants heard about the organisation or
vacancy and what encouraged them to apply.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Employee Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Employee Satisfaction
Prism Facet 3:
Sub-Facet 3:
Analysis of feedback and suggestions should include consideration of the parts of the organisation
from which suggestions are received to understand which parts of the organisation are most proactive
in terms of performance improvement. It will also indicate in which areas employee satisfaction is
highest.
Causal analysis of suggestions and feedback will allow identification of the most important and
frequently made suggestions. The importance of suggestions and feedback must be considered, as it is
important that organisations don't take their eye off the most important performance factors that are
already being delivered, in an attempt to improve other less important performance areas.
Suggestions will be more important if they are not prompted. The amount of feedback can be
enhanced by providing incentives or rewards for feedback and suggestions, however the effect of
such schemes should be considered when analysing the volume of ideas and suggestions received.
It is important that organisations proactively seek feedback and suggestions in order to improve
performance in line with employee requirements. Many organisations implement suggestion schemes
to encourage ideas from employees. These may include incentives for the contribution and
implementation of ideas or suggestions which have a positive impact on the operations of the
organisation. Suggestions might also be encouraged through employee satisfaction surveys and
personal appraisals.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Employee Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Employee Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Human Resources
Absenteeism
Why should we measure it?
Absenteeism measures the proportion of time that employees are present and available for work.
The level of absenteeism is an important input into the capacity planning process, providing an
indicator of the likely availability of employees and skills when required. As a result data from this
measure is an important input to planning and scheduling of all operations and activities.
Measurement of absenteeism is also considered to be an attempt to gauge the morale and attitudes
within the organisation. It is considered that the level of absence provides an indication of
commitment to the organisation as a proportion of absence is 'voluntary'. To use absenteeism in this
way, the level should be compared to a benchmark level for the region or industry.
How do we measure it?
the total number of working days lost due to absenteeism as % of maximum number of working days
available
the total number of working days lost due to absenteeism as % of number of employees
What do we need to consider when defining the measure?
Working days lost - are those days on which employees are unavailable for work.
Working days available - are maximum number of days which employees would have been available
for work (i.e. excluding holidays, weekends and considering shifts where appropriate).
Use of the measure should include analysis based on a number of criteria. Such criteria include job
types and departments to identify where morale is lowest or accidents and illness are most common.
Analysis should also consider the causes of absence - determining the severity of the cause to assess
how willing employees are to attend work if they have an illness or injury that are considered to be
relatively minor, and whether the cause is an occupational illness or injury.
The data required to calculate this measure should be available from the personnel department who
should maintain records of absence and its cause.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Employee Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Employee Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Operations
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Employee Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Recruiting - relates to the process of bringing in the workers required to fulfil demand.
Lay off - is the process of disposing of employees who are no longer required by the organisation.
Short-term contract - are employment contracts of a fixed term.
Temporary workers - are workers brought in to undertake a specific activity over a short period of
time. Often they are employed by a third party, an agency, which is paid for their provision. In this
case the employment agency incurs the employment costs of the individual contract employee.
Use of the measure should include analysis by:
job type - this should include consideration of level in the organisation
by contract type / employment conditions - full time / part time, permanent / temporary staff
skill type - employees with key skills are likely to be kept on permanent contracts to ensure that
they are kept within the organisation. Of course this adds to the employee's security.
When using the measure it is important to consider the availability of the required skills within the
labour market. Scarce skills, especially those providing competitive advantage, should be acquired
and effort should be made to keep the employees within the organisation.
The data for this measure should be available within the personnel department's records.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Employee Satisfaction
Transferability of Skills
Why should we measure it?
Transferability of skills refers to the ability to use specific skills for different jobs. This will affect
the ability of employees to transfer from one job to another.
Transferability of skills is a capability that an organisation will be keen to develop as it means that
employees can be transferred between locations or jobs to satisfy changes in demand. In order to
achieve transferability of skills it is necessary to plan training and staff development appropriately
and to design jobs in such a way that transferable skills can be utilised.
As well as measuring capabilities and the effectiveness of human resources planning process,
transferability of skills will also positively affect employee satisfaction. Employees are keen to
acquire skills that will enable them to enhance their careers. Investment in training, which goes
beyond the employee's current job, indicates a commitment to employees and their personal
development.
The availability of training and staff development can encourage people to join and stay with an
organisation. This might be important in organisations where salaries are not the most competitive.
Development of skills that are transferable between jobs within the organisation is important to
enhance the flexibility of an organisation's workforce - enabling employees to work on a number of
different jobs.
CAUTION
Skills may be transferable to jobs with other organisations. Caution must be taken when providing
employees with an abundance of transferable skills, as it may lead to valued employees leaving the
organisation. This might include employees leaving to join competitors.
How do we measure it?
% of skills held that are transferable to other jobs / operations
% of skills held that are transferable to other employers
What do we need to consider when defining the measure?
Skills - are specific competencies appropriate for a particular job or set of jobs. Skills are both of a
manual and cognitive nature.
Transferable skills / capabilities - are those which can be transferred to other jobs or tasks.
It may be difficult to define how transferable skills are. This may require a subjective judgement
made by the personnel or the training department.
Analysis of the measure should include investigation of the transferability of different types of skill.
For example analysis of the difference between manual and cognitive skills. Analysis should also
consider how transferability varies at different organisational levels.
Data for calculation of this measure should be collected by the human resource planning process as
part of an on going programme of personal appraisal.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Employee Satisfaction
calculating and reporting this measure, this process or department should undertake analysis of the
reasons that offers have been rejected so that any necessary action can be taken to reduce them.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Employee Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Capabilities Sub-Facet 3: People
Safety Incidents
Why should we measure it?
This measure assesses the number of incidents that occur within the organisation which risk the safety
of its employees in some way.
The number of safety incidents at work is an indication of the employees' working environment.
Higher than industry average number of safety incidents will have an adverse effect on employee
satisfaction and discourage employees from joining or staying with the organisation.
Safety incidents are regulated by Health and Safety authorities / regulators and will usually be
covered by safety procedures / codes of practice.
Regulators represent the employee in regard to safety incidents and as such measure affects
compliance to regulator requirements and regulator satisfaction.
How do we measure it?
number of safety incidents / accidents in a given period
employee days lost due to safety incidents in a given period
number of fatalities in a given period
What do we need to consider when defining the measure?
Safety incidents - are incidents where safety policies / codes of practice are breached. They include
incidents where injury or ill health is caused by a 'safety' incident at work.
Employee days lost - are days where an employee is absent or unable to undertake his or her usual
job due to injury or ill health caused by a safety incident at work.
Fatalities are deaths of employees which occur whilst at work or representing the organisation.
Analysis should be made of the root causes of all incidents, accidents and fatalities, so that action can
be taken to eliminate that cause and ensure that the incidents do not recur.
The plan and manage human resources process should report all safety incidents, their causes and
their impact on the individuals concerned. It is their responsibility to ensure that practices and
procedures are in place to maintain a safe working environment.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Employee Satisfaction
Prism Facet 2:
Working Hours
Why should we measure it?
The length of working hours is a basic feature of an employees terms and conditions of employment
and has a significant effect on employee satisfaction. Long working hours are likely to have a negative
effect on employee satisfaction.
When measuring working hours, it is important to do so in the context of the terms and conditions
offered by competitors or other organisations to which employees could move. Employees'
perceptions of the terms and conditions available elsewhere will affect their satisfaction, so
comparable terms and conditions must be maintained. Although working hours might be longer than in
other organisations this might be compensated for by other benefits, such as pay.
The employee satisfaction survey / analysis of reasons for employees leaving should include analysis
of the significance of long working hours. Use of this measure is important where long working hours
are identified as causing dissatisfaction and employee turnover.
CAUTION
The measure should reflect actual hours worked. Although contracted working hours may be the same
as the industry or geographic norm, there may be the expectation that longer hours are worked.
Under or over recording of the hours worked can have serious implications for the accurate charging
of time to specific accounts, customers or budgets. It can also cause problems in planning project
resources / resource availability.
How do we measure it?
average annual / weekly working hours
average number of hours overtime in a given time period
What do we need to consider when defining the measure?
Working hours - are those hours actually worked by employees of the organisation as part of their
terms and conditions, with the addition of overtime. The measure should consider actual hours
worked rather than those charged or recorded.
Overtime - is work undertaken beyond that of standard contracted hours, whether paid or unpaid. It
includes voluntary and compulsory overtime. Consideration must be given to whether overtime is
compulsory and whether there is an expectation that a certain amount of overtime is undertaken.
Analysis of the measure should reflect this.
It is important to compare performance with that of competitors and other companies in comparable
industries. This can be done through benchmarking activities.
This measure should be analysed by job type as there may be significant differences between
managerial and subordinate positions.
The data for this measure should be available from the manage human resources process which is
responsible for recording work undertaken.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Employee Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Sub-Facet 3:
Measurement of satisfaction with training courses and their impact should be considered, along with
their cost, when deciding training strategies and the portfolio of training that is offered.
Analysis of employee satisfaction with training programmes should include consideration of who
delivers the course and of the method of delivery.
It is important to identify the method of delivery to which employees are most receptive, as this will
have a significant effect on the advantage gained from the course for the individual and the
organisation. Where possible the method of training course delivery should be tailored to the subject
or audience. Whether courses are delivered in-house or are contracted out, satisfaction with delivery
should be reviewed with participants. This is particularly important if considerable amounts are
being paid to external organisations for courses.
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Human Resources
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Employee Satisfaction
Prism Facet 3:
Sub-Facet 3:
Training Spend
Why should we measure it?
The level of an organisation's expenditure on training and staff development is an important indicator
of the organisation's commitment to employee development and skills enhancement.
Analysis of an organisation's spend on training is important in identifying where training is focused in
comparison to skills requirements in order to deliver competitive advantage.
The willingness to invest in training is also an indicator of the organisation's commitment to the
personal development of its employees which will also contribute to employee satisfaction.
Those organisations participating in national employee development schemes, such as Investors In
People in the UK, will find this measure to be essential rather than optional.
Some national governments and industrial associations provide training grants to organisations, in
which case this measure becomes important for the purposes of claiming the grant offered.
How do we measure it?
expenditure on training and staff development per employee in a given period
What do we need to consider when defining the measure?
Training / staff development - is any activity provided or funded by the organisation to enhance an
employees skills or capabilities. Training includes internal and external training courses and 'on the
job' training, although in the case of 'on the job' training it may be more difficult to identify specific
'offers' of training and the training is less likely to be voluntary.
Spend on training includes training that is bought from outside suppliers and training that is provided
in-house. For in-house training and development it may be necessary to attribute a notional cost.
There is also a need to consider the value of 'on the job' training.
As well as company-wide analysis per employee, further analysis by job grade or type allows greater
understanding of the areas of the business in which training is being focused in comparison to areas
where there are skills shortages or requirements.
It may also be useful to compare training spend that is job related to that which is not. There are a
number of incentives for organisations to invest in non-job related training. These include:
provide employees with new skills that will allow them to change jobs within the organisation
to develop an employees willingness and ability to learn so that training with greater work focus
can follow or
to enhance employee satisfaction
The desired level of expenditure per employee will vary between organisations. Spend is likely to be
higher in organisations requiring higher skill levels to be competitive, or where benefits such as
training and personal development are important to maintain a satisfied and committed workforce.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Employee Satisfaction
Training Take Up
Why should we measure it?
Training take up measures the willingness of an organisation's employees to undertake education and
training. This provides an indication of how willing employees are to improve their skills and
abilities in order to improve their contribution to the organisation.
It is also a measure of the future success of training programmes and an indication of their design. It
indicates whether the human resource management process designs or selects training courses that
employees want to attend, as well as employee satisfaction with the training programmes.
Where participation levels are found to be undesirable, the reasons could be found and corrective
measures taken.
How do we measure it?
% of training courses that are fully subscribed
% of offers of training that are accepted
% of places that are taken on training programmes
What do we need to consider when defining the measure?
Training - is any activity provided or funded by the organisation to enhance an employee's skills or
capabilities. Training includes internal and external training courses and 'on the job' training, although
in the case of 'on the job' training it may be more difficult to identify specific 'offers' of training and
the training is less likely to be voluntary.
As well as company-wide analysis per employee, further analysis by job grade or type and
department or function allows greater understanding of the areas of the business in which training is
being taken up. This should be compared to areas in which specific skills shortages exist or where
performance could be improved.
It may also be useful to compare training take up that is job related and that which is not. There are a
number of incentives for organisations to invest in non-job related training. These include:
to provide employees with new skills that will allow them to change jobs within the
organisation
to develop an employees willingness and ability to learn so that training with greater work focus
can follow
to enhance employee satisfaction
While it is important to encourage training of all types, if take up of non-job related training is higher
than that of job related training it might indicate that employees are using the organisation's resources
to obtain skills which they can then take with them to employment in another organisation.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Employee Contribution
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Employee Satisfaction
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Employee Satisfaction
Prism Facet 3:
Capabilities Sub-Facet 3: People
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Employee Satisfaction
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Employee Contribution
organisations where there is a low probability of accidents, but where major hazards are present. In
such cases, the historical incidence of reported accidents can be an unreliable, deceptive indicator of
safety performance.
As an organisation's understanding of its risks and their control develops, the frequency and depth of
inspection may be changed to improve the monitoring process. This may involve the redesign of
inspection regimes, inspection forms and checklists.
Caution must be used when using accident frequency and severity rates as they are downstream
measures and have little predictive value.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Employee Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Investor Turnover
Why should we measure it?
Investor turnover measures the rate at which investors sell their shares in the organisation. This
measures the investors' satisfaction with the performance, and potential future performance, of the
organisation in comparison to their expectations and in comparison to that of other companies in their
sector.
The measure also assesses the contribution investors make to the organisation. The lower the turnover
rate, the longer investors hold their stake in the business, indicating their level of loyalty.
Investor turnover will be determined by the investors' confidence in the operations and future
profitability and hence their confidence of receiving a return on that investment. Investors' confidence
in the organisation and its future performance (i.e. investor satisfaction) will be determined by recent
performance of the organisation, the perceived reliability of predictions of future performance and
investors' confidence in the management of the organisation. As a result there are close and important
links between this measure and those of 'Investors' Perceptions of Management' and 'Performance
Against Promises'. These measures should be considered together. Feedback from investors should
be used to identify shortcomings in performance of these other two measures and identify ways in
which they can be improved.
Investor turnover provides a useful measure of the attractiveness of the organisation to investors and
hence the ability of the organisation to raise funds. Low turnover indicates that investors are loyal and
do not wish to dispose of shares. High turnover with a rising share price indicates that the company is
a popular one to invest in, indicating that it is performing well and satisfying investors. High turnover
with a falling share price indicates performance that is poorer than expected.
Whilst high turnover has positive implications for attracting new capital as investors are likely to be
able to sell on shares should they need to, consideration should be given to whether such short-term
investors will be willing to support the organisation in times of difficulty.
There are numerous sources of investment capital including equity (share issue), fixed interest bonds,
bank borrowings and venture capitalists. Although it is important to consider the turnover of each of
these groups, consideration of shareholder turnover is the one which is most significant, and on which
attention should be focused.
How do we measure it?
% of shareholders that sell their shares in the organisation in a given time period
average length of shareholding / investment in the organisation
What do we need to consider when defining the measure?
Share - shares in the ownership of the company.
Shareholder - holders of the equity (shares) of the company (i.e. the owners of the company).
Shareholding - length of time for which shares in the company are held.
Investment - is any application of money which is intended to provide a return to the investor by way
of interest, dividend or capital appreciation.
When measuring the level of investor turnover it is important to consider it in the context of turnover
in the market as a whole. In general investor turnover is growing rapidly. In the 1960s less than 20%
of shares changed hands annually. In 1999 over 80% of shares changed hands (Byrne, 1999).
Investor turnover will vary considerably depending on the industry in which the organisation
competes. Byrne (1999) indicated that on average investors in new Internet-based organisations such
as Amazon.com and Yahoo! only hold shares for seven or eight days, as opposed to organisations
such as General Electric and Johnson & Johnson for which average turnover is over 30 months.
Analysis of the data from this measure should include comparison of the turnover of different types of
investor in the organisation. For example, different types of institutional investor (such as those with
specialist sector interests and knowledge) or individuals.
There should also be comparison of performance against competitors, organisations in the
appropriate market sectors and industries and with the market as a whole.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Investor Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Investor Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Financial Operations
Profitability
Why should we measure it?
Measures of profitability assess the percentage profit generated as an indication of the 'productivity'
of asset utilisation and the amount of profits generated from sales.
Clearly profitability provides one of the key measures of the success of the business, reflecting the
efficiency and effectiveness of all parts of the organisation. Investors place great importance on
trends in profitability and it is a key driver of investor satisfaction.
These measures of profitability can be used to compare the efficiency of one company against
another.
How do we measure it?
Return on Assets: Profit (before interest and tax) Total Assets
Return on Sales: Profit (before interest and tax) Total Sales Turnover
Profitability (Earnings) per share: (Profit after tax - preferred stock dividends) / number of
ordinary shares
What do we need to consider when defining the measure?
Profit (before interest and tax) - is operating profit (turnover - cost of sales - overheads) before the
deduction of interest and tax.
Total Sales Turnover - is the total value of sales.
Total Assets - all of the assets of the company.
Preferred Stock Dividends - are dividends paid to preference shareholders (i.e. those entitled to a
share of the company's profit before ordinary shareholders).
The profitability of a company will be dependant on the business they are in. For example in a
service industry, such as advertising, there is likely to be a high return on assets simply because there
are very few assets.
Earnings per share measures the earnings that are available to the owners of common stock (ordinary
shares).
It is important to compare profitability with that of competitors and other organisations in the market
sector in which the organisation operates.
Data for this measure should be available from accounting systems and statutory financial statements.
Prism Facet 1:
Prism Facet 3:
Sub-Facet 3:
Market Capitalisation
Why should we measure it?
Market capitalisation is the total value of all of the shares in the company. It is based on the market
price of the company's shares at any given moment and provides an indication of the company's value.
Market capitalisation provides a snapshot of the stock market's perception of the value of the
organisation at any point in time.
Monitoring trends in market capitalisation over time indicates changes in investors' perceptions of the
organisation and as a result it provides one of the key indicators of investor satisfaction. Comparison
of trends in market capitalisation with competitor organisations and the rest of the market sector is a
key benchmark of the organisation's performance.
How do we measure it?
number of ordinary shares issued multiplied by the market price
% change in market capitalisation in a given period
What do we need to consider when defining the measure?
Ordinary shares - the shares in the company which entitle the holders to the remaining devisable
profits after prior interests (e.g. creditors and preference shares) have been satisfied.
Issued shares - are shares that have been issued to the market and are in circulation.
Market price - the price of each of the company's shares on the equity market at a given moment.
Market capitalisation - number of ordinary shares issued multiplied by the market price.
Data to calculate this measure is available based on current market value of the company which is
available in the financial press.
Comparison of this measure with other organisations in the same industry sector is useful in assessing
the relative value of businesses in the sector.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Brand identifying symbols, words, or marks that distinguishes a product or company from its
competitors.
Brand Equity the intangible asset that the firms marketing activity builds. It represents the
perception in the minds of the consumer, built up over time through use, advertising and distribution.
Brand Value depicts the financial worth of the brand equity.
Price Premium - is the additional price that is charged for a branded product. It is established by
benchmarking the unit price of the branded product against a comparable unbranded product in the
market.
Additional cash inflows resulting from the brand - assesses the additional cash flows generated as a
result of the brand by multiplying the price premium by volume sold. This enables consideration of
the impact of the price premium on volumes as well as the brand value. This metric should consider
potential future additional cash inflows to make an assessment of the potential future value of the
brand.
Survey of consumer awareness / preference - is a subjective assessment of the consumers' perception
of the brand. Such market surveys are important to assess the strength of the brand in the market,
however their subjectivity means that the reliability of data for valuation purposes can be variable.
Historical cost of brand development - is a fairly straightforward sum of the investment made to
develop the current brand. This investment will include advertising and other promotion, R&D,
distribution etc. Other costs such as management time might also be included, care must be taken
when defining which costs have been incurred in developing the brand. This measure is limited as it
only reflects investment in the brand, not its impact.
Replacement Cost - is the value that a third party would place on the brand i.e. the cost of reestablishing the brand.
The Interbrand Method - Interbrand is an international branding consultancy that has developed a
brand valuation methodology that is recognised by auditors, tax authorities and stock exchanges in
many countries. The method combines hard factual information such as market share with more
subjective judgements about a brand's 'strength' in order to determine brand-related profit. The
subjective judgement provides a structured approach for incorporating in the brand valuation factors
such as market leadership, brand stability, size and stability of the market, internationality of the
brand, long-term trend of the brand, support for the brand (including investment in promotion) and
protection of such as trademarks. This method attempts to accommodate the inherent uncertainty in the
market and hence brand equity.
Whilst brand equity is a powerful measure of performance it is hard to use as a short-term measure as
it can take a long time for marketing expenditure to create a strong brand. Equally it can take a long
time for brand value to dissipate even if marketing support is reduced. As a result brand equity or
brand value should be used to assess effectiveness of past marketing activity and the future impact of
current activity.
Prism Facet 1:
Strategies Sub-Facet 1: Brand, Product & Service Strategy
Prism Facet 2:
Processes Sub-Facet 2: Generate Demand
Prism Facet 3:
Stakeholder Satisfaction Sub-Facet 3: Investor Satisfaction
The data for this measure should be obtained from statutory accounting information.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Financial Operations
Prism Facet 3:
Sub-Facet 3:
Profitability Growth
Why should we measure it?
Measures of profitability assess the percentage profit generated as an indication of the 'productivity'
of asset utilisation and the amount of profits generated from sales. Profitability growth indicates the
growth in profitability of the organisation.
It provides investors with indication of the ability of the organisation to generate profit and increase
that profit over time.
Profitability growth is an important measure as it is one of the key measures that investment analysts
track and try to predict. It is often referred to as earnings growth.
Comparison of profitability per share with dividends per share provides an indication of the
proportion of profits that are distributed to shareholders. This comparison indicates whether the
organisation's priority is to reward shareholders in the short term or reinvest profits in the business.
How do we measure it?
% increase in profit (earnings) per share per year
What do we need to consider when defining the measure?
Profit - is defined as the profit, based on the consolidated profit and loss, after tax, minority interests
preference shares but before extraordinary items.
Analysis of the measure should include comparison of profitability growth from productivity
improvements vs. profitability growth from acquisitions and mergers.
It is important to compare profitability with that of competitors and other organisations in the market
sector in which the organisation operates.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Dividend Growth
Why should we measure it?
Dividend growth indicates the growth in profits that are distributed to shareholders.
This provides an indication of investor satisfaction as it measures whether the return that investors
are gaining is increasing. It is a useful measure as it allows comparison of performance with
competitors and other organisations and as such it is a key benchmark for comparative performance.
In many countries financial analysts tend to give dividend growth a high weighting in their analysis of
companies.
Dividends are one of the benefits that investors gain from investing in an organisation in addition to
profits made from selling shares following any increase in share price.
How do we measure it?
% increase in dividends per share per year
% increase in total amount of dividends distributed to investors per year
% of profit circulated as dividend per year
What do we need to consider when defining the measure?
Dividend - is the share of the organisation's profits and cash flow that are distributed to shareholders.
Total dividend - is the sum of all of the dividends paid out to shareholders.
Share - is a share in the ownership of the company.
Analysis of the measure should show the trend in dividend growth over the medium to long-term. This
gives an indication of the long-term value of holding the organisation's shares. Although this should
be considered in parallel with increases in share price.
Regional / national differences in attitudes towards dividend policies should be considered when
comparing the performance of business units in different countries.
The data required to calculate this measure should be available from the statutory accounts and
accounting information system.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Investor Recommendations
Why should we measure it?
The willingness of investors to recommend investment in the organisation to others is a key indicator
of their satisfaction with the performance of the business. It also represents an important contribution
that existing investors can make to the organisation as it increases the availability of funds.
Whilst measuring willingness to recommend assesses the satisfaction of existing investors this is only
potential contribution. It is only by measuring actual recommendations that have been made that the
realised contribution can be assessed.
Investors will consider recommendations from numerous sources when considering whether to buy,
hold or sell shares. Such recommendations might come from existing investors (colleagues or
friends), the media or financial advisors, such as brokers.
The level of recommendations indicates the satisfaction of those making recommendations with the
organisation as a place to invest capital. As such understanding recommendations from existing
investors is an important measure of their satisfaction with the investment they have made in the
organisation. Investor satisfaction in the organisation and its future performance (i.e. investor
satisfaction) will be determined by recent performance of the organisation, the perceived reliability
of predictions of future performance and investors' confidence in the management of the organisation.
As a result there are close and important links between this measure and those of 'Investors'
Perceptions of Management' and 'Performance Against Promises'. These measures should be
considered together. Feedback from investors should be used to identify shortcomings in performance
of the other two measures and identify ways in which they can be improved.
How do we measure it?
% of investors who recommend to others that they invest in the organisation
average number of recommendations made per existing investor
% of investors who are willing to recommend to others that they invest in the organisation
% of new investors (by number and value) that result from recommendations
average number of recommendations to invest from financial media / advisors / brokers
What do we need to consider when defining the measure?
Investors - are institutions or individuals that have invested, or have the potential to invest, in the
organisation.
Others - are potential investors who receive advice on where to make an investment.
Financial media - includes specialist investment publications, the financial pages of newspapers and
radio and television programmes, for example.
Advisors - financial experts who advise investors and potential investors where their investment
should be made.
Brokers - are agents who execute the publics buying and selling instructions in return for a
commission.
CAUTION - When using this measure it is important to beware of excessive hype as a result of large
numbers of recommendations. Excessive hype will result in the company being overvalued which
will have implications for the expectations of long-term performance, as it is likely that the value of
the organisation will fall to a realistic level, which will have a detrimental effect on investor
satisfaction.
Analysis should include identification of the sources of recommendations to understand the opinions
of those who exert some influence over investors. Comparison of recommendations with the levels of
investment will provide an understanding of who has the greatest influence over investors and hence
over the level of investment. This will allow the organisation to focus attention on satisfying those
with most influence so that they will continue to recommend the organisation, improving satisfaction
of potential investors.
The process of planning and managing relationships with investors should be responsible for
monitoring investments and recommendations. They should manage public and external relations,
monitoring recommendations and relationships with those who can recommend to potential investors.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Investor Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Investor Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Financial Operations
Suggestions / feedback - are contributions made by investors with the objective of improving the
operations of the organisation.
Investors - are individuals or institutions that have invested, or have the potential to invest, in the
organisation.
Value of suggestions / feedback - is the value of implemented ideas or suggestions to the organisation.
This may be realised through increased competitive advantage (resulting in increased sales) or
improved operating efficiency or effectiveness (resulting in reduced cost). It may be possible to
measure the value of improvements, although it may be necessary to make a subjective assessment of
the value.
Lead time to respond - is the time from receipt of a suggestion or piece of feedback to the time action
is taken. Initially this action should be an acknowledgement of receipt and notification of potential
time before action will be taken. There should be a standard benchmark lead time for
acknowledgement.
It is important that investors are notified of the progress of their suggestions and are given reasons if
suggestions are not going to be implemented.
The size of the investment should be considered when analysing this measure. The larger the
investment the greater consideration that should be given to their feedback.
The % of suggestions that are acted upon will depend on how valid or useful the suggestions are.
Data for the calculation of this measure should be collected through the investor suggestion scheme
that should be used to collect ideas and suggestions. The investor satisfaction survey can also be used
to collect data. Such suggestion schemes could be executed at the annual general meeting where
investors are brought together.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Investor Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Investor Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders
In some cases it may be difficult to identify specific and discrete promises or forecasts. It may be
desirable for the organisation to make predictions and forecasts as vague as possible to provide
leeway for performance variances.
In order to calculate the measure, promises made to investors should be recorded during the process
of communicating with investors. Actual performance will be available from statutory and market
performance reports.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Use of the measure should include analysis by type of investor (e.g. equity vs. loan capital) and by
size of investment. The size and importance of an investor is an important consideration when using
the measure.
Use should be made of the tools to survey investor satisfaction to collect the data for this measure.
This includes investor satisfaction surveys and mechanisms to collect investor feedback and
suggestions. Furthermore it is possible to use external agencies to conduct surveys to assess investor's
perceptions of management.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Employee Productivity
Why should we measure it?
Productivity is a key measure of the contribution that employees make to the organisation and is a key
benchmark of the efficiency and effectiveness of an organisation.
Typically measures of value added per employee relate sales and profit to the number of employees
required to generate them. Value analysis of processes within the organisation can also be used to
identify where value is added in the organisation. This can then be attributed to more specific groups
of employees.
This is a key measure that can be compared with other organisations to benchmark performance with
competitors and organisations in the same or similar industries.
How do we measure it?
average sales turnover per employee
average profit per employee
value added per employee
What do we need to consider when defining the measure?
Sales turnover - is the total income from the sale of goods and services.
Profit - is the sales turnover less expenditure.
Value added - can be calculated in two ways: (i) sales turnover less the cost of goods and services
bought; (ii) employee costs plus depreciation plus operating profit.
The measure should be analysed by location or region to compare the efficiency and effectiveness of
similar processes. When using the value added metric, the value added by indirect support processes
will often be difficult to specify.
Much of the data for this measure is available through the financial accounting reports and statutory
accounts. Estimation of the specific value added of a process or employee will require additional
analysis.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Investor Satisfaction
Prism Facet 3:
Strategies Sub-Facet 3: Operating Strategy
Margin Performance
Why should we measure it?
The profit margin generated from customer, markets and market sectors is an important measure of the
value that organisations get from supplying customers and markets. The profit that is generated is the
main reason that organisations provide goods and services to a customer, although there may be
strategic reasons for supplying certain key customers or markets.
The measure assesses the level of profit raised from a customer account as a proportion of the level
of business done (i.e. sales).
Clearly profit margins provide one of the key measures of the success of the business, reflecting the
efficiency and effectiveness of all parts of the organisation. Investors place great importance on
trends in profitability and it is a key driver of investor satisfaction.
This is an important measure for the organisation to use when deciding which customers or markets to
target or in which products to invest time and money.
How do we measure it?
profit as % of sales turnover (per customer, market and market sector)
What do we need to consider when defining the measure?
Profit - is operating profit (turnover - cost of sales - overheads) before the deduction of interest and
tax. In this case profit refers to the profit raised from a specific customer, market or market sector.
Sales Turnover - is the total value of sales. In this case sales turnover refers to the sales generated
from specific customers, markets or market sectors.
The profitability obtained from customers, markets or market sectors will be dependent on the
business that the organisation is in, including the value of goods and services supplied.
Analysis of this measure should investigate the differences in profitability between different
customers, products or market segments providing an indication of where performance improvement
effort should be focused.
Data for this measure should be available from accounting information systems.
Prism Facet 1:
Strategies Sub-Facet 1: Corporate Strategy
Prism Facet 2:
financial analysts and senior management of the organisation. As such they should collect the data for
this measure and use it when making such decisions.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Investor Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Investor Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Financial Operations
Cost of Capital
Why should we measure it?
The cost of capital assesses the cost of funds to finance an investment or project. This provides an
input into investment decisions so that shareholders value can be maximised.
Measurement of the cost of capital is important as an organisation clearly has the objective of
obtaining capital where cost is lowest so that investors can maximise the contribution they can make
and profitability can be increased.
The cost of capital also provides a measure of the economic performance of the firm, putting the
accounting profit into the context of the cost of funding operations. Accounting profit must exceed the
cost of capital - see the Shareholder Value Added measure.
The cost of capital should include the cost of borrowed capital (interest paid on borrowings) and the
cost of equity capital (investors' opportunity cost of investing in the company). Although when
considering the cost of capital to the company (i.e. investors contribution), the opportunity cost of the
investment is not important. Opportunity cost can seldom be measured precisely as it is based on
investors' expectations which are largely unobservable.
Measurement of the cost of capital encourages managers to think about whether they are creating or
destroying value for the owners of the organisation.
How do we measure it?
weighted average cost of capital
marginal cost of capital as a % of capital
What do we need to consider when defining the measure?
Cost of capital - is the cost to the organisation of receiving investment funds from the organisation.
This cost is mainly determined by interest rates but also includes dividends.
Weighted Cost of Capital - is the average cost of the combined sources of finance weighted according
to the proportion that each element bears to the total pool of capital available, e.g.
Equity Market Value - 800,000; Rate - 10%; = Cost 80,000
Debt Market Value - 400,000; Rate - 15%; = Cost 60,000
Total Market Value - 1,200,000 Cost 140,000. Therefore the weighted average is 11.67%
Marginal cost of capital is the additional cost incurred as a result of raising the capital in question.
Marginal cost should be compared with marginal revenue (return on investment). Economic theory
suggests that shareholder wealth is maximised where marginal cost = marginal revenue.
Dividends paid to investors are also a cost of capital. As a result the measure of Dividend Growth
should also be considered when using this measure.
Analysis of the cost of capital should consider the sources of capital and the differences in cost of
capital dependent on the source of capital chosen.
Interest rates are available from the source of the capital. Opportunity costs are identified by
estimating the return investors would receive by investing elsewhere.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Investor Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Investor Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Financial Operations
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Financial Operations
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Investor Satisfaction
Prism Facet 3:
Strategies Sub-Facet 3: All Strategies
example, will provide a benchmark for the amount of information that should be provided in order to
satisfy investors. Similarly, feedback from investors and requests for information should be
considered when deciding what information to communicate widely.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Time Period - the time period for consideration of this measure would normally be annually.
Traditionally financial performance data would be provided to investors twice a year, non-financial
information (qualitative and quantitative) can be provided more frequently. For dynamic stocks
communication should be more frequent to reflect the rapidly changing nature of purchasing decisions,
reflecting the changing circumstances of the market and the company.
BEWARE - When considering communication with investors care must be taken to avoid issues of
insider trading or providing misleading information. Information must be made widely available to
avoid accusations of only notifying certain groups of investors. Similarly the information provided
must be accurate to guard against litigation for investors' losses resulting from performance
predictions which are not realised.
Analysis of this measure should include consideration of different types of investor (e.g. institutional
investors, individuals etc.) as they are likely to have different information requirements.
Consideration should also be given to the frequency with which different modes of communication
are used (e.g. meetings, mail outs, press releases, etc).
The data for this performance measure should be collected by the organisations external relations
department who should control the communication with investors.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Sub-Facet 3:
Dates on which reports are produced can easily be recorded by the finance department or the
recipients of the reports. As financial statements always refer to specific periods in time it will be
relatively easy to calculate the elapsed time since the end of that period.
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Financial Operations
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Investor Satisfaction
Prism Facet 3:
Sub-Facet 3:
Regulator Satisfaction
Why should we measure it?
Increasingly regulators are becoming highly significant stakeholders in organisations. Often they have
considerable influence over the conduct of the organisation and the way in which it operates.
Assessment of regulator satisfaction indicates how well the organisation understands and interprets
the regulator's requirements and acts to satisfy them.
In most circumstances satisfaction of the regulator and regulator requirements is a precondition to
market entry. If regulators are not satisfied the organisation quite simply will not be awarded a
licence to operate.
In many cases regulators represent the interests of other stakeholders or the community in which the
organisation operates. This might include particular minority stakeholders, who are not organised
collectively.
Regulators might include industry specific regulators, environmental regulators, regulators of
competition, health and safety regulators, accreditation bodies (e.g. ISO), etc.
How do we measure it?
Regulator Satisfaction Survey
What do we need to consider when defining the measure?
There are a number of surrogate measures of regulator satisfaction. Assessment of regulator
satisfaction could be made via a survey, although more often the organisation is in close contact with
the regulator and can therefore assess satisfaction more directly.
Analysis of the regulator satisfaction should focus on the key areas with which the regulator is not
satisfied. Specific operational measures may then have to be implemented to monitor performance in
these areas.
This measure is linked to the measures of:
non-conformances to regulatory requirements
the costs or penalties of those non-conformances.
Use of this measure should include analysis of the level of satisfaction of each of the different
regulators for the organisation. This allows improvement attention to be focused on those regulators
whose satisfaction is lowest and on those regulators who have the greatest influence over the
organisation.
Prism Facet 1:
As a result even though effort has been dedicated to improving regulator satisfaction, league table
position will go down if other organisations have improved more.
Analysis of performance should identify the criteria for defining the position in the league table. This
will identify the drivers of regulator satisfaction. Identification of these drivers will enable attention
to be focused on the criteria which receive the highest priority. Frequently regulators produce league
tables ranking organisations in sub categories of performance which reflect these drivers.
Analysis of the regulator satisfaction should focus on the key areas with which the regulator is not
satisfied. Operational measures should then be implemented to monitor performance in these areas.
Analysis should also identify where performance is most in need of improvement, indicating where
improvement action should be focused.
Measurement should consider league tables produced by each of the regulators that have influence
over the organisation. However improvement attention should be focused on the regulators who have
the greatest influence, i.e. those that can impose the greatest penalties or revoke the organisation's
licence to operate.
This measure is linked to the measures 'non-conformances to regulatory requirements' and the 'costs
or penalties for those non-conformances'.
Data for calculation of this measure is available from the regulators concerned. Typically league
tables are published to allow the general public to consider the performance of organisations.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Non-Conformance to Regulations
Why should we measure it?
Increasingly regulators are becoming a highly significant stakeholder in organisations with
considerable influence over them and the way in which they operate. Non-conformance to regulations
assesses the frequency with which the organisation fails to meet the regulator's requirements.
A variety of regulators might be concerned with any individual organisation. These might include
industry specific regulators, environmental regulators, regulators of competition, health and safety
regulators, accreditation bodies (e.g. ISO), etc.
Satisfaction of regulatory requirements is often a condition of entry to the marketplace and nonconformance can often be penalised by sizeable fines. As such measurement of conformance is
essential, as are procedures to ensure the identification and elimination of problems which might
affect future conformance.
In addition to penalties imposed by regulators, non-conformances can also affect public perception of
the organisation. Environmental accidents often attract media attention and can damage public
perceptions and hence sales and profits.
The frequency of non-conformance is closely linked to the measure of the cost of non-conformance, as
frequent instances of non-conformance will increase the number of fines incurred.
How do we measure it?
number of non-conformances to regulations in a given period
What do we need to consider when defining the measure?
Non-conformances - are incidents where the organisation does not satisfy regulations or meet
regulator's requirements. Non-conformance will be defined by the regulator. Non-conformances will
vary in severity and will often be accompanied by penalties or requirements for corrective action.
Analysis of this measure should identify and eliminate the root causes of non-conformances. Action
should be taken to implement processes and procedures to make sure that future activities conform to
regulations.
Analysis by regulator should also be carried out. This will enable the identification of the regulators
who have the strictest requirements. Improvement efforts should be focused on those regulators who
have the greatest influence over the organisation. This includes those who will impose the largest
fines, who can impose the greatest restrictions on the organisations, or who can take away the
organisation's licence to operate.
Further analysis should relate this measure to the cost of non-conformances which will reflect the
severity of the issue.
In order to collect the data for this measure it is important that the organisation has a process to
manage relationships with regulators. This process should record occurrences of non-conformance
and analyse their causes.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
The value of fines levied in a given period - measures the financial burden placed on the nonconformance by the regulator. This provides an indication of the regulator's perception of the severity
of the non-conformance.
The given period for this measure should reflect the frequency with which regulators judge the
organisation and impose fines.
Use of the measure should include identification and elimination of the root causes of nonconformances so that they do not recur. This should include implementation of processes to identify
and rectify such root causes.
Analysis of the measure should include consideration of the size of fines, as this will reflect the
severity of the problems which have caused non-conformance.
There should also be analysis by regulator to identify which regulators have the most stringent
requirements. Focus should be placed on satisfaction of the most significant regulators and
expenditure should be focused on them. The most significant regulators are those who can impose the
greatest penalties and/or restrictions on the organisation.
Organisations should have a process for managing relations with regulators. This process should
identify who is responsible for collecting and analysing the data for this measure and co-ordinating
action to improve conformance.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Compliance to regulator requirements should include identification and elimination of the root causes
of non-compliance to ensure that compliance is maintained. Related expenditures should be built into
the cost of compliance.
Organisations should have a process for managing relations with regulators. This process should not
only identify who is responsible for maintaining relationships with the regulator, but also who should
be responsible for collecting and analysing data for this measure and co-ordinating action to improve
the efficiency and effectiveness of conformance.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
causes.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Sub-Facet 3:
"environmental" or whether it is undertaken only for economic reasons. The adoption of a new
technology often implies an improvement in environmental performance, even if the investment is
made without considering environmental issues.
Even when expenditures are properly accounted for, data can be misunderstood by external
stakeholders. For instance, is a company undertaking expensive investments for environmental
protection from a proactive posture, or is it just paying for years of mismanagement of the
environment? The problem can only be partially solved by explicitly showing the links between
improvements in environmental performance and expenditures.
Analysis should include consideration of the differences in expenditure in different business units or
in relation to different products or processes. Differences might be caused by differences in the nature
of the specific operations or due to differences in requirements in different locations.
Organisations should have a process for managing their impact on the environment which should
involve collection and analysis of data for this measure and co-ordination of action to reduce any
negative environmental impacts.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
The measure will monitor the effectiveness with which the organisation uses its budget to improve
relationships with communities.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
These include industry specific regulators, environmental regulators, regulators of competition, health
and safety regulators, accreditation bodies (e.g. ISO), etc.
Community - the local community is that in which the organisation considers that it operates. This
might be at the level of town or city. For larger organisations it may be national or international level.
Community groups - are groups representing the community in which the organisation operates. They
might include pressure groups which are those groups which campaign on particular issues of
interest.
Value of suggestions / feedback - is the value of implemented ideas or suggestions to the organisation.
It is likely that value will be realised through reduced cost of conformance and reduced cost of nonconformance.
Lead time to respond - is the time from receipt of a suggestion or piece of feedback to the time action
is taken. Initially this action should be acknowledgement of receipt and notification of potential time
before action will be taken. There should be a standard benchmark lead time for acknowledgement. It
is important that regulator or community are notified of the progress of their suggestions and are given
reasons if suggestions are not going to be implemented.
The importance placed on the feedback received will depend on the importance of the stakeholder. If
they can prevent the organisation from operating or impose fines then their feedback will be
considered to be very important.
The % of suggestions that are acted upon will depend on the importance, validity and usefulness of
the suggestions.
Data for the calculation of this measure should be collected through a regulator or community
suggestion scheme which encourages feedback and arranges specific events to facilitate this. This
should be undertaken by the process responsible for managing the relationship with regulators and
communities, including public and external relations.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Regulator & Community Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Regulator & Community Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders
Press Coverage
Why should we measure it?
Coverage of the activities of the organisation in the press is a significant way in which stakeholders
perceptions of the organisation can be influenced, affecting the satisfaction of all stakeholders,
improving the likelihood of them making a positive contribution in return.
As a result there should be close management of relations with the press to maximise positive press
exposure and minimise negative exposure.
Press coverage can reflect a wide range of organisational activities from normal operations and
product or service information to coverage of contribution to the community or environmental issues.
How do we measure it?
number of positive press appearances in a given period
number of negative press appearances in a given period
What do we need to consider when defining the measure?
Press articles - items about the organisation that appear in local, national and international press.
Analysis of the number of press articles should include consideration of the subject of the article.
Typical subjects might include:
product or service offered (e.g. product launches)
operational issues (e.g. recruitment)
the impact of the organisation of the environment
activities undertaken in the local community, including charitable activities and donations.
The public relations department should monitor and control all communications with the press and
report the performance against this measure.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Regulator & Community Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Regulator & Community Satisfaction
Prism Facet 3:
Sub-Facet 3:
Advance warnings of regulation changes - are instances where advice is provided of future regulation
changes, allowing more notice to take action.
The given period for this measure will be determined by the frequency with which regulations change
and communication between the organisation and the regulator is necessary.
For each of the modes of communication consideration should be given to the instigator. If working
relations are good the organisation will be able to instigate all modes of communication to consult on
a wide range of issues. This will not be the case if relations are poor - all communication is likely to
be from the regulator.
Data for this measure should be collected by the process responsible for managing relations with
regulators.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Regulator & Community Contribution
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Regulator & Community Satisfaction
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders
factors that stand in the way of full compliance among certain firms. For example, some companies
may hold the view that pollution reduction activities can increase costs that consumers may be
unwilling to pay. Plus, sometimes the product produced using less-polluting processes may be of an
inferior quality and/or the option of process changes is inefficient in many older plants.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
This compilation process can be more complex for larger companies, particularly multinational
enterprises. Information may be fragmented across various divisions of the company; for instance,
operating departments may collect fuel information, while finance departments collect electricity
information. Indeed, the same type of data may be tracked in different ways by different divisions, or
tracked in some divisions but not in others.
When identifying targets for raw material conservation programmes, it is important to consider each
individual conservation target (such as a goal to recycle 20 tonnes of paper per year) and develop
data on the progress made toward achieving these goals.
A core requirement of several internationally-based corporate reporting initiatives, such as UNEP
and GRI, is the development of an inventory regarding environmentally significant materials used.
Such an inventory should provide an indication of which materials used are hazardous, toxic or
associated with significant potential environmental impacts. The scope and practice of materials
recycling on- and off-site should also be addressed.
There is no standard unit for energy usage. Process industries, such as petrochemicals and
manufacturing, generally prefer to use Joules, whereas others prefer Kilowatt-hours. The latter may
be clearer for a wide audience since it can readily be related to electricity use with which many are
familiar. Further, the use of production-related units can lead to greater transparency and easier
comparisons within a site and between sites. These units often relate to consumption per unit output,
such as Gigajoules per production tonne.
According to recent industry-based surveys, few companies currently reveal their capital investment
in energy savings or the expected pay-back times. However, such information is key to assessing the
priority which the company attaches to energy savings.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
disposal cost, potential liability, quantity generated, waste hazard, potential to remove bottleneck(s),
and potential by-product recovery.
Supplier options to minimise waste and maximise recycling opportunities can be best achieved
through source reduction assessment such as equipment changes, procedure changes, or material(s)
changes. Each option should be evaluated in terms of reduction in waste hazard, reduction of disposal
costs, reduction of materials cost, and effect on product quality.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Regulator & Community Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Supplier Satisfaction
Why should we measure it?
Increasing supplier satisfaction is important if long and close relations are to be developed between
the customer and the supplier. Increasing supplier satisfaction increases the suppliers willingness to
supply the particular customer and the likelihood that performance will be improved.
Increased supplier satisfaction will encourage the supplier to enter into long-term contracts or
agreements which allow programmes of mutual benefit, such as capital investment and supplier
development, to be undertaken.
This measure is linked to supplier feedback and suggestions which will provide the organisation with
an understanding of the level of supplier satisfaction and will identify specific issues on which
attention should be focused.
How do we measure it?
Supplier Satisfaction Survey
What do we need to consider when defining the measure?
Although the catalogue contains numerous examples of surrogate measures of supplier satisfaction,
the only way to understand the actual satisfaction of suppliers is to ask them through a survey.
A supplier satisfaction survey can be used to provide a numerical value for the level of supplier
satisfaction, a percentage, for example. Such index numbers indicate trends in satisfaction and allow
correlations to be identified in order to assess the drivers and consequences of supplier satisfaction.
However the greatest value is gained if the drivers of supplier satisfaction that most need improving
can be identified.
Surveying supplier satisfaction provides an indication of current satisfaction levels. The survey
should be designed to provide the organisation with an understanding of which factors contribute to
supplier satisfaction. For example, for most suppliers on time payment (as per contractual terms and
conditions, industry norms or national codes of practice) is a key driver of satisfaction and should be
measured separately.
When using supplier satisfaction surveys, it is important to focus on those suppliers that are most
important both strategically and by value of purchases.
Analysis of the measure should consider the volume, value and type of goods and services supplied.
This analysis should allow action to be focused so that the satisfaction of those suppliers that are the
most important to the organisation can be improved. This includes those who supply the highest value
and volume of goods and services, and suppliers of specific goods and services that are critical to
operations. Action should also be focused on suppliers with whom the organisation wishes to
develop long-term relationships.
The purchasing function should be responsible for assessment of supplier satisfaction and execution
of the satisfaction survey. They will also be responsible for acting on the results.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
partnership with a particular customer. Generally this includes formal contracts over an explicit
period of time, although it might relate to less formal agreements of future purchasing intentions clearly formal, contractual arrangements are more desirable for suppliers.
Bidding Contests / Tender Requests - are customer requests for suppliers to compete or bid for
contracts to supply certain goods or services.
Investment - is the provision of financial capital into a business.
Data for this measure should be available from the purchasing department, which is responsible for
measurement and analysis of supplier performance, and sales departments which play a similar role
with customers. These departments are responsible for analysis and development of the relationships
between customers and suppliers.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Processes Sub-Facet 3: Fulfil Demand
There should also be analysis by goods and services to focus action on improving the future visibility
given to those suppliers who provide the goods and services which are most important to the
operations of the customer organisation.
Assessment of future visibility should be the responsibility of those who manage the relationship with
suppliers and who are responsible for communication.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders
Prism Facet 2:
Stakeholder Contribution Sub-Facet 2: Customer Contribution
Prism Facet 3:
Strategies Sub-Facet 3: Brand, Product & Service Strategy
Customer Liquidity
Why should we measure it?
Customer liquidity measures the availability of funds within customer organisations, indicating their
ability to pay for goods and services provided.
As a result it is an important factor in the relationship between customers and suppliers, as it makes
an important contribution to the development of trust in the relationship. The higher the liquidity of
customers the more confident the supplier will be that future debts and invoices will be paid and that
there will be business in the future. Low liquidity will lead suppliers to seek alternative customers to
spread risk of future operations.
The development of trust within the customer supplier relationship is important to ensure cooperation providing mutual benefit.
This is a particularly important measure to consider when taking on new customers and when setting
credit limits which will determine exposure to risk. As such this is an important measure of credit
control which requires close liaison with sales management.
How do we measure it?
customer's liquid assets customer's total assets
What do we need to consider when defining the measure?
Liquidity - is the availability of liquid assets.
Liquid Assets - are cash, or other assets that are readily convertible into cash.
Total Assets - all of the assets of the company.
Customer liquidity should be measured and analysed individually for each customer and aggregated
to indicate overall risk.
It is essential that there is close liaison between sales management and credit controllers to ensure
that full consideration is given to the liquidity of customers when agreeing to supply and when setting
credit limits.
The data for this measure should be available from the supplier or potential supplier's financial
accounts and should be used by the sales department when identifying potential customers and
agreeing contracts.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:
Stakeholder Contribution Sub-Facet 2: Customer Contribution
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Financial Operations
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:
Stakeholder Contribution Sub-Facet 2: Supplier Contribution
Prism Facet 3:
Sub-Facet 3:
might reflect the number of discrete orders, number of deliveries, etc. The number of transactions
should be defined to appropriately reflect the volume of business between supplier and customer.
Both the number and value of purchases / transactions should be measured in the appropriate time
buckets (e.g. months) with the trend analysed over time.
Purchasing spend - is the customers spend on purchased products or services. It might be divided into
the type of product or service purchased or the end product for which the component is purchased.
Supplier's turnover - is the total income suppliers receive in return for the provision of goods and
services to all of their customers.
Analysis of this measure should include the division of sales into appropriate product groups.
Suppliers and customers should be categorised by the value of business.
Data regarding sales revenue and the level of purchasing should be available from accounting
information system which records all financial transactions. Operating control systems should collect
data regarding the number of transactions. This data should be collected together by sales (with
regard to customers) and purchasing (supplier data) for analysis and action.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:
Stakeholder Contribution Sub-Facet 2: Customer Contribution
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders
The measure should be analysed by supplier and supplier type. Types of supplier include the amount
of business between the customer and supplier, as well as the type of product or service delivered.
Data for calculation of this measure is likely to be a subjective evaluation of involvement by those
responsible for developing the relationship between customer and supplier. It is important to quantify
this relationship to gain an understanding of the level of involvement and track how this changes over
time. Consideration should be given to the way in which consistency of this measurement can be
maintained.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage the Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
organic. Analysis of organic growth performance should be undertaken as part of the corporate
strategic review process.
Prism Facet 1:
Strategies Sub-Facet 1: Corporate Strategy
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
made or where strategic improvement initiatives have been focused. This will identify the
effectiveness of improvement effort and return on investment.
Use of this measure should also include comparison of sales and profit growth with that expected and
planned during the strategy development process and during the purchase of new enterprises.
Financial accounting systems will provide data on sales and profit growth. The finance department
and strategy development process will be able to identify the proportion of that growth which has
been acquired. Analysis of organic growth performance should be undertaken as part of the corporate
strategic review process.
Prism Facet 1:
Strategies Sub-Facet 1: Corporate Strategy
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
development and scheduling / capacity planning. These processes should review the availability of
technology and compare it to requirements to identify required movements. At this point estimations
of the time required to move equipment should be considered and compared with that of purchasing
new equipment. Estimations should be based on previous experiences and expert opinion. When
deciding on redeployment options consideration should be given to the need for rapid relocation
versus the cost of relocation.
Speed of transfer will vary greatly depending on the nature of the technology being re-deployed. As a
result this measure must be analysed by the type of technology redeployment being undertaken.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Strategies Sub-Facet 2: Corporate Strategy
Prism Facet 3:
Sub-Facet 3:
technology and compare it to requirements to identify required movements. At this point estimations
of the cost of moving equipment should be considered and compared with the cost of purchasing new
equipment. Cost estimations should be based on previous experiences and expert opinion. The
finance department should maintain data regarding previous costs incurred in moving location and
equipment. When deciding on redeployment options consideration should be given to the need for
rapid redeployment versus its cost.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Strategies Sub-Facet 2: Corporate Strategy
Prism Facet 3:
Sub-Facet 3:
different functions or divisions of the organisation. This will identify how well the strategic
objectives are communicated to different areas and levels of the organisation. It will also assess
execution of the appropriate strategies in all areas of the organisation.
Prism Facet 1:
Strategies Sub-Facet 1: All Strategies
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Plan Enterprise
Prism Facet 3:
Sub-Facet 3:
Hierarchical Complexity
Why should we measure it?
The way in which an organisation operates will have a significant effect on its effectiveness and
efficiency and hence its financial performance. The way in which management of people and
operations is organised will affect this performance.
Measurement of the hierarchical complexity of an organisation assesses the number of levels within
the organisation between the senior management and 'shop floor' workers. The more organisation
levels there are, the more difficult communication between the top and bottom of the organisation will
be.
Excessive hierarchical or management levels in the organisation mean that objectives and strategies
get confused in their deployment. It is also possible to ensure that inefficiencies within the
organisation can be hidden.
How do we measure it?
number of levels in organisational hierarchy
What do we need to consider when defining the measure?
Organisational hierarchy - is the way in which the management of the organisation from top level
management to 'shop floor' level operations is arranged or organised. In the case of this measure the
organisational hierarchy refers to the number of levels or direct line managers between the top level
management of the organisation and workers at 'shop floor' level.
Where possible action should be taken to identify and eliminate unnecessary hierarchical levels in
order to improve vertical communication within the organisation. This should help to improve
alignment and achievement of strategies and the consistency of action throughout the organisation.
Assessment of the hierarchical complexity of the organisation is likely to be part of a process for
reviewing the structure of the organisation or part of the strategic review of operations. As such this
is unlikely to be an operational measure, rather a measure to review progress against a specific
objective of reducing complexity.
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Plan Enterprise
Prism Facet 2:
Capabilities Sub-Facet 2: Practices
Prism Facet 3:
Prism Facet 3:
Strategies Sub-Facet 3: Brand, Product and Service Strategy
Cost of moving operations to new land / buildings - includes cost of selling land and buildings or
'decommissioning' facilities, cost of disposing of equipment that is no longer required and the cost of
making redundant employees that are no longer required. These costs will also include taking on new
employees in the new location and the set up costs of newly introduced equipment and operations.
Cost of moving equipment - will include the cost of uninstalling and reinstalling the equipment, the
cost of transportation and the cost of skilled personnel to move the equipment and operate it in the
new location. This might include costs of recruiting new personnel.
The data for this measure should be available from the processes that use the measure, i.e. strategy
development and scheduling / capacity planning. These processes should review the availability of
infrastructure and compare it to requirements to identify required movements. At this point
estimations of the cost of moving operations and equipment should be considered and compared with
the cost of purchasing new facilities and equipment or not moving. Cost estimations should be based
on previous experience and expert opinions. The finance department should maintain data regarding
previous costs incurred in moving location and equipment.
When deciding on relocation options consideration should be given to the need for rapid relocation
versus the cost of relocation.
The costs of transfer will vary greatly depending on the nature of the infrastructure being considered.
Organisations should select comparable items of infrastructure when analysing performance. As a
result this measure must be analysed by the type of infrastructure relocation being undertaken.
Categories include:
- Relocation of operations from one location to another. This will vary depending on size, distance
moved, whether the new location is a new or existing site, the amount and nature of equipment that is
being moved or bought
- Relocation of equipment. This will vary depending on the value and size of equipment, distance
moved, complexity of installation and uninstallation, level of technical expertise required to move
and operate the equipment, etc.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Strategies Sub-Facet 3: Business Unit Strategy
Equipment - are items of infrastructure that are not fixed to a specific location and can be moved to,
and used in, another location.
Time required to move - is the time from identification of the need for a new piece of infrastructure
(land and buildings or equipment) to the time that the infrastructure is available for use.
Time required to move operations to new land / buildings - includes the time taken to acquire or
construct new land and buildings. It might also be necessary to consider the time required to take on
new employees in the new location.
Time required to move equipment to a new location - will include the time required to uninstall and
reinstall the equipment, to transport the equipment and the time to find skilled personnel operate the
equipment in the new location. This might include the recruitment of new personnel.
The data for this measure should be available from the processes that use the measure, i.e. strategy
development and scheduling / capacity planning. These processes should review the availability of
infrastructure and compare it to requirements to identify required movements. At this point
estimations of the time required to move operations and equipment should be considered and
compared with that of purchasing new facilities and equipment or not moving. Estimations should be
based on previous experience and expert opinions. When deciding on relocation options
consideration should be given to the need for rapid relocation versus the cost of relocation.
Analysis of the measure over time is difficult, as in most industries there is unlikely to be relocation
of similar items of infrastructure, making comparison problematic. Organisations should select
comparable items of infrastructure when analysing performance. Analysis should allow comparison
of the speed of individual parts of the process of relocation which are more comparable than the
entire process.
Speed of transfer will vary greatly depending on the nature of the infrastructure. As a result this
measure must be analysed by the type of infrastructure relocation being undertaken. Categories
include: (i) relocation of operations from one location to another - this will vary depending on size,
distance moved, whether the new location is new or existing site, the amount and nature of equipment
that is being moved or bought; and (ii) relocation of equipment - this will vary depending on the value
and size of equipment, distance moved, complexity on installation and un-installation, level of
technical expertise required to move and operate the equipment, etc.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
manner.
The process responsible for the management of technologies should undertake audits of technologies
and hence calculate and report this measure.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Strategies Sub-Facet 2: Business Unit Strategy
Prism Facet 3:
Sub-Facet 3:
Use of the measure should include analysis of type of technology being licensed, such as product or
process technologies, and split by product groups or process types. This will indicate the area of the
business which is providing the greatest innovation of interest to the outside world and resultant
income generation.
Analysis should also consider the organisations that are using the licences, for example which
industries they are from, whether they are competitors, etc. Organisations and types of technology
used should be analysed together to identify trends.
The financial accounting systems should record income from licence agreements. Such systems should
link this income to specific development projects or areas of the business.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Strategies Sub-Facet 2: Business Unit Strategy
Prism Facet 3:
Sub-Facet 3:
Data for this measure should be available from accounting information systems with market
intelligence data providing information regarding alternative markets and sectors.
Prism Facet 1:
Strategies Sub-Facet 1: Brand, Product & Service Strategy
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
consideration should be given to the product life cycle because new products launched in one year
may not have generated adequate sales within the year for them to reflect their impact on new revenue
generation. So, measuring new product or service sales per year may not take account of the time lag
involved in new sales revenue generated. Analysis should investigate the demand for individual
products, product groups as well as for all products, assessing the 'develop new products & services'
process as a whole.
Analysis of the measure by product or product group will provide an understanding of which are the
most profitable products or product groups and hence which are the markets on which the
organisation should focus. This is an important feedback mechanism to review the assumptions that
were made when deciding which products to introduce and which markets to aim for.
Data for this measure will be available from the organisation's financial accounting information
systems which record revenues and costs incurred. It is important that the accounting systems include
an appropriate basis for the allocation of costs to ensure that they represent as accurately as possible
the costs incurred in developing, producing and selling each new product and/or service. These are
similar issues to those considered when measuring New Product / Service Break Even Time.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Processes Sub-Facet 2: Generate Demand
Prism Facet 3:
Strategies Sub-Facet 3: Brand, Product & Service Strategy
R&D Spend
Why should we measure it?
Research and Development (R&D) spend reflects the amount of resource directed towards the
systematic search for innovations and indicates the commitment of the organisation to developing new
products and processes in order to maintain competitiveness.
The amount spent has a direct impact on the innovative outputs (products, processes or patents) of the
business unit. It can be regarded as one of the key inputs to the innovation process.
The level of spend on R&D will vary considerably between industries, depending on the rate at
which new products and processes need to be introduced in order to maintain competitiveness and the
cost of developing these products and processes.
This measure is an input to the R&D process, as the level of resources available will have a
significant effect on its output. As a result it will assess the Develop Products and Services process
and the strategic importance of developing new processes, products and services.
How do we measure it?
R&D expenditure as a percentage of sales turnover
R&D expenditure as a percentage of operating costs
What do we need to consider when defining the measure?
R&D expenditure - is expenditure which relates to research and development activities. R&D will
relate to the development both of new products and processes.
Turnover - is income from the sale of goods and services.
One should be aware that R&D is only one of the key elements within the innovation process. Other
non-R&D inputs include new product marketing, patent-related work, financial and organisational
change, design engineering, industrial engineering and manufacturing start-up.
It is important to note that the amount of R&D spend does not always translate into innovative
products or processes. Specifically there are eight factors that are critical for new product success:
a product with a high performance-to-cost ratio
development, manufacturing and marketing functions that are well co-ordinated and integrated
the product provides a high contribution margin to the firm
the new product benefits significantly from the existing technological and marketing strengths of
the business units
significant resources committed to selling and promoting the product
the R&D process is well planned and co-ordinated
a high level of management support for the product from the product conception stage through to
most profitable and on which products or product groups effort should be placed to improve the
effectiveness and efficiency of product introduction and marketing.
The actual breakeven time will vary considerably between industries and products and services
within industries. Key factors affecting breakeven time include the complexity of the product, the cost
of the R&D involved and the profit margin included in the final selling price.
The actual point of breakeven will be affected by the 'Target Cost vs. Actual Cost' measure.
The Develop Products & Services process should include a process to monitor the progress of new
products and services that are developed. This should enable evaluation of the output of the process
including the success of the products that are introduced into the market. The process will require
data from accounting information systems regarding the costs incurred and sales revenue generated.
This monitoring process should provide important and valuable feedback regarding the performance
of the process.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Strategies Sub-Facet 2: Brand, Product & Service Strategy
Prism Facet 3:
Sub-Facet 3:
Analysis of new product or service introduction rates should compare performance for different
products and product groups to identify which are the most competitive and for which performance
improvement is important. There should also be analysis of each stage of the introduction process to
identify where improvement can be made. Each stage of the process could be benchmarked with other
organisations to see how they can be improved. Analysis must also include comparison of
introduction rate versus that of competitors and standard rates within the industry.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Strategies Sub-Facet 2: Brand, Product and Service Strategy
Prism Facet 3:
Sub-Facet 3:
Infrastructure Availability
Why should we measure it?
This measure assesses whether infrastructure is available when required.
As with other capabilities, it is essential that infrastructure is available when required in order to
satisfy demand. The measure assesses how well infrastructure is planned in order to ensure that the
organisation has the right items of infrastructure and that the infrastructure is in the right place at the
right time so that demand for the organisation's products and services can be satisfied. Such planning
is a key part of the capacity planning process when scheduling activities, as a result this is an
important measure of the effectiveness of these planning processes.
It is most important to use this measure in relation to key pieces of infrastructure, where their absence
can constrain activity of the organisation, or items which provide competitive advantage, the absence
of which could affect the competitiveness of the firm.
The availability of infrastructure can be maintained by making large investments to ensure that
infrastructure is always available. This might include maintaining excess infrastructure to cover all
eventualities. Although this will ensure availability it might well be an inefficient use of resources as
there will be increased investment costs and increased cost of maintaining infrastructure which might
not be highly utilised. As a result it is important to use this measure in conjunction with the measure
of 'Infrastructure Utilisation' which assesses the amount of infrastructure that is under-utilised. The
balance between utilisation and availability of infrastructure should be assessed by the organisation
based on its competitive priorities. Expenditure on excess infrastructure in key strategic areas or on
key strategic items can be justified if availability and flexibility are key competitive priorities.
The availability of capital to invest in infrastructure can be a key consideration in its availability
when required as will the speed and cost of infrastructure relocation.
The availability of infrastructure is related to its age and condition and the level of maintenance to
ensure availability. As a result this measure should be used in conjunction with measures of those
areas of performance.
Lack of availability will cause additional costs to be incurred. These costs are included in the 'Cost
of Equipment Breakdown' measure.
How do we measure it?
% of occasions that items of infrastructure are / are not available when required
mean time between equipment breakdowns
What do we need to consider when defining the measure?
Infrastructure - is the underlying capital of the organisation. Infrastructure includes land, buildings,
plant, machinery, vehicles, furniture and other equipment.
Equipment - are items of infrastructure that are not fixed to a specific location and can be moved to,
and used in, another location. These are working items of infrastructure that can break down i.e. other
than land and buildings.
Breakdown - is to become in-operational due in unexpected circumstances.
The availability of infrastructure will provide an input to the strategy development process when
decisions regarding investment are made. In such instances the frequency with which the measure is
used should reflect the frequency of the strategy development and review. In the case of smaller items
such as equipment, machinery, etc. the measure will be more regularly used to assess whether the
infrastructure required to fulfil customer demand is available. This will be part of a quicker feedback
mechanism to ensure that machines and equipment are available when required and that plans and
schedules consider current availability and trends that will indicate potential future availability.
It is most important that the measure is focused on key items of infrastructure where their absence can
constrain activities of the organisation, or infrastructure which provides competitive advantage, the
absence of which could affect the competitiveness of the firm.
It is important that causal analysis of this measure is undertaken. Such analysis will allow the
identification of the reasons for infrastructure being unavailable and hence action can be taken to
prevent recurrence. Lack of infrastructure might be caused by a lack of investment in the appropriate
infrastructure, failure to effectively deploy available infrastructure in a timely manner or poor
planning / scheduling of activities.
Analysis should also include split by business unit or department to analyse where the planning is
most effective and where improvement is required.
There is a need for a feedback mechanism to determine when infrastructure is not available and to
analyse the causes so that they can be reduced.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Strategies Sub-Facet 3: Operating Strategy
Cost of acquiring / constructing new land / buildings - includes the purchase price of the land and
buildings, all construction or modification costs plus start up costs.
Start up costs of new locations - include taking on new employees in the new location and the set up
costs of newly introduced equipment and operations.
Cost of new equipment - will include cost of installing the equipment, cost of transportation and the
cost of skilled personnel to operate it. This might include costs of recruiting and training new
personnel.
Whole life costs of infrastructure - are the costs that will be required to acquire and maintain items of
infrastructure throughout their entire useful life. These costs include the costs of acquisition,
installation or construction and the cost of maintenance.
The measure is used in strategy development and scheduling / capacity planning and the data to
calculate it should be available from these processes. These processes should review the availability
of infrastructure and compare it to requirements to identify necessary acquisition. At this point
estimations of the cost to acquire new infrastructure should be considered and compared with the cost
of utilising existing facilities, the benefits of acquiring new infrastructure and the costs of not doing
so. Cost estimations should be based on previous experience and expert opinion. The finance
department should maintain data regarding previous costs of acquiring infrastructure, which is
especially relevant if similar types of infrastructure have previously been acquired. Analysis of the
measure over time is difficult, as in many industries there will not always be regular investments in
similar items of infrastructure, making comparison between types of expenditure problematic. Trends
will allow understanding of changes in infrastructure requirements.
The costs of infrastructure will vary greatly depending on their nature. As a result this measure must
be analysed by the type of infrastructure relocation being undertaken. Categories should include:
cost of land - which will vary depending on size, location, availability of local facilities, etc
cost of buildings - which will vary depending on size, location, features (including equipment,
fixtures and fittings etc.), availability of local facilities, etc. The cost of any work required to
modify existing buildings to new uses should be included
cost of construction - will include all design and construction costs, cost of purchasing land, cost
of fitting out the building, start up costs, etc. The amount of specific requirements required will
have a significant effect on the cost of constructing new buildings
cost of new equipment - will include variation depending on the complexity and technical
specification of equipment, complexity on installation, level of technical expertise required to
operate the equipment, etc
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
When using the measure of remaining useful life, consideration should be given to the lead time
required to replace the item.
Assessment of the age and condition of assets and infrastructure should be undertaken in conjunction
with the fixed asset inventory which monitors fixed assets. There should also be a feedback
mechanism to report changes in condition of infrastructure. In many cases this will be provided by the
maintenance department who will monitor the condition of all infrastructure. Operators using
infrastructure should also be encouraged to provide feedback of condition and the need for
replacement.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Strategies Sub-Facet 2: Operating Strategy
Prism Facet 3:
Sub-Facet 3:
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Plan Enterprise
Prism Facet 3:
Sub-Facet 3:
etc.
Unless marked by a specific event, such as input from a customer or marketing department, it might
sometimes be difficult to determine the point at which ideas are generated and so identifying the start
of conceptual design can be difficult.
The 'develop products & services' process should monitor and record all stages of the product
introduction process, including identification of the beginning and end of each stage of the process.
This should include measurement and analysis of this measure.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Sub-Facet 3:
is taken. Initially this action should be acknowledgement of receipt and notification of potential time
before action will be taken. There should be a standard benchmark lead time for acknowledgement.
It is important that those contributing ideas and suggestions are notified of the progress of their
suggestions and are given reasons if suggestions are not going to be implemented.
The Develop Products and Services and Fulfil Demand processes should monitor idea generation
including their conversion into actions. This should include the collection of data for this measure.
The process should therefore include a process or mechanism which records ideas and their progress
including the results of their implementation.
The % of suggestions that are acted upon will depend on how valid or useful the suggestions are.
Improvements should be assessed in terms of savings or enhancement in cost, cycle-time and quality.
In essence the idea conversion rate measure provides an indication of how effective the process of
converting and implementing the upstream pool of ideas is. A Pareto analysis of implemented
suggestions is often useful as this will display patterns of improvement initiatives within the
company.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: All stakeholders
This measure is related to the measure of patents which will also indicate the uniqueness of products.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Cost of non-conformance - (or cost of failure to control) is the cost of wastage in time, materials and
capacity in the process of receiving, producing, despatching and reworking unsatisfactory goods and
services. Cost of non conformance includes internal failure costs (e.g. scrap and rework costs,
wasted effort first time) and external failure costs (which includes warranty claims, field repairs,
returns, product recall, lost custom, etc.).
Quality costs are "those costs associated with the definition, creation, and control of quality as well
as the evaluation and feedback of conformance with quality, reliability, and safety requirements, and
those costs associated with the consequences of failure to meet the requirements both within the
factory and in the hands of the customers" (See Armand Feigenbaum "Total Quality Control" and
British Standard on Quality Costing: BS6143 Part 1, Guide to the Economics of Quality, Process Cost
Model).
Performing process modelling to identify sub-processes in the production of new product or service
is an effective first step in building a big-picture view of the cost of quality. Having identified
opportunity areas for reduction in cost of conformance and non-conformance measures should be
introduced to monitor the cost of quality. Operations reviews should also be established to look into
root causes of non-conformance.
Organisations should have a quality control or assurance department which is responsible for
ensuring the products and services that are delivered are of appropriate quality. This process should
include recording and analysing data regarding the costs of quality. The department should also
receive feedback from other departments or processes such as the sales department regarding missed
sales.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Processes Sub-Facet 3: Plan & Mange Enterprise - Operations
Analysis of costs should consider the differences in costs incurred between different products,
product groups and customers. This will identify where the greatest penalties for late introduction
will be incurred, which will be important information when deciding on prioritisation and resourcing
of product introduction projects.
Data for this measure is readily available from the list of tasks to be completed within the Gantt Chart
of projects. After the date of intended launch, all outstanding activities are translated into "manhours" and costed. The sales department should make an assessment of the expected sales that are lost
as a result of failure to get the project to market and should record penalties that customers impose.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
organisations that are using licences for technologies developed internally as well as the number of
licences being used.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Processes Sub-Facet 2: Develop Products & Services
Prism Facet 3:
Sub-Facet 3:
Number of Patents
Why should we measure it?
Use of this measure provides an independently quantifiable indication of how innovative an
organisation is, as it measures the number of patent applications that are granted. The number of
patents or commonly known as 'patent counts' have the effect of revealing the scientific and
technological base of a company.
Patents counts are measured for a number of reasons:
patents provide information about the rate, volume and direction of technological developments
the data can be benchmarked against competitors so that in-house research and development
performance can be tracked
the data can also be used as a proxy measure to assess the effectiveness of R&D Spend
Use of this measure is particularly important where competition based on innovation is high and
considerable advantage can be gained from being the first to introduce a new product or service.
Registration of patents ensures that the organisation that has developed innovative products or
services can exploit them exclusively.
CAUTION - registration of patents also tells the competition what technologies the organisation has
developed. Therefore it is worth not registering patents, or not registering them immediately, in some
situations.
How do we measure it?
the number of patents successfully registered in patents office of respective countries
% of patent applications that are successfully registered
average R&D expenditure per successful patent application
value of patents vs. R&D spend
% of target markets in which patents are successfully registered
What do we need to consider when defining the measure?
Patents - a formal document securing the inventor the exclusive right to make, sell or use their
invention.
Patents might relate to products or processes, either of which might provide an organisation with a
competitive advantage.
Value of patents - is the commercial value gained from the sale of products or use of processes that
are protected by patents. Value from patented processes might be generated from increased
efficiencies or increased sales of products that can only be produced by the patented process or
technology.
The valuation of patents may have to be subjective, but will give an indication of the benefit gained
from R&D expenditure, and might be a more relevant measure than the number of patents.
Patents protect ideas. As such they are considered an intermediate output of the whole process of
innovation. Patent counts reflect the propensity to patent, not the actual innovations (exploitation of
ideas in the form of actual products or processes that get launched in the market). The propensity to
patent may vary across firms, industry sectors and countries. Hence, patent counts are highly
correlated with research inputs, but not necessarily innovative outputs.
Analysis of the number of patents should include comparison of patent application success rates in
different countries. It should also include comparison with competitors to assess the relative
effectiveness of the R&D process and the competitive advantage that it provides.
Data regarding patent applications lodged and their success should be tracked by the R&D process.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
estimation and the effectiveness of cost control. The period over which the measure should be used
will depend on the frequency with which products are introduced. A number of projects need to be
considered in order to understand the performance of the whole process rather than simply the
introduction of individual products.
Analysis should also include comparison of compliance in different parts of the project or different
business units. This will improve understanding of where estimation and compliance can be
improved and action is required.
The Develop Products and Services process should include monitoring of costs incurred, collecting
data for this measure.
Prism Facet 1:
Processes Sub-Facet 1: Develop Products & Services
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Cost of Quality
Why should we measure it?
Cost of quality aims to financially quantify the activities in the prevention and rectification of defects.
It measures the total cost (cost of conformance and cost of non-conformance) of ensuring that products
of the correct quality are delivered.
It is critical to measure the cost of quality for the following reasons:
to display critical quality-related activities to management in meaningful terms
to illustrate the impact of quality-related activities on key business performance criteria
(profitability, operational costs, inventory levels, customer satisfaction etc.)
to enable benchmarking against other divisions or companies
to establish bases for budgetary control over the whole quality operation
to provide cost information to motivate employees across all levels of the company
The measure of Cost of Quality provides an indication of how well products and processes are
designed in order to produce high quality products, and does so in the common unit of cost to allow
comparability of data. It also measures how well all activities are executed (Fulfil Demand) to ensure
that products and services are delivered to specification as most of the failure costs will come from
operations. In addition costs of prevention are managed in the plan and manage operations process.
Cost categories are defined in BS (British Standard) 6143 to include cost of conformance (COC) and
the cost of non-conformance (CONC).
How do we measure it?
total cost of quality conformance (COC)
total cost of non-conformance to quality requirements (CONC)
What do we need to consider when defining the measure?
Cost of conformance - (or cost of control) is the cost of providing new products and services to
specified standards. For example, prevention costs (preventing defects and non-conformities - quality
planning, process control, quality training, etc.) and appraisal costs (maintaining quality levels
through formal evaluation - inspection, testing, quality audits etc.).
Cost of non-conformance - (or cost of failure to control) is the cost of wastage in time, materials and
capacity in the process of receiving, producing, despatching and reworking unsatisfactory goods and
services. Cost of non-conformance includes internal failure costs (e.g. scrap and rework costs,
wasted effort first time) and external failure costs (which includes warranty claims, field repairs,
returns, product recall, lost custom, etc.).
Quality costs are "those costs associated with the definition, creation, and control of quality as well
as the evaluation and feedback of conformance with quality, reliability, and safety requirements, and
those costs associated with the consequences of failure to meet the requirements both within the
factory and in the hands of the customers" (See Armand Feigenbaum "Total Quality Control" and
British Standard on Quality Costing: BS6143 Part 1, Guide to the Economics of Quality, Process Cost
Model).
Performing process modelling to identify sub-processes in the production of new product or service
is an effective first step in building a big-picture view of the cost of quality. Having identified
opportunity areas for reduction in cost of conformance and non-conformance measures should be
introduced to monitor the cost of quality. Operations reviews should also be established to look into
root causes of non-conformance.
Organisations should have a quality control or assurance department which is responsible for
ensuring the products and services that are delivered are of appropriate quality. This process should
include recording and analysing data regarding the costs of quality. The department should also
receive feedback from other departments or processes such as the sales department regarding missed
sales.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Processes Sub-Facet 2: Develop Products & Services
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Operations
will vary considerably. Analysis can be further segmented - for example response rates for focused
special interest publications are likely to be higher than in general publications such as national
newspapers.
Response rates and return on investment are relatively easy to calculate when doing direct marketing
as it is easy to identify the specific individuals targeted and whether they respond.
Advertising via the world wide web enables even more data to be collected about response rates and
effectiveness. Refer to the measures of Web Site Hit Rate and Web Site Customer Behaviour.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
consideration. The expected time a quotation is required should always be considered. This might not
always be a formally stated time or date, in which case an estimate of the maximum acceptable
elapsed time should be made.
As the preparation of quotes is likely to include interaction between different functions or
departments, analysis should identify the performance of each contributing function so that those
causing delays in finalising quotes can be identified and improvement action can be taken.
The generate demand process should include a process or mechanism for recording and monitoring
the progress of quotations from original request for a quote to its delivery and the ultimate decision of
the customer whether to purchase.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Cost to Quote
Why should we measure it?
The cost to quote measure assesses how much it costs an organisation to prepare a quotation in
response to a customer request. This is an important measure of the efficiency of demand generation
process.
If the costs involved in preparing a quote are too high it might eliminate any hope of making a return
on the deal. As a result it is important to compare the cost of preparing quotes with the margin that
would be made if the bid were successful. If the cost of bidding is greater than the margin, the bid
should only be prepared if the strategic decision is made that the bid is a 'loss leader'.
Using this measure in conjunction with the measure of quotation conversion provides an important
indication of the amount of resources that are wasted preparing quotations that are unsuccessful.
How do we measure it?
average cost of producing a quotation
cost of quote preparation as % of the margin on the quotation
What do we need to consider when defining the measure?
Quotation / proposal - is a statement of an organisation's ability to satisfy a customer's demand for a
product or service. It will include specification of the way in which the organisation would satisfy the
demand and include the price, lead time or delivery date, support services offered, etc.
Cost of producing a quotation - includes the costs of collecting together all of the necessary data,
producing prototypes, etc.
Margin on the quotation - is the amount by which the selling price exceeds the costs included in the
quotation.
When using this measure consideration should be given to the volume and detail of material provided
with the quotation. This should be compared to that provided by competitors or that expected by the
potential customers. Provision of excessive material will increase costs unnecessarily.
Analysis of the cost of quotes should include identification of where in the process costs are incurred
so that they can be reduced if appropriate.
The generate demand process should include a process or mechanism for recording and monitoring
the cost of preparing quotations.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Analysis of sales force productivity should include comparison of the performance of individuals or
sales teams as part of the processes of setting their sales targets.
Analysis might also consider the differences in costs incurred in selling different products or services
to different customers as this will have implications for the focus of the resources in sales and
marketing.
Data regarding sales and costs should be available from the accounting information system. Personnel
data should be available within the 'generate demand' process which should collect the data together,
analyse it and report it.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
should be designed to understand the difference between the expectations generated by advertising.
Analysis of advertising effectiveness should compare differences in effectiveness between different
target markets or customers. It should also consider the most effective mode of advertising for each
market sector. This analysis will allow advertising to be focused on the markets where it will be
most effective and in the mode which will be most effective.
Expenditure on advertising should be monitored by the generate demand process, as it will often form
a large proportion of the budget for that process. The same process should also monitor revenue
generated in order to monitor trends and identify patterns and correlation. Expenditure and revenue
data should be available from the accounting information system, but is likely to require further
analysis to provide the precise data required.
Prism Facet 1:
Processes Sub-Facet 1: Generate Demand
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
In some instances it may be possible to negotiate with the customer to extend the demanded lead time
in order to improve this ratio.
Analysis of the D:P ratio should compare products and services to identify where performance needs
to improve. It should also promote analysis of processes such as cycle times, scheduling and
procurement to identify where lead time reductions can be achieved.
The production or operations planning and control system should monitor all activities, identifying
when activities are planned and executed including when materials are required. The lead time for
purchased goods and services should be available from purchasing. Sales should provide details of
demanded lead time and details of actual orders and deliveries. It is important that all of these
processes are involved in review of this measure and agreement of the actions required to improve.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Skill Deployment
Why should we measure it?
The measure of skills deployment assesses how quickly and easily skills can be made available at a
location or job when required.
The speed with which skills can be deployed to the location or job at which they are required will
have a considerable impact on the availability of labour and skills when required and significant
impact on the flexibility of the organisation. If a central pool of skills exists within an organisation it
is important to maximise their use by reducing the time required to redeploy them, increasing the
measure of skill / labour utilisation.
Similarly reducing the cost of deployment will have a significant impact on the efficiency with which
the labour force is used.
Quicker and cheaper redeployment of skills will allow an organisation to maintain a small pool of
labour and skills as they can be moved to the required location when required, rather than having to
maintain skills or labour in many locations or maintaining surplus skills and labour as backup.
The cost and time of deployment will be dependent on the size and physical distribution of the
organisation. Organisations with a large number of geographically diverse locations will find it more
difficult to re-deploy skills and labour quickly and cheaply.
Skill deployment is an important measure of the creation of a workforce that is mobile and flexible so
that they can be re-deployed to the location required to fulfil demand for the organisation's products
and services, responding to changes in the market. This assesses the capabilities of the workforce and
the way in which human resources are managed to encourage and facilitate mobility and flexibility.
This is an important measure for an organisation that has poor skills coverage, meaning that there are
few people holding specific key skills within the organisation, so it is more important to move those
skills to the places where they are required.
How do we measure it?
lead time required to re-deploy skills / labour when required
cost of re-deploying skills / labour
What do we need to consider when defining the measure?
Skills - are specific competencies appropriate for a particular job. Skills are both manual and
cognitive in nature.
Labour - the workforce of the organisation. In the case of this measure labour refers to the whole
workforce not just those with specific skills.
Analysis should also include split by job type and department to analyse where the planning is most
effective and where improvement is required.
There is a need for a feedback mechanism to determine when skills and labour are not available and
to analyse the causes so that they can be reduced. This mechanism should include feedback from
operational areas to the planning human resource process.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Processes Sub-Facet 3: Fulfil Demand
Lost customers due to breakdowns - are customers who are lost because delivery failures have lead
them to choose alternative suppliers. This is related to the reputation of the organisation for reliability
and will be dependant on the availability of alternative suppliers.
The time taken to repair equipment that has broken down will have a considerable impact on
penalties, lost sales / customers and the impact on downstream activities.
This measure can be used to measure the cost of individual breakdowns, however it is most effective
when considered over a period of time as this will address the reliability of equipment which will
determine the frequency of breakdowns.
The data required to calculate this measure needs to be collected from a variety of sources. Data
regarding the cost of repairing equipment should be available from the maintenance department
responsible for repairing equipment. The finance department will be responsible for monitoring
investment in replacement equipment. The sales department should provide information on penalties
and lost sales which should be allocated to breakdowns. The sales department should also estimate
the value of lost sales. This should be undertaken as part of the causal analysis of lost accounts /
customers.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Capabilities Sub-Facet 2: Technology
Prism Facet 3:
Processes Sub-Facet 3: Fulfil Demand
Prism Facet 3:
Sub-Facet 3:
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Operations
Prism Facet 3:
Sub-Facet 3:
Capacity Availability
Why should we measure it?
The capacity availability measure assesses whether there is sufficient capacity available to fulfil
orders. This is a measure of how well the business predicts future requirements and plans its
operations and capacity actions to satisfy them. It is important that capacity be made available when
required to ensure that plans and schedules can be executed as and when required in order to satisfy
customer requirements.
Assessment of capacity availability can be applied at two levels:
1. In the long term capacity availability assesses how well the organisation predicts long-term
market trends and future demand, and plans the resources that will be required to satisfy them. At
this level capacity planning is concerned with investment in infrastructure to satisfy long-term
requirements and strategic plans.
2. In the short term capacity planning is concerned with planning and scheduling of activities.
Capacity planning at this level is more concerned with identifying the capacity and resource
requirements of the products and services that the customer demands and scheduling existing
activities so that existing capacity and resources are used effectively and schedules can be
achieved.
Capacity availability can be maintained by investing in excess or spare capacity. This ensures that
capacity will always be available when required, but ties up capital in excess capacity and can result
in inefficient capacity utilisation. As a result this measure should be used in conjunction with that of
'key resource utilisation'. The measure should be balanced to ensure that capacity and resources are
available when required, but that this is achieved with the efficient use of resources.
How do we measure it?
% of occasions that capacity / resources are available when required
% of occasions that critical capacity / resources are available when required
What do we need to consider when defining the measure?
Capacity / resources - are items that are required to execute operations. They refer to items of
equipment required to manufacture products or enable the delivery of products and services.
Critical capacity / resources - are items of capacity or resources that are critical to the achievement
of plans and schedules or to the competitiveness of the organisation. Most notably they refer to
bottleneck machines, where lack of availability will stop operations, thereby reducing the reliability
with which the product or service can be delivered to the customer and the productivity of the entire
organisation.
When using this measure it is important that an appropriate unit of analysis is used. The unit should be
that used to plan capacity and might include the output of finished products, man hours of a specific
skill or consumption of a specific materials or parts.
Focus on the measure should be on the availability of key resources or pieces of equipment. These
are the resources or capacity that are the key constraints on operations (e.g. bottleneck machines). If
key resources are not available when required the impact on the organisation will be significant. The
organisation will not be able to meet customer requirements for products and services and activities
elsewhere in the organisation will be stopped, which in turn will adversely affect productivity.
Analysis of capacity / resource availability should include causal analysis of instances where
capacity is not available. Causes might include inaccurate capacity plans, inaccurate demand
forecasts, changes in customer requirements, a lack of understanding of capacity requirements for
products or services, or equipment breakdowns. In each case the capacity planning process should
analyse the frequency with which each root cause occurs in an attempt to identify trends, so that if
possible future occurrences can be predicted.
Use of this measure should include feedback about availability of capacity and resources to the
capacity / resource planning process. This should enable the planning process to be improved.
Data collection for this measure should include feedback from the shop floor detailing actual capacity
requirements and a comparison of these requirements with those that were planned or predicted.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Plan Enterprise
Prism Facet 3:
Capabilities Sub-Facet 3: Infrastructure
schedules are not missed for the same reasons again. Equally importantly the reasons should be fed
back to the planning process so that the root causes can be considered when making future plans.
The size of the 'time bucket' in which the schedule is planned will have a significant impact on the
schedule adherence performance. Time buckets are the time period in which plans and schedules are
planned. For example monthly time buckets mean that schedule defines the number of products that
are to be produced in a month. Large time buckets (e.g. one month) do not provide precise delivery
dates and allow considerable flexibility as to when specific products are completed. Although this
enables good schedule adherence, it does not necessarily facilitate the completion of products on the
date required by the customer.
Data for this measure should be collected as part of the operational planning and control system
which monitors activities within operational areas of the organisation. This should record when
products are completed and compare that to the date specified in the original plan or schedule.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Causal analysis of changes in demand that result in inaccurate forecasts should allow the organisation
to test the assumptions on which forecasts are based. This will enable future forecasts to be
improved. The documentation of the assumptions where possible will aid this review process.
Analysis of the measure should include comparison of accuracy for individual items, product groups,
customers and different markets. The characteristics of the markets and the demand for different
products will mean that fluctuations in demand will differ.
Consideration should be given to the differences in accuracy over different time periods. The longer
the time period over which demand is forecast, the less likely it is going to be accurate.
Actual demand will be the orders that are received by sales order processing in the given period.
This should be fed back to the demand forecasting process for comparison with the original forecast.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Plan Enterprise
Prism Facet 3:
Sub-Facet 3:
Schedule Stability
Why should we measure it?
The stability of plans and schedules is important to consider as the more stable plans are the more
controlled operations will be. Stable plans allow all activities to be executed as planned eliminating
the need for fire fighting and expediting to achieve changing requirements. Instability in the short term
will prevent schedules from being achieved and will therefore affect delivery reliability.
This measure is particularly relevant in volatile environments where there are frequent to changes
plans and schedules. Measurement and analysis enable understanding of changes so that they can be
accommodated and where possible root causes can be identified and eliminated.
The importance of stable plans is exacerbated in the short term by the impact on suppliers and
internal processes that supply the planned or scheduled operations. If plans fluctuate, orders for
materials and parts become inappropriate or obsolete. This will result in rush orders for new
materials and parts and cancellation of existing orders or the build of inventory that is not required.
The stability of internal plans and schedules will determine the stability of plans and schedules that
are forwarded to suppliers. The measure is related to the measure of 'Future Visibility given to
Suppliers'.
In the longer term stable schedules allow accurate planning of future requirements and planning of
operations to make most efficient and effective use of resources and facilities.
How do we measure it?
average number of changes to schedule within 'frozen zone'
What do we need to consider when defining the measure?
Plan / schedule - is the plan by which operations of the organisation are planned, detailing when all
activities are undertaken and products completed.
Frozen zones - are time periods over which plans should not be changed as changes will prevent
schedules being achieved on time.
Changes - include changes to scheduled due dates or changes to the mix of products scheduled.
There should be causal analysis of changes in schedules. In particular consideration should be given
to those caused by changes in demand and those caused by incorrect scheduling. Reasons for
incorrect scheduling should be identified and eliminated where possible. Similarly the causes of
changes in demand should be analysed to see if they can be pre-empted in future. Reduction of lead
times and hence frozen zones will also reduce the number of changes to schedules.
Analysis of this measure should reflect the degree to which schedules are fixed at various time
horizons. It is common to allow tentative long-term plans to vary within agreed tolerances.
Assessment of the stability of schedules should be the responsibility of business or production
planners in liaison with sales in the case of changes caused by demand changes. The planners should
be responsible for conducting the measurement, analysing the data and following up with those who
are most affected by the changes - e.g. suppliers.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Operations
Prism Facet 3:
Sub-Facet 3:
will identify whether the right level of safety stock is being held, or whether reductions can be made.
The measure of stock outs should be used when considering safety stocks. If the same item is subject
to stock outs on repeated occasions, safety stocks might be necessary if no specific root cause for the
stock outs can be identified.
The inventory control process should record inventory levels and usage to identify the data for
calculation of this measure.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Financial Operations
Prism Facet 3:
Sub-Facet 3:
Number of Suppliers
Why should we measure it?
In many organisations reduction in the supplier base is a key measure of supplier development
activity. Reduction in the supplier base increases control that can be maintained over the supply of
goods and services to the organisation as more attention can be focused on controlling each supplier
and developing closer working relations with them.
Reducing the number of suppliers eases inbound logistics and increases the value of business with the
remaining suppliers, which in turn increases their commitment to the organisation. As a result
measurement of the number of suppliers is linked to supplier satisfaction measures such as 'Level of
Business between Customer and Supplier'.
This measure should be used where a reduction in the supplier base is required in order to increase
business with good suppliers at the expense of poor suppliers. However there is a need to assess the
trade-off between increasing commitment and increasing risk, by reducing the number of alternative
suppliers.
How do we measure it?
% reduction in suppliers in a given period
number of suppliers per work cell
What do we need to consider when defining the measure?
Suppliers - organisations that supply goods and / or services to the organisation.
The given period for the measure should be defined based on the level of supplier development
activity which will determine the importance of this measure and rate at which the number of
suppliers is reduced.
The manufacturing of a product or service can be thought of as consisting of flow of materials across
work cells. In measuring the number of suppliers, one might treat a work cell as a process consisting
of inputs and outputs. For illustration, consider the case of printed circuits board manufacturing. In the
drilling section (work cell), the inputs would be laminates for drilling and the process is performed
by drilling machines which use drill bits. So, to take account of the number of suppliers for this
section of the manufacturing plant, one would measure the number of suppliers for laminates (raw
material) and the number of suppliers for drill bits (process).
The number of suppliers for bought-in parts can be readily obtained from the buyer in most cases.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
speed).
Quality = % Production Units that are Defect Free.
Analysis of asset utilisation should look at each of the contributing performance criteria (Availability,
Duty Cycle, Efficiency and Quality) in turn to identify variations in performance over time. This
analysis should identify the root causes of poor performance and highlight where improvement effort
is required.
Although asset utilisation provides a comparable performance measure, comparing operations
between organisation is not possible because of the large number of variables that cause performance
differentials (location, age of assets, customer requirements, supplier quality, etc.).
The operational control system should collect data regarding the outputs of machines especially
critical or bottleneck machines.
Prism Facet 1:
Processes Sub-Facet 1: Fulfil Demand
Prism Facet 2:
Capabilities Sub-Facet 2: Infrastructure
Prism Facet 3:
Sub-Facet 3:
Accounting information systems will provide the data for this measure
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Operations
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Financial Operations
Prism Facet 3:
Sub-Facet 3:
Securities Required
Why should we measure it?
This measure assess the level of security the organisation must place in order to obtain capital from
investors. The measure indicates how easily the organisation can obtain capital from potential
investors.
Investors can contribute to the organisation by reducing the amount of securities they demand in order
to invest. This makes it easier for the organisation to obtain capital.
The amount of securities required will be determined by the investors' confidence in the operations
and future profitability of the organisation and hence their confidence of receiving repayment of loans.
Investors' confidence in the organisation and its future performance (i.e. investor satisfaction) will be
determined by recent performance of the organisation, the perceived reliability of predictions of
future performance and investors' confidence in the management of the organisation. As a result there
are close and important links between this measure and those of 'Investors' Perceptions of
Management' and 'Performance Against Promises'. These measures should be considered together.
Feedback from investors should be used to identify shortcomings in performance of the other two
measures and identify ways in which they can be improved.
The drivers of the cost and availability of capital will be the same as those of the level of securities
required. As a result these three measures should be considered together.
The level of securities that an investor will demand will be based on their confidence that loans will
be repaid. Therefore, the measure provides an indication of the investors' confidence that loans will
be repaid based on their perception of the future profitability of the business.
How do we measure it?
average value of securities required to obtain a loan
security as % of loan value
What do we need to consider when defining the measure?
Securities - are assets of the business that are used to secure a loan. This means that the investor will
take possession of the asset should the organisation default on repayment of the loan.
Loan value - is the full value of the debt loaned by the investor.
Analysis of securities required should include comparison of the securities required from different
institutions or types of institution. This will give an indication of the most appealing sources of
investment capital.
Analysis should also consider loans of different sizes separately as smaller loans are less likely to
require security.
The data required by this measure should be available from the financial accounting systems and the
terms and conditions of loans taken out.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Investor Contribution
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Financial Operations
Prism Facet 3:
Sub-Facet 3:
Cost of Insurance
Why should we measure it?
Insurance against unexpected eventualities is important to safeguard organisations against heavy
financial penalties or costs. The financial burden of insurance premiums can be substantial so it is
important that costs are measured to ensure that they can be controlled. Organisations must monitor
the cost of insurance against the benefits that are received. A measure of the costs will give an
indication of the pros and cons of risk minimisation (or elimination) efforts, against the cost of paying
for insurance.
Organisations must take decisions regarding the policies they take out based on the level of risk and
the cost of liability that will be incurred if the policies are not taken out. To make such decisions
effectively it is important to measure both the costs of insurance and the liabilities incurred. This is
appropriate both where losses are insured and where there is no insurance and the entire liability
falls on the organisation. Comparison of losses and premiums allows the organisation to test the
assumptions underpinning their decisions regarding insurance.
Although risk minimisation is both possible and desirable, total elimination of risk will be
impossible. Therefore, it will not be possible to totally eliminate the necessity for taking insurance.
However, risk minimisation will bring not only direct financial benefits, due to reduced insurance
premiums, but also indirect benefits in the form of improved public image of the company and
increased employee satisfaction.
How do we measure it?
total cost of insurance as % of operating costs
total cost of insurance premiums as a % of value of loss or damage
difference between the cost of minimising risks and the saving on reduced insurance charge
% reduction in insurance premium in a given period
What do we need to consider when defining the measure?
Insurance - is payment of a premium in return for which the insurer pays compensation for certain
eventualities.
Premium - is the regular payment made in return for an insurance policy. Insurers calculate the
premium based on their perception of the risk. As such the organisation must consider whether the
insurer's perception matches their own and hence whether the premium is a realistic estimation of the
likely value of claims against the policy.
Value of loss or damage - is the cost of losses incurred by the organisation as a result of unexpected
circumstances, whether covered by an insurance policy or not. There are many risks against which
insurance can be obtained. Common types include coverage for: (i) damage to property; (ii) injury or
death to employees and (iii) claims from third parties, including customers, the general public and the
environment.
Insurance policies will usually be for a duration of a year for which the premium will be fixed. As
such consideration should be given to trends in premiums over a number of years in comparison to
changes in risk.
Each of the metrics indicate trends in expenditure on insurance which should be considered over time
to identify changes in the level of risk and continue to verify decisions regarding insurance policies
taken out. They will also indicate whether risk minimisation strategies, such as safety programmes,
are bringing financial returns in comparison to the costs associated with them.
Use of the measure should include analysis by the different types of policy taken out, including those
identified above. This allows analysis of expenditure on insurance and whether the right policies are
being taken out and the right risks insured against. Analysis should also include consideration of the
amount of losses which were uninsured, for which total liability falls upon the organisation.
Analysis should also consider premiums and claims incurred by specific areas of the business to
identify where the greatest risks are.
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Financial Operations
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Operations
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Financial Operations
Skills Coverage
Why should we measure it?
Skills coverage measures the average number of people within the organisation that have each skill.
This measures whether the organisation has sufficient flexibility to cope with changes in demand or
absence of employees with key skills. It is important that an organisation has sufficient coverage of
important skills, such as those of bottleneck operations or those which provide competitive
advantage. It is important that these skills are always available when required.
The planning of human resources should identify the appropriate skills and ensure that there is
sufficient coverage of these skills. As a result this measure should be used in conjunction with the
skills inventory / gap analysis to determine future training and recruitment activities.
CAUTION
It is possible to increase skills coverage by increasing headcount so that there is surplus labour to
cover unexpected eventualities. Although it might be necessary to maintain surplus key strategically
important skills, this will usually result in inefficient use of the workforce. As a result, when using
this measure, it is important to also consider the measures of headcount and labour / skills utilisation.
This measure is closely related to that of multi-skilling. Skills coverage focuses on the organisational
level, measuring whether there are sufficient skills within the organisation. Multi-skilling focuses on
the individual, assessing how many different skills individuals within the organisation have.
How do we measure it?
average number of employees per identified skill
average number of employees holding each key skill
% of jobs for which insufficient skills cover is available
What do we need to consider when defining the measure?
Skills - are specific competencies appropriate for a particular job or set of jobs. Skills are both
manual and cognitive in nature.
Key skills - can be defined as those that are critical to the performance of the organisation. Such
skills might be shortage skills where the absence of the skill can stop an activity of the organisation,
or skills which provide competitive advantage, the absence of which could affect the competitiveness
of the firm.
Use of this measure should be focused on specific, key skills that are important to the organisation.
Using the measure as a global indicator across the organisation can also provide an indication of the
overall flexibility of the organisation.
Data for such a measure should be kept as part of the training plan for the management of the human
resources. In addition such information is often maintained at the point at which skills are used, such
as the shop floor. Boards are often maintained in the work area which list the skills required and the
employees that have those skills. This should be linked to the skills inventory which monitors
employees' competence at specific skills.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Sub-Facet 3:
Analysis of the measure should be by: job type; organisational level; employment / contract type;
department or section.
When benchmarking performance of this measure against other organisations it is important to
consider whether the activities of the two business units are similar. For example, are the levels of
outsourcing the same. Similarly it is important to consider whether levels of accountability or
responsibility between jobs is similar.
The analysis should include use of each of the defined metrics at each level in the organisation to
indicate the efficiency of each unit of analysis and the return they generate. Analysis of the measure
should also consider changes over time in order to identify trends and causes. This should include
consideration of seasonal variations in headcount and costs reflecting variations in product or service
demand.
The employment costs will be dependent on the market circumstances. If there is a lot of surplus
labour in the market or in a specific region, employment costs per employee are likely to be lower.
Similarly highly skilled employees are likely to be in higher demand and shorter supply and hence the
cost of labour is likely to be higher.
The data required for this measure should be collected during preparation of financial reports and
statutory accounts, although collection and analysis of data should be undertaken at departmental or
lower organisational level.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Sub-Facet 3:
locations.
The skills audit will be undertaken by the personnel department in conjunction with all members of
the organisation. Therefore personnel should collect the data for this measure.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Sub-Facet 3:
This measure will vary considerably depending on the type of skill that is being developed and
analysis of the measure should reflect that. Complex and intricate skills are likely to take longer to
develop. As a result, analysis of this measure should include consideration of the type of skill being
developed.
Analysis should also include consideration of the mode of skill development. This will include the
difference between in-house and outsourced speed, whether skills are developed on the job and
comparison of school versus computer-based learning.
When using the measure it is important to give consideration to the quality of the output of the training
and skills development. This might include post training assessment and grading of an individual's
competence at a specific skill. This might also include consideration of an individual's propensity to
acquire skills.
Data for this measure should be available via the training process which should use the information to
plan training programmes and the availability of skills.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Sub-Facet 3:
Use of this measure should include analysis by skill or job type to identify gaps that have to be
closed. There should also be analysis between departments and locations to investigate differences
and gaps.
Skills requirements should be identified as part of the strategy formulation and implementation
process. Skills requirements for specific processes or functions can be recorded on a 'Skills Matrix'
that identifies which people have which skills and what level of competence they have reached at that
skill. Such matrices, which are often displayed clearly at the place of work, illustrate where skills
gaps need to be closed.
A skills audit can be used to identify the skills that are available throughout the organisation.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Employee Contribution
Benchmarking is 'the search for industry best practices that lead to superior performance' (Camp,
1989).
Internal benchmarking - is the transfer of practices from one part of the organisation to another. This
enables an organisation to establish its own internal best practice before seeking industry best
practice.
Best practice gaps - are gaps in the performance of key activities or processes between actual and
required performance. These gaps might be identified by comparing performance levels with those
achieved by other organisations or by estimating by how much performance would improve if best
practice was introduced.
Expected performance with best practices - is the level of performance that the organisation expects
can be achieved if best practices were implemented.
Not all practices will be appropriate in all circumstances. Practices should always be modified to
make them appropriate to the organisation. Lessons learnt from other organisations might encourage
the organisation to redesign its processes to make them more appropriate. Best practice for a process
might be a hybrid practice of a number of organisations. It is important for each part of the
organisation to consider its own requirements and decide how practices need to differ to applications
elsewhere. This might be due to different cultural backgrounds or legal requirements in different
locations.
Analysis might be by process, department or business unit to compare which areas of the business are
best at identifying practices and knowledge elsewhere in the organisation and applying them.
There is a need for a central catalyst to the internal benchmarking process which facilitates and
promotes the exchange of knowledge. This catalyst should keep a record of the availability and where
they might be applied. This is where the data for this measure should be collected.
Prism Facet 1:
Capabilities Sub-Facet 1: Practices
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Sub-Facet 3:
Prism Facet 3:
Sub-Facet 3:
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Human Resources
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Human Resources
Prism Facet 2:
Capabilities Sub-Facet 2: People
Prism Facet 3:
Sub-Facet 3:
Multi-skilling
Why should we measure it?
This measure assess the number of employees who have a number of different skills required within
the organisation. The measure provides an indication of the coverage of skills within the organisation.
Multi-skilling provides the organisation with the flexibility to cope with changes in demand or
absence of employees with key skills. It is important that an organisation has sufficient coverage for
key skills such as those of bottleneck operations or those which provide competitive advantage. It is
important that these skills are always available when required.
It is important that the human resources planning process identifies the appropriate skills and ensures
that there is sufficient coverage of these skills.
Multi-skilling enables employees to make a greater contribution to the organisation by adding greater
flexibility. In addition providing employees with a number of different skills can also have a positive
impact on employee satisfaction as it gives employees the opportunity to undertake different jobs
offering variety in their working life.
This measure is linked to that of 'Skills Coverage' which measures the amount of people within the
organisation holding a specific skill, whereas multi-skilling focuses on the employee assessing the
number who have more than one skill.
How do we measure it?
average number of employees who have more than 1/2/3 specific / key skills
average number of skills held per employee vs. plan
What do we need to consider when defining the measure?
Skills - are specific competencies appropriate for a particular job or set of jobs. Skills can be both of
a manual and cognitive nature.
Key skills - can be defined as those that are critical to the performance of the organisation. Such
skills might be shortage skills where the absence of the skill can stop an activity of the organisation,
or skills which provide competitive advantage, the absence of which could affect the competitiveness
of the firm.
Multi-skilling - is where an employee has more than one skill that is important to the organisation.
Analysis of the measure should include definition of the number of skills considered in metric 1. This
will give a further indication of the level of flexibility.
Use of this measure should be focused on specific key skills that are important to the organisation.
Such skills might be shortage skills, or those that deliver competitive advantage to the organisation.
Data for such a measure should be kept as part of the training plan for the management of human
resources. In addition such information is often maintained at the point at which skills are used, such
as the shop floor. Boards can be maintained in work areas which list the skills required and the
employees that have those skills. This should be linked to the skills inventory which monitors
employees' competence at specific skills.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Employee Contribution
Size of HR Department
Why should we measure it?
The size of the Human Resource Management department is a key measure of the efficiency with
which the 'Manage Human Resources' process is undertaken within the organisation.
Planning human resources is an indirect, support activity, as a result organisations should seek to
ensure that the process is undertaken in as efficient and effective a way as possible.
The actual efficiency of the 'Plan Human Resources' process will vary considerably depending on the
way it is executed and the nature of the activities undertaken. In many organisations HR activities are
centralised and the HR department is entirely responsible for all recruitment, staff development and
training, industrial relations, etc. In other organisations many of these activities are delegated to line
managers to whom the central HR department offer support.
The size of the HR department will also be affected by the commitment of the organisation to
employee satisfaction. This will affect the level of communication with employees, the level of
training and staff development, etc. These are activities that are co-ordinated by the HR department.
When measuring the efficiency of the HR department measures of its effectiveness should also be
considered. These include the effectiveness with which vacancies are filled, the effectiveness with
which training or skills development requirements are identified and satisfied, effectiveness of
industrial relations, etc.
How do we measure it?
number of employees in HR department as % of total headcount
HR department staff costs as % of whole organisation staff costs
What do we need to consider when defining the measure?
HR department - is the centralised department responsible for planning, co-ordinating and executing
the 'Manage Human Resources' process.
Number of employees in HR department - is the number of employees based in the centralised HR
department undertaking the planning and execution of human resource policies.
Total headcount - is the number of employees within the whole organisation.
Staff costs - are all of the costs involved in employing staff. These include salaries and additional
costs such as taxes, bonuses, pensions, etc.
Analysis of the measure should consider where efficiency can be improved and where non value
adding activities can be taken out of the process.
Analysis should also consider the results achieved by the HR department. Assessment of the
effectiveness of the department or process is important to put the efficiency into context.
Comparison of the efficiency of the HR department with other organisations should take into account
of the way in which the 'Plan Human Resources' process is undertaken differently in different
organisations (e.g. the level of centralisation).
The financial accounting information system will maintain data regarding the staff costs incurred in
the HR department while the organisation's personnel records will identify the number of employees
in the department.
Prism Facet 1:
Processes Sub-Facet 1: Plan & Manage Enterprise - Human Resources
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Maintenance Costs
Why should we measure it?
In order to ensure that technologies and infrastructure are available when required it is important that
maintenance and technical support are available to resolve problems when they arise and that
preventative maintenance schemes are put in place. It is important that appropriate levels of skills and
equipment are made available, however this must be balanced against the cost of doing so.
Controlling and minimising costs are always important, as a result it is important to measure and
analyse costs to see where they can be reduced while maintaining the appropriate level of support.
This measure also assesses the condition of an organisation's infrastructure and technologies. The
better the condition of the infrastructure and technologies the less the maintenance costs are likely to
be. As such there is a link between this measure and those of the age and condition of both
infrastructure and technologies.
The cost of maintenance is also a measure of the planning of maintenance activities which is
considered as part of the planning of operations (Plan & Manage the Enterprise). Planning operations
should include identification of the workload of infrastructure and technologies, providing an
understanding of wear and tear so that maintenance can be planned. Effective planning will increase
the amount of preventative maintenance, reducing the need for urgent reactive maintenance which will
be more expensive as it will be required at short notice. Proactive maintenance will also reduce
breakdowns and downtime which are likely to affect the productivity and the ability to meet customer
due dates.
How do we measure it?
average cost of maintenance costs incurred in a given period
maintenance costs as a % of total operating costs
preventative maintenance spend as a % of total maintenance spend
What do we need to consider when defining the measure?
Maintenance - is the upkeep of an organisation's infrastructure and technologies to ensure that they are
available when required.
Preventative maintenance - is maintenance carried out before any breakdowns occur. Preventative
maintenance is designed to ensure that unplanned breakdowns do not occur.
Maintenance costs - are the costs incurred acquiring and maintaining the level of skills and equipment
required to maintain an organisation's technology and infrastructure to ensure its availability when
required. Maintenance costs include the maintenance of skills and equipment internally or can be
based on contracts with third parties to contract out maintenance services.
While it is always going to be important to manage and reduce costs within an organisation, it is
important to balance cost reduction with the need to provide the appropriate level of maintenance to
ensure that technologies and infrastructure are available when required. Often far greater costs can be
incurred if a key piece of technology or infrastructure in unavailable when required than could be
saved by reducing maintenance coverage. See the 'cost of equipment breakdowns' measure. Because
of the need to balance the cost of maintenance with availability, it is important to consider
maintenance response time and infrastructure / technology availability or down time when using this
measure. The proportion of maintenance and technical support available internally versus that
outsourced will also affect this measure.
Analysis of this measure should include consideration of whether the maintenance is provided
internally or contracted out. As such the measure of Internal Technology Support should also be
considered with this measure.
Analysis should also consider the importance or urgency of the maintenance in question. Analysis
should compare costs that are incurred on maintenance which is preventative / reactive / urgent (e.g.
to resolve a breakdown on a bottleneck, etc.)
Analysis should also compare maintenance costs in different departments and sub sections of the
organisation. This will help in identification of areas of the business with infrastructure that is in poor
condition or where planning of maintenance is ineffective. Clearly differences in the level of
automation and complexity of infrastructure and technologies in different parts of the organisation
will affect the comparability of the measure. Monitoring over time will provide an understanding of
trends in maintenance costs per section / department.
Data for this measure should be available from the organisation's accounting system. To use the
measure effectively the system must record the location that the costs are incurred and causes.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Capabilities Sub-Facet 2: Infrastructure
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Operations
It is important that this measure is aggregated over a long period of time to cover numerous
implementation projects. This enables a full understanding of the time taken to undertake each stage of
an implementation so that future projects can be planned more effectively and areas requiring
improvement can be identified.
Use of this measure should include analysis by different implementation project types. This will
include the type of innovation / equipment being implemented (e.g. product versus process and by
product group / process type), the length of the project, the processes or functions involved and the
type of technical skills required to complete it.
The product and process implementation processes must include project management activities to
monitor execution. These processes should include measurement of the lead time of each stage of the
project and of the entire project. This data should be aggregated across several projects so that the
efficiency and effectiveness of the implementation process as a whole can be assessed, rather than
simply the efficiency and effectiveness of a single implementation project.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Capabilities Sub-Facet 2: Infrastructure
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Operations
Implementation project - is the process of converting an innovative idea into a technology which is
practically applied within the organisation. This includes translating the concept into a prototype,
testing, implementation and integrating it into the operations of the organisation. The process should
be considered to include ensuring the technology is running smoothly, hence should include the
appropriate training of employees, etc.
It is important to monitor project milestones and budget achievement for individual projects to control
their execution. However in terms of process improvement it is more important that this measure is
aggregated over a long period of time to cover numerous technology implementation projects. This
enables a full understanding of the reliability of the implementation process and a better
understanding of the likelihood that project deadlines and budgets will be met.
Analysis of the performance of different stages of implementation projects is also important to
identify where improvements in the implementation process can be made and understand whether
projects are likely to be completed to plan. It is particularly important to identify which parts of the
implementation projects are causing delays and overspend.
Use of this measure should include analysis by different implementation project type. This will
include the type of innovation being implemented (e.g. product versus process and by product group /
process type), the length of the project, the processes or functions involved and the type of technical
skills required to complete it.
The product and process implementation processes must include project management activities to
monitor execution. These processes should include measurement of achievement of milestones and
budgets which should be aggregated to measure the implementation process as a whole rather than
just monitor and control one project.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Operations
Prism Facet 3:
Sub-Facet 3:
Clarity of Regulations
Why should we measure it?
One of the key requirements that an organisation will have of its regulators is that they provide clear
regulations so that they are easy to follow and adhere to. Regulations that are not clear can lead the
organisation to incur penalties because of misunderstandings. Regulations that lack clarity will also
result in different interpretation by different organisations and might lead to resources being misused
in attempting to achieve inappropriate objectives.
It is important for any organisation to assess the clarity of regulations and feed this information back
to the regulators in an attempt to achieve improvement.
Development of a good working relationship with regulators should enable improved understanding
and clarity of regulations. Such relationships should also increase the possibility of regulations being
made clearer and more appropriate. As such collection of data for this measure should help to assess
the effectiveness with which relations with regulators are developed.
Although clarity is subjective and an assessment of the clarity of regulations can be made, it is also
possible to objectively assess the result of unclear regulations.
How do we measure it?
% or number of occasions that penalties are incurred due to ambiguities in regulations in a given
period
% of regulations that the organisation has had to clarify with the regulator
cost of identifying / clarifying ambiguities
What do we need to consider when defining the measure?
Regulators - are bodies which control or regulate the operations of organisations. Regulators often act
on behalf of other stakeholders. A variety of regulators might be applicable to different organisations.
These include industry specific regulators, environmental regulators, regulators of competition, health
and safety regulators, accreditation bodies (e.g. ISO), etc.
Regulations - are rules imposed by regulators.
Penalties - are punishments enforced by regulators as a result of failure to adhere to regulations.
Ambiguities - are regulations of which the meaning is doubtful or which have double meaning.
Cost of identifying / clarifying ambiguities - are the costs incurred as a result of misunderstandings
between regulators and the organisation. Such costs might include cost of penalties for nonconformance to regulations, legal costs, costs involved with communication with regulators, etc.
This measure should be used for each regulator, where there is more than one regulator relevant for
an organisation. The collection and analysis of data, and of improvement action should be focused on
the regulator that has the most influence over the organisation. This is the regulator that can impose
the greatest penalties or withdraw the organisation's licence to operate.
Data for this measure should be collected through the process concerned with management of
communication with regulators.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Regulator & Community Contribution
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
frequency with which the infrastructure within the organisation changes. The frequency with which
infrastructure changes is affected by the industry in which the organisation operates as this will
determine how frequently requirements for infrastructure change. Particularly important determinants
are the frequency with which new products are introduced and the frequency with which technologies
and infrastructure requirements change.
Larger organisations might consider undertaking audits more frequently as it will be more difficult for
them to maintain an accurate understanding of the condition of their infrastructure. However they
should encourage regular proactive feedback on the condition of infrastructure from those using the
items of infrastructure directly.
The infrastructure audit should be linked to the fixed assets inventory which monitors and controls
fixed asset movements and changes.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
OEE can be used to compare the effectiveness and efficiency of equipment to identify and eliminate
bottlenecks, and to identify where improvement actions should be taken.
Use of the OEE measure should be focused on bottleneck equipment, i.e. that which is a constraint on
output. Maximising output on other equipment will result in production of output for which there is no
demand.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology & Infrastructure
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Processes Sub-Facet 3: Plan and Manage Enterprise - Operations
depreciation and location. The process should be audited to ensure that the fixed asset data is
accurate.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
This measure will vary considerably depending on the type of infrastructure that is being acquired
and analysis of the measure should reflect that. Large items such as new buildings or complete new
locations will take longer to acquire than smaller items or those that can be purchased 'off the shelf'.
As a result analysis of this measure should include consideration of the type of infrastructure being
acquired.
Analysis of the measure over time is difficult as many industries will not make regular investments in
similar items of infrastructure, making comparison between types of expenditure problematic.
Organisations should select comparable items of infrastructure when analysing performance. Analysis
should also consider whether each stage of the infrastructure acquisition process is executed in the
planned time. This enables an assessment to be made of whether the planning of the project to acquire
infrastructure is effective. Even if it is not possible to calculate an average lead time to acquire
infrastructure, it should be possible to identify whether the acquisition process is improving.
Analysis should also include consideration of the mode of infrastructure acquisition. There are
differences between purchasing new or second hand infrastructure, making new items or modifying
existing items. This choice is likely to have a significant impact on the cost, as a result consideration
should be given to the urgency with which the infrastructure is required. The make vs. buy decision
might also have an impact on the quality, fitness for purpose and level of customisation to
requirements of the resultant item of infrastructure.
There is a need for a feedback process to collect the data for this measure. This should be part of the
process which monitors infrastructure movements for the infrastructure audit and inventory. This
should include recording when infrastructure gaps are identified, when orders are placed and when
delivery and installation take place.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Qualification Levels
Why should we measure it?
The level of qualifications held provides an independent assessment of the level of skills that are held
within the organisation. Although traditionally qualifications reflect academic achievement it is also
possible to assess non-academic achievements in a similar way.
There are a wide range of qualifications available reflecting the wide range of skills that are used
within organisations.
Qualifications are often used as entry criteria to gain employment, as a result the level of
qualifications held will reflect the criteria for recruitment. As such the measure reflects how difficult
it is to gain employment with the organisation which provides an indication of how desirable the
organisation is as an employer.
Giving employees the opportunity to enhance the qualification levels can also contribute to the level
of employee satisfaction. Provision of opportunities and commitment of resources indicates the
organisation's commitment to the personal development of their employees and helps them with
transferable skills which are universally recognised.
CAUTION - must be taken however, as supporting employees as they improve their qualification
might increase the chances of employees leaving the organisation. It is important to ensure that
employee satisfaction is maintained so that employees don't feel the desire to move to other
organisations once they have upgraded their skills.
This measure should be considered along with the availability and development of skills within the
organisation.
How do we measure it?
number of employees that are university graduates
average number of employees with the appropriate professional / trade qualification
% of qualifications that have been obtained during employment with the organisation
What do we need to consider when defining the measure?
Qualifications - are recognition of accomplishments provided by independent accreditation bodies.
These might include academic qualifications, professional qualifications or recognition of trade
skills. As such they include manual and cognitive qualifications.
Professional qualifications - might include certified accountancy, engineering or legal qualifications,
for example.
Trade qualifications - might include acknowledgement of demonstration of skills or completion of
training courses.
Analysis of this measure by job and qualification type will allow understanding of different types and
levels of qualification that are available within the organisation. Consideration should also be given
to levels of achievement, such as grades.
Analysis might also consider differentiation between qualifications held on entry to the organisation
and those which are achieved during employment with the organisation. This will measure the support
that the organisation provides to education and training.
Data for this measure should be collected through personal appraisals.
Prism Facet 1:
Capabilities Sub-Facet 1: People
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
practice to the time that best practice is implemented to improve performance. Additional
consideration should be given to the time required for satisfactory adoption of the practices and the
lead time for the practice to have an effect on the performance of the process or activity, and hence
the whole organisation.
Benchmarking - is 'the search for industry best practices that lead to superior performance' (Camp,
1989). As such the benchmarking process is the process of identifying best practices that exist in
other organisations and implementing them where appropriate. The process includes identifying the
processes or activities that need to be improved, identifying partners from whom lessons can be
learnt and adopting practices that are considered to be best, where appropriate.
The primary way in which the lead time can be reduced is to adopt an internal benchmarking strategy.
This involves identifying best practice that exists within the organisation. The advantage of internal
benchmarking is that it allows some improvement to be made through access that is easier than with
external partners and with a free exchange of knowledge. However it is unlikely that the benefit will
be as great as with external partners.
Analysis of the measure should be by process, department and business unit to identify where
improvement needs to be made. Furthermore the stages of the process should be measured separately
to identify which stages require improvement. Measuring the process in stages can be advantageous
over measuring the whole process as implementation lead times will vary considerably, based on the
type of practice being implemented.
Lead time can be affected by such factors as the complexity of the practice being implemented,
complexity of the processes being benchmarked, number of benchmark partners involved, the level of
performance improvement required etc. Analysis of the measure should reflect this.
Data should be identified and collected during the benchmarking process. All parts of the process
should be documented.
Prism Facet 1:
Capabilities Sub-Facet 1: Practices
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
1989). As such the benchmarking process is the process of identifying best practices that exist in
other organisations and implementing them where appropriate. The process includes identifying the
processes or activities that need to be improved, identifying partners from whom lessons can be
learnt and adopting practices that are considered to be best, where appropriate.
It is important that the benchmarking process be continued to ensure that the practices used remain
best, especially where they apply to key practices.
CAUTION
Increasing coverage of best practices can be costly as resources have to be dedicated to the
benchmarking process. It is important that the benchmarking activity be focused on important
processes and activities and on processes where potential improvement will outweigh the cost.
The measure should be analysed based on the scope of benchmarking activity. This analysis might be
by process, department or business unit to identify which areas of the business have the best
practices.
Data should be identified and collected during the benchmarking process, part of which should audit
current activity and processes to identify where best practices exist and where they are required.
In some cases the search for best practices is inappropriate. Instead the organisation might seek
simply to improve its processes.
Prism Facet 1:
Capabilities Sub-Facet 1: Practices
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
other organisations and implementing them where appropriate. The process includes identifying the
processes or activities that need to be improved, identifying partners from whom lessons can be
learnt and adopting practices that are considered to be best, where appropriate. Costs will be
incurred at each stage of this process.
The given time period for the measure will be dependent on the level and frequency of benchmarking
activity. Measurement must be over extended periods of time to map trends, over a number of years,
for example.
Often the greatest benefit can be gained from benchmarking organisations in different industries that
specialise in, or gain competitive advantage from, activities or processes which the organisation
needs to improve. The cost of internal benchmarking is less than that of benchmarking with external
partners. Internal benchmarking enables internal best practice to be established so that some
improvement can be made throughout the organisation before deciding whether to embark on the more
difficult and expensive benchmarking with external partners.
Whilst an organisation should strive to achieve best practice in all its activities, in reality this is
impossible as it would be too costly. The organisation must prioritise the activities and processes to
be benchmarked. As it is not possible to be best at everything, it is important to focus on processes
and activities which are 'qualifiers' (required to meet industry norms, the minimum required to
compete) and 'winners' (which provide competitive advantage).
The measure should be analysed based on the scope of benchmarking activity to compare if different
benchmarking projects or teams are more costly than others. In addition there should be analysis of
the cost of different stages of the process over time. This will allow the organisation to identify
where costs are being incurred and where they might be reduced. Data for this measure should be
identified and collected during the benchmarking process.
Prism Facet 1:
Capabilities Sub-Facet 1: Practices
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
The measure should be analysed based on the scope of benchmarking activity. This should include
analysis by process, considering the number of times each activity or process is audited. A key
process might be audited frequently to ensure the practices employed remain 'best'.
Data should be identified during the benchmarking process which should document all such activities.
Prism Facet 1:
Capabilities Sub-Facet 1: Practices
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Best practices - are the best way of undertaking an activity or process. Best practices are identified
by comparing the organisation's current activities with those who are considered to undertake that
process better than any other.
Required best practices - are the practices that the organisation has identified as requiring
implementation. These are processes at which it is important that the organisation improves.
Best practice gaps - are gaps in the performance of key activities or processes between actual and
required performance. These gaps might be identified by comparing performance measures with other
organisations or by estimating by how much performance would improve if best practice was
introduced.
Expected performance with best practices - is the level of performance that the organisation expects
can be achieved if best practices were implemented.
Often the greatest benefit can be gained from benchmarking with organisations in different industries
that specialise in, or gain competitive advantage from, activities or processes which the organisation
needs to improve. For example manufacturing companies might learn from benchmarking a
supermarket's stock control system, as supermarkets have to maintain close control of very high
turnover of inventory often including items with short shelf lives.
Not all practices will be appropriate in all circumstances. Practices should always be modified to
make them appropriate to the organisation. Lessons learnt from other organisations might encourage
the organisation to redesign its processes to make them more appropriate. Best practice for a process
might be a hybrid practice of a number of organisations' practices or might be practice that is
modified to make it more appropriate to the organisation.
Whilst an organisation should strive to achieve best practice in all of its activities, in reality this will
not be possible. The organisation must prioritise the activities and processes to be benchmarked. As
it is not possible to be best at everything, it is important to focus on processes and activities which
are 'qualifiers' (required to meet industry norms, the minimum required to compete) and 'winners'
(which provide competitive advantage).
The measure should be analysed based on the scope of benchmarking activity. This might be by
process or department for example. Data should be identified during the benchmarking process.
Prism Facet 1:
Capabilities Sub-Facet 1: Practices
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Availability of Technology
Why should we measure it?
This measure assesses whether pieces of technology are available when they are required.
As with other capabilities, it is essential that technology is available when required in order to satisfy
demand. The measure assesses how well technology is planned in order to ensure that the
organisation has the right items of technology, and that the technology is in the right place at the right
time to satisfy demand for the organisation's products and services. Such planning is a key part of the
capacity planning process when scheduling activities. This is an important measure of the
effectiveness of these planning processes.
It is most important to use this measure in relation to key pieces of technology, where their absence
can stop activity of the organisation, or items which provide competitive advantage, the absence of
which could affect the competitiveness of the firm.
The availability of technology can be maintained by making large investments to ensure that the right
technology is always available. This might include maintaining excess technology to cover all
eventualities. Although this will ensure availability it might well be inefficient use of resources as
there will be increased investment costs and increased cost of maintaining technology which might
not be highly utilised. As a result it is important to consider 'Technology Utilisation' when using this
measure to ensure that the organisation's technology is appropriately utilised. The balance between
utilisation and availability of technology should be assessed by the organisation based on its
competitive priorities. Expenditure on excess technology in key strategic areas, or on key strategic
items can be justified if availability and flexibility are key competitive priorities.
The availability of capital to invest can be a key consideration in the availability of technologies
when required as will the speed and cost of technology relocation.
Lack of availability will cause additional costs to be incurred (see cost of equipment breakdowns).
How do we measure it?
% of occasions that items of technology are available when required
average time between technology breakdowns
What do we need to consider when defining the measure?
Technology - a piece of technology is the application of a new scientific or technological
development that has practical value to the organisation. New technologies can relate to products or
processes and will include information and communication technologies, manufacturing process
technologies and/or product development technologies.
Breakdown - is to become in-operational due in unexpected circumstances.
It is most important that analysis of this measure is focused on key items of technology where their
absence can stop activity of the organisation, or infrastructure which provides competitive advantage,
the absence of which could affect the competitiveness of the firm.
It is important that causal analysis of this measure is undertaken. Such analysis will allow the
identification of the reasons for technology being unavailable and hence action can be taken to
prevent it recurring. Lack of technology might be caused by a lack of investment in the appropriate
technology, failure to effectively deploy available technology in a timely manner or a lack of
appropriate support to minimise down time.
Analysis should also include split by business unit or department to analyse where the planning is
most effective and where improvement is required.
There is a need for a feedback mechanism to determine when technology is not available and to
analyse the causes so that they can be reduced.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
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necessary to undertake cost benefit analysis to place quantitative values on the benefits that are
realised. Such analysis should include consideration of the costs and benefits of those affected by the
implementation at all levels of the organisation. The costs and benefits can often be very different at
different levels and in different departments - analysis should reflect this.
Isolating the effect of new technologies from those of other variables is always going to be difficult.
Estimates, rather than precision are therefore appropriate.
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and dynamic environments it is important to ensure that there are a large number of innovations and
ideas to choose from. As a result it is important that use of this measure does not deter members of the
organisation from suggesting ideas for fear of failure or lowering the success rate. It is important to
consider success rate in light of the number, not just proportion, of successful innovations.
There are numerous measures which should be considered when using this measure. Success rate
should be considered in the context of the overall number of ideas generated as a low success rate
from a high number of ideas may provide sufficient innovations to maintain the organisations
competitiveness. It should also be considered in conjunction with the value of new technologies and
their break even time.
In order to calculate this measure it will be necessary for the product / technology development
process, which manages innovations, to track all innovations. As with the measure of break even
point, this should include tracking impact on costs and revenues from accounting information systems,
as well as assigning values to qualitative effects of the innovation.
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measure should reflect this. Different types of technology should be analysed separately with
appropriate targets.
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prevent it recurring. Lack of technology might be caused by a lack of investment in the appropriate
technology or failure to effectively deploy available technology in a timely manner.
Analysis should also include split by business unit or department to analyse where the planning is
most effective and where improvement is required.
There is a need for a feedback mechanism to determine when technology is not available and to
analyse the causes so that they can be reduced.
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Age of Technology
Why should we measure it?
The age and condition of its technology is an important determinant of an organisation's ability to
execute its strategies and satisfy the demand for its products.
New technologies perform more efficiently and effectively than those that are ageing or in poor
condition. As a result it is important to monitor and control the age and condition profile. New
technologies are also more likely to facilitate effectiveness of operations and responsiveness to
changing market conditions.
The age and condition profile is linked to the technology inventory which assesses the availability
and condition and identifies technology gaps which need to be filled for the organisation to be
competitive. It will also be linked to technology availability as new technologies and those that are
maintained in good condition are less likely to break down.
The age and condition profile will provide input to strategy development and technology management
decisions regarding the need and timing of replacement and redeployment.
How do we measure it?
average age of technologies
% of useful life of pieces of technology completed
% of pieces of technology that are in need of replacement
What do we need to consider when defining the measure?
New technology - a piece of new technology is the application of a new scientific or technological
development that has practical value to the organisation. New technologies can relate to products or
processes and will include information and communication technologies, manufacturing process
technologies or product development.
Useful life - is the time from the purchase of an item until it needs to be replaced. An estimation of the
useful life of an item of technology will be made when justifying investment in it. This estimation
should be updated as it ages and its condition deteriorates.
The overall age of technology throughout the organisation will provide an indication of the control
maintained over infrastructure and the frequency of investment.
The benchmark age of technology and actual performance of this measure will depend on the nature of
the organisation and industry in which it operates. Where technologies are frequently changing and
where the performance of new technologies is very important and technologies will need to be
younger and in better condition.
The importance of age and condition of technologies will vary depending on the type of technology
and the function it performs. Analysis of this measure should reflect this, similar types of technology
should be grouped together with appropriate targets.
Assessment of the age and condition of technologies should be undertaken in conjunction with the
technology inventory / audit which monitors technology availability and gaps that need to be filled.
There should also be a feedback mechanism from operational areas to report changes in condition of
technologies and new technology needs.
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The actual point of breakeven will be affected by the 'Target Cost vs. Actual Cost' measure.
The new technology introduction process should include a process to monitor the progress of
technologies that are developed. This should enable evaluation of the output of the process including
the success of technologies following introduction. This monitoring process should provide important
and valuable feedback regarding the performance of the process.
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Technology gaps - are technologies that do not exist within the organisation but have been identified
as being required. It is particularly important that gaps are closed where the technologies are key to
competitive advantage.
It is important that all technology introduction projects are completed as quickly as possible, however
often resources are limited. As a result it will often be appropriate to focus this measure on key
technologies that provide the organisation with competitive advantage so that resources are focused
on their rapid introduction. When using this measure it is also important to ensure that the quality of
introduction is not compromised by rapid introduction. Technologies that do not meet the
organisation's requirements are a waste of resources regardless of the speed with which they are
implemented.
The lead time to introduce new technology will vary considerably depending on the type of
technology to be introduced. Analysis of the measure should reflect this, grouping together similar
items such as information technologies, manufacturing technologies, etc. This analysis should include
comparison with implementation in other organisations or other business units. Benchmarks for such
lead time can be obtained from external consultants or business press. Analysis should also include
consideration of the mode of technology acquisition. This will include the difference between
purchasing new technologies and developing them internally.
Use of this measure should include analysis by each stage of the acquisition process over an extended
period of time. This will enable understanding of which stage in the process is causing the greatest
delay. Comparing performance of the same stage in the acquisition process will provide more
appropriate comparisons as similar activities will have to be undertaken. Stages of the process might
include defining the specification for the technologies, finding a source, procurement or development
lead time, installation time, etc.
There should be a process for planning and executing new technology introduction which documents
activities so that they can be reviewed and improved. This should include collection of data for this
measure.
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Debtor Days
Why should we measure it?
Debtors days, or days debt outstanding, provides an indication of how much is currently owed to the
company. Credit terms and late payment of bills or invoices can have a significant impact on a
companys cash flow and hence its liquidity. It is not uncommon for debtor days to run at 60 plus days
in organisations, despite the fact that many payment terms specify payment within 30 days.
How do we measure it?
Debtor days = days debt outstanding
Average trade debtors
Average daily turnover
What do we need to consider when defining the measure?
Debtors - are individuals or companies that owe debt to another individual or company (the creditor).
Days debt outstanding is calculated by determining how many days sales are required to cover the
outstanding debt. If the debt is 100,000 and monthly sales are 50,000, then two months (60 days)
worth of sales would be required to cover the outstanding debt. Hence debtor days would be 60.
When using this measure in different countries it should be noted that standard terms vary from
country to country. This is an important consideration when comparing the performance of
subsidiaries or business units in different countries. Locally accepted practices must be understood.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
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Stakeholder Contribution Sub-Facet 2: Customer Contribution
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Processes Sub-Facet 3: Plan and Manage Enterprise Financial Operations