MANAGEMENT PERFORMANCE AND MANAGEMENT INDICATOR

REPUBLIQUE DU CAMEROUN REPUBLIC OF CAMEROON

Paix - Travail - Patrie
MINISTERE DE L’ENSEIGNEMENT
SUPERIEUR UNIVERSITE DE DSCHANG
FACULTE DE SCIENCE ET
ECONOMIQUE ET DE GESTION
Peace - Work - Fatherland
MINISTRY OF HIGHER EDUCATION
UNIVERSITY OF DSCHANG
FACULTY OF SCIENCE ECONOMIC
AND MANAGEMENT

UNIVERSITYOF DSCHANG DOUALA

Option: ACCOUNTING CONTROL AND AUDIT
Course Title: BUDGET CONTROL

MANAGEMENT PERFORMANCE AND

MANAGEMENT INDICATOR

Level: Bachelor Degree

Assignment done by: RAFIGATOU ABDOU HND in accountancy

COURSE INSTRUCTOR
Mr. TCHIENGANG PEGUY
Accounting lecturer at IUG

2022-2023 ACADEMIC YEAR

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 MANAGEMENT PERFORMANCE AND MANAGEMENT INDICATOR

CERTIFICATION

This is to certify that this piece of work title MANAGEMENT PERFORMANCE AND
MANAGEMENT INDICATORS is solely carried out and presented by RAFIGATOU
ABDOU for the partial fulfilment of the allocation of continuous assessment marks.

DEDICATION

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 MANAGEMENT PERFORMANCE AND MANAGEMENT INDICATOR

MY LOVELY PARENTS

ACKNOWLEDGMENT

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 MANAGEMENT PERFORMANCE AND MANAGEMENT INDICATOR

I first of all thank the ALMIGHTY who gave me the ability to write this document , the
determination and the knowledge so as to make it possible for me to produce this piece of
work.I forward my profound gratefulness to those who did not care about giving a time to
help in the realization of this work. This is directed particularly to;
Mr TCHIENGANG PEGUY
Late Mr. DJAMBOU MARIE LOUIS the promoter the IUG who facilitated
our training in his institution by giving us the necessary resources
My family who supports me in any circumstances
To all my mates of PBA ACA who supported me

TABLE OF CONTENT

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Contents
CERTIFICATION .................................................................................................................... 1
DEDICATION ........................................................................................................................... 2
ACKNOWLEDGMENT............................................................................................................ 3
TABLE OF CONTENT ............................................................................................................. 4
INTRODUCTION ..................................................................................................................... 5
Management Performance (Performance Management) ........................................................... 7
Financial performance ............................................................................................................ 7
People performance ................................................................................................................ 7
MANAGEMENT PERFORMANCE CYCLE ...................................................................... 8
Planning .............................................................................................................................. 8
Monitoring .......................................................................................................................... 8
Developing.......................................................................................................................... 9
Rating & rewarding ............................................................................................................ 9
Management Indicator or KPI ................................................................................................... 9
KPI Meaning vs Metrics Meaning ....................................................................................... 10
Importance of KPI ................................................................................................................ 10
Types of KPIs ....................................................................................................................... 10
KPI Examples ....................................................................................................................... 12
Finance.............................................................................................................................. 12
Sales .................................................................................................................................. 18
Customer Metrics ............................................................................................................. 19
Marketing.......................................................................................................................... 19
Conclusion ............................................................................................................................... 21
Reference ................................................................................................................................. 21

INTRODUCTION
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When discussing performance management, many people will immediately think of the
annual performance review process. But the performance appraisal is only one component of
what is considered to be performance management. One of the best definitions of performance
management is provided by Michael Armstrong in his Handbook of Performance Management,
which carefully and plainly lays out the Armstrong performance management cycle:

“Performance management is the continuous process of improving performance by setting indi-

vidual and team goals which are aligned to the strategic goals of the organisation, planning
performance to achieve the goals, reviewing and assessing progress, and developing the knowl-
edge, skills, and abilities of people.”

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Management Performance (Performance Management)

Management Performance is the process of creating a business environment or activities to

ensure people are enabled to perform to the best of their capabilities. Performance
management include goals that are consistently achieved in an effective and efficient
way.Just to take a few pointers about what performance management would cover
1. Financial performance;
2. Marketing performance; and
3. People Performance
Financial performance
To know how your company is performing, you would need to find out how your financials
are performing. Thus you would first of all, establish the financial goals, namely, profit and
loss, cash flow and your balance sheet. Thereafter you would check your actual financial results
against your financial targets. This generally will be taken care of by the Finance Department
or Accounting Department. For small and medium enterprise, you may outsource or engage a
part-time professional to perform this task.

Nevertheless, you still need to set your financial goals.

Marketing performance
You would also want to strategize your marketing activities to achieve your company annual
revenue and its contribution to the gross margin. The management team would want you to
establish the marketing performance measurement or marketing metrics. Again the marketing
performance indicators are based on your specific industry. You are therefore benchmarking
your company marketing performance against the industry performance metrics.

Marketing performance is one of the key success factors or critical success factors.

People performance
Whenever we mention about peoples’ performance, the performance appraisal comes to our
mind. You are definitely right to say you need performance appraisal to assess your people
performance. Therefore performance appraisal is a tool and technique whereby you measure
the performance of your people to reach the goals that you had set for your people.

What is people performance? People performance management and measurement would be

how you manage, motivate and engage your people to achieve business results that are
desirable. In other words, are the business results through people? Business agility is the
learning agility of its organisation and its people. Business results are interdependent of the
business agility to the market changing environment.

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Why do we need to have performance management?

Without performance management, how would you know whether your lead team achieved the
business goals?

With performance management, you are in a better position to allocate your financial resources,
your human resources and commitment of capacity for the level of operations for your products
and services.

Human resources or human capital is an intangible resource, and the return of human
investment is a huge potential. That’s why you have talent management, career management,
flexible wages or compensation management as well as corporate culture development.

You want an inclusive and thinking work team; your activities would include engaging and
participative employees.

You want a productive and innovative team; your activities would include productivity events
and doing things differently.

A key point here is that performance management is a continuous process — not a once-a-year
“one-off” activity. Quality performance management should, therefore, bring together a num-
ber of different, integrated activities to form an ongoing”performance management cycle”, as
shown below.

MANAGEMENT PERFORMANCE CYCLE

Planning: The planning phase revolves around setting performance expectations for the
employee. These are often planned and are also included in the job descriptions. It is best
practice to actively involve the employee in this planning process. this involvement increases
satisfaction with the performance cycle, as well as perceived fairness, usefulness, and
motivation to improve. Employee performance plans should also be flexible so they can be
adjusted for changing objectives and requirements along the way. For more information about
planning and goal setting

Monitoring: In the monitoring phase, the goals set in the planning phase are actively tracked.
Monitoring involves the continuous measuring of performance and providing feedback on
progress towards the goals. By monitoring continuously, the manager or supervisor can correct
in case of suboptimal performance, rather than finding this out at the end of the year when it is
too late. Especially when dealing with highly educated professionals, it is important to focus

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on whether the goal is achieved instead of howit is achieved. A manager should stay away from
micromanagement and determining exactly how this goal has to be achieved. Good
management practices are key when it comes to effective monitoring.

Developing: Development plays a key role in improving performance. As a result of active

monitoring, areas of improvement can be identified. This can be underperformance that
should be corrected or areas of superior performance in which the employee wants to excel
even further. This can be achieved in the form of training and development but also through
challenging assignments and other opportunities for personal and professional growth.

Rating & rewarding: Rating performance is an inevitability to determine the added value of
employees to the organization. This is usually done during the employee’s (bi)
annual performance appraisal. In case of continuous subpar performance, the employee might
not be in the right function or organization, and parties should say goodbye. In case of
superior performance, the employee should be recognized for their performance. This can be
through giving them praise, a raise, time off, recognition items, a promotion, or all of the
above!

The information above are the four stages of the performance management cycle. It is
important to remember that performance management is not a fully top-down process.
Rather, it is a shared responsibility between the manager and the employee.

Emphasizing this shared responsibility will make the whole process more effective. The
employee will be most motivated when he or she feels involved in the process and
understands why their goals matter to their colleagues and the

rest of the organization. This makes monitoring progress on goals much easier as well

MANAGEMENT INDICATOR OR KPI

KPI stands for key performance indicator, a quantifiable measure of performance over time for
a specific objective. KPIs provide targets for teams to shoot for, milestones to gauge progress,
and insights that help people across the organization make better decisions. From finance and
HR to marketing and sales, key performance indicators help every area of the business move
forward at the strategic level.

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KPI Meaning vs Metrics Meaning

While key performance indicators and metrics are related, they’re not the same. Here’s a quick
explanation:

 KPIs are the key targets you should track to make the most impact on your strategic
business outcomes. KPIs support your strategy and help your teams focus on what’s
important. An example of a key performance indicator is, “targeted new customers
per month”.
 Metrics measure the success of everyday business activities that support your KPIs.
While they impact your outcomes, they’re not the most critical measures. Some
examples include “monthly store visits” or “white paper downloads”.

Importance of KPI
KPIs are an important way to ensure your teams are supporting the overall goals of the
organization. Here are some of the biggest reasons why you need key performance indicators.

 Keep your teams aligned: Whether measuring project success or employee

performance, KPIs keep teams moving in the same direction.
 Provide a health check: Key performance indicators give you a realistic look at the
health of your organization, from risk factors to financial indicators.
 Make adjustments: KPIs help you clearly see your successes and failures so you can
do more of what’s working, and less of what’s not.
 Hold your teams accountable: Make sure everyone provides value with key
performance indicators that help employees track their progress and help managers
move things along.

Types of KPIs

Key performance indicators come in many flavors. While some are used to measure monthly
progress against a goal, others have a longer-term focus. The one thing all KPIs have in
common is that they’re tied to strategic goals. Here’s an overview of some of the most common
types of KPIs

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 Strategic: These big-picture key performance indicators monitor organizational

goals. Executives typically look to one or two strategic KPIs to find out how the
organization is doing at any given time. Examples include return on investment,
revenue and market share.
 Operational: These KPIs typically measure performance in a shorter time frame,
and are focused on organizational processes and efficiencies. Some examples
include sales by region, average monthly transportation costs and cost per
acquisition (CPA).
 Functional Unit: Many key performance indicators are tied to specific functions,
such finance or IT. While IT might track time to resolution or average uptime,
finance KPIs track gross profit margin or return on assets. These functional KPIs
can also be classified as strategic or operational.
 Leading vs Lagging: Regardless of the type of key performance indicator you
define, you should know the difference between leading indicators and lagging
indicators. While leading KPIs can help predict outcomes, lagging KPIs track what
has already happened. Organizations use a mix of both to ensure they’re tracking
what’s most important.

If your key performance indicators aren’t delivering the results you expect, it’s time to adjust
your strategy. Here are three things you can do to ensure that people across the organization
know what your KPIs mean, and how to use them to make data-driven decisions that impact
your business.

1. Select KPIs that matter most: To be sure you’re measuring what matters, you should
include a balance of leading and lagging indicators. Lagging indicators help you
understand results over a period of time such as sales over the last 30 days. Leading
indicators help you predict what might happen based on data, allowing you to make
adjustments to improve outcomes.
2. Create a KPI-driven culture: Key performance indicators don’t mean much if
people don’t understand what they are and how to use them (including what the KPI
acronym means). Increase data literacy in your organization so everyone works
toward strategic targets. Educate employees, assign them relevant KPIs, and use a
best-in-class BI platform to keep everyone making decisions that move your
business forward.

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3. Iterate: Keep your key performance indicators current by revising them based on
market, customer and organizational changes. Meet regularly to review them, take
a close look at performance to see if adjustments need to be made, and publish any
changes you make so teams are always up to date.
KPI Examples

Every business unit has unique key performance indicators that help them track progress. Many
organizations use KPI dashboards to help them visualize, review and analyze their
performance metrics all in one place. Here are a few KPI examples by department, including a
dashboard view of each.
 Finance
 Sales
 Marketing
 IT
 Customer Service

Finance

From expense and revenue to margin and cash management, finance managers have lots of
choices when it comes to tracking financial progress. Here are a few examples to consider as
you define your own key performance indicators.

I- Profitability Ratio

o Gross Profit Margin (and %)

 The gross profit margin tells you what your business made after paying for the direct
cost of doing business, which can include labour, materials and other direct
production costs.
 It’s one of three major profitability ratios, the others being operating profit margin
and net profit margin. Arguably, it’s the most important of the three profitability
measures because without a high enough gross profit margin, you won’t have a viable
business—at least, not for long.


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Calculation of gross profit margin ratio

The gross profit margin is calculated by subtracting direct expenses or cost of goods sold
(COGS) from net sales (gross revenues minus returns, allowances and discounts). That
number is divided by net revenues, then multiplied by 100% to calculate the gross profit
margin ratio.

(Net revenue – direct expenses)Net revenuex 100% = Gross profit margin ratio

Example of a gross profit margin calculation

Let’s say your business makes 20,000XAF by cleaning offices. It costs you 8000XAF to
provide those services.
Gross profit =20000-80000
Gross profit= 12 000XAF
Gross profit margin = 12000/20000
Gross profit margin = 60%

A negative or unfavourable GPM may be due to the following

- The business is buying at a higher price
- The business is selling at a lower price
- The business is operating at a higher cost

o Operating Profit Margin (and %)

The operating profit is the difference between the revenues of a business and its costs and
expenses, excluding income and losses from sources other than its regular business activities
(called extraordinary or one-time items) and income deductions, like interest and taxes.
Calculation of the operating profit margin
operating profit margin formula.

Operating profit margins = (Net sales – (cost of goods sold + SG&A) ) / Net sales
X 100%

Here’re the few details of the income statement of YOU Matter Inc. –
 Gross Sales – 564,000 XAF
 Sales Return – 54,000XAF

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 Cost of Goods Sold – 2,40,000XAF

 Labour Expenses – 43,000XAF
 General & Administration Expenses – 57,000XAF

net sales would be = (Gross Sales – Sales Return)

= 564,000 – 54,000 = 510,000.XAF

gross profit would be = (Net Sales – Cost of Goods Sold)

= 510,000 – 240,000= 270,000.XAF

The operating profit would be = (Gross profit – Labour expenses – General and
Administration expenses)

= 270,000 – 43,000 – 57,000 = 170,000XAF

Operating Profit Margin formula = Operating Profit / Net Sales * 100

, Operating Margin = 170,000 / 510,000 * 100 = 1/3 * 100 = 33.33%.

o Net Profit Margin (and %)

The net profit margin, or simply net margin, measures how much net income or profit is
generated as a percentage of revenue. It is the ratio of net profits to revenue for a company or
business segment.
Net Profit Margin ratio = (Net Profit/Revenue) *100

For example, a company has 200,000 FCFA in salesand 50,000FCFA in monthly net income.
Net profit margin = 50,000 / 200,000 = 25%
This means that a company has 0.25 FCFAof net income for every dollar of sales.
Steve has 200,000FCFA worth of sales yet his net income is only 50,000FCFA. By
decreasing costs, he can increase net income. In conclusion, he evaluates his decision and
decides to implement the online system he was thinking about.

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A low profit margin can be improved by

- Reducing operating costs

- Increasing selling price
- Increasing sales quantity

o Operating Expense Ratio

The Operating Expense Ratio is the ratio between the cost of operation to the net revenue. It is
typically used in evaluating real estate properties, where a higher Operating Expense ratio
means higher operating expense than its property income and serves as a deterrent. Therefore,
a lower operating expense ratio implies lower operating costs and is preferable and investment-
friendly.
Operating expense ratio formula
Expense Ratio = Operating Expenses / Revenues
Example of Operating Expense Ratio (OER)

Take a hypothetical example, where Investor A owns a multi-family apartment building and
brings in 65,000Fper month in rent. The investor also pays 50,000F for operating expenses
including his monthly mortgage payments, taxes, utilities, and so on. The property also is
expected to depreciate by 85,000F this year.

Therefore, the annual OER can be calculated as:

[(50,000×12)−85,000] /(65000 ×12) =66%

o Working Capital Ratio

Working capital" is the money you need to support short-term operations. It is this focus on the
short term that distinguishes working capital from longer-term investments in fixed assets

Working capital ratio = current assets / current liabilities

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. If it is less than 1:1, this usually means you are finding it hard to pay bills. Even when the
ratio is higher than 1:1, you may have difficulty, depending on how quickly you can sell
inventories and collect accounts receivable. A ratio of 2:1 usually provides a reasonable level
of comfort.

o Profit investment ratio

When it comes to evaluating and shortlisting capital investment opportunities, an organization
needs to consider selecting and investing in them as capital projects. With this, they must decide
if the profit investment ratio (PIR) or value investment ratio (VIR), which is a capital budgeting
measure that gauges the potential profitability of a capital project investment, is in an
acceptable range. The evaluation and shortlisting of initiatives that could possibly be
considered for selection and execution also takes into account the risk or threats exposure
associated with each opportunity.
 Return on assets = net income ÷ average total assets. The return-on-assets ratio
indicates how much profit companies make compared to their assets.
 Return on equity = net income ÷ average stockholder equity. This ratio shows
your business’s profitability from your stockholders’ investments.
 Profit margin = net income sales. The profit margin is an easy way to tell how much
of your income is from sales.
 Earnings per share = net income ÷ number of common shares outstanding. The
earnings-per-share ratio is similar to the return-on-equity ratio, except that this ratio
indicates your profitability from the outstanding shares at the end of a given period.

Market value ratios

Market value ratios deal entirely with stocks and shares. Many investors use these ratios to
determine if your stocks are overpriced or underpriced. These are a couple of common
market value ratios:

 Price-to-earnings ratio = price per share ÷ earnings per share.Investors use the
price-to-earnings ratio to see how much they pay for each dollar earned per stock.
 Market-to-book ratio = market value per share ÷ book value per share. This ratio
compares your company’s historic accounting value to the value set by the stock
market.

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II- Liquidity Ratio

These ratios are used to calculate how capable your company is of paying its debts, usually
by measuring current liabilities and liquid assets. This determines how likely it is that your
business will be able to pay off short-term debts. These are some common liquidity ratios:

 Current ratio = current assets ÷ current liabilities. The purpose of this ratio is to
measure if your company can currently pay off short-term debts by liquidating your
assets.
 Quick ratio = quick assets ÷ current liabilities. This ratio is similar to the current
ratio above, except that to measure “quick” assets, you only consider your accounts
receivable plus cash plus marketable securities.
 Net working capital ratio = (current assets – current liabilities) ÷ total assets. By
calculating the net working capital ratio, you’re calculating the liquidity of your
assets. An increasing net working capital ratio indicates that your business invests
more in liquid assets than fixed ones.
 Cash ratio = cash ÷ current liabilities. This ratio tells you how capable your
business is of covering its debts using only cash. No other assets are considered in this
ratio.
 Cash coverage ratio = (earnings before interest and taxes + depreciation) ÷
interest. The cash coverage ratio is similar to the cash ratio, but it calculates how
likely it is that your business can pay interest on its debts.
 Operating cash flow ratio = operating cash flow ÷ current liabilities. This ratio
tells you how your current liabilities are covered by cash flow.

III- Leverage ratio (Solvency ratio)

A leverage ratio is a good way to easily see how much of your company’s capital comes from
debt, and how likely it is that your company can meet its financial obligations. Leverage
ratios are similar to liquidity ratios, except that these consider your totals, whereas liquidity
ratios focus on your current assets and liabilities.

 Debt-to-equity ratio = total debt ÷ total equity. This ratio measures your
company’s leverage by comparing your liabilities – or debts – to your value as
represented by your stockholders’ equity.

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 Total debt ratio = (total assets – total equity) ÷ total assets. Your total debt ratio is
a quick way to see how much of your assets are available because of debt.
 Long-term debt ratio = long-term debt ÷ (long-term debt + total equity). Similar
to the total debt ratio, this formula lets you see your assets available because of debt
for longer than a one-year period.

IV- Turnover ratios

Turnover ratios are used to measure your company’s income against its assets. There are
many different types of turnover ratios. Here are some common turnover ratios:

 Inventory turnover ratio = costs of goods sold ÷ average inventories. The

inventory turnover rate shows how much inventory you’ve sold in a year or other
specified period.
 Assets turnover ratio = sales ÷ average total assets. This ratio indicates how good
your company is at using your assets to produce revenue.
 Accounts receivable turnover ratio = sales ÷ average accounts receivable. You
can use this ratio to evaluate how quickly your company can collect funds from its
customers.
 Accounts payable turnover ratio = total supplier purchases ÷ ((beginning
accounts payable + ending accounts payable) ÷ 2). This ratio measures the speed at
which a company pays its suppliers.

Sales

Ensure your teams are meeting sales targets by tracking and regularly reviewing sales key
performance indicators, including those for leads, opportunities, closed sales and volume. Here
are some examples of KPIs for sales teams:


o New Inbound Leads

o New Qualified Opportunities

o Total Pipeline Value

o Sales Volume by Location

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o Average Order Value

Customer Metrics

Customer-focused KPIs generally center on per-customer efficiency, customer satisfaction,

and customer retention. These metrics are used by customer service teams to better
understand the service that customers have been receiving. Examples of customer-centric
metrics include:

 Number of New Ticket Requests: This KPI counts customer service requests
measures how many new and open issues customer are having.
 Number of Resolved Tickets: This KPI counts the number of requests that have been
successfully taken care of. By comparing the number of requests to the number of
resolutions, a company can assess its success rate in getting through customer
requests.
 Average Resolution Time: This KPI is the average amount of time needed to help a
customer with an issue. Companies may choose to segment average resolution time
across different requests (i.e. technical issue requests vs. new account requests).
 Average Response Time: This KPI is the average amount of time needed for a
customer service agent to first connect with a customer after the customer has submit
a request. Though the initial agent may not have the knowledge or expertise to
provide a solution, a company may value decreasing the time a customer is waiting
for any help.
 Top Customer Service Agent: This KPI is a combination of any metric above cross-
referenced by customer service representatives. For example, in addition to analyzing
company-wide average response time, a company can analyze who the three fastest
responders are and who the three slowest responders are.

Marketing

Get a handle on marketing spend, conversion rates and other indicators of marketing success
by clearly defining key performance indicators and aligning them with your organization’s
strategic goals. Here are a few marketing KPIs to get you started.
 Website Traffic: This KPI tracks the number of people who visit certain pages of a
company's website. Management can use this KPI to better understand whether

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online traffic is being pushed down potential sales channels or if customers are not
being funneled appropriately.
 Social Media Traffic: This KPI similarly tracks the views, follows, likes, retweets,
shares, or other measurable interactions between customers and the company's social
media profiles.
 Conversation Rate on Call-To-Action Content: This KPI centers around focused
promotional programs that ask customers to perform certain actions. For example, a
specific campaign may encourage customers to act before a certain sale date ends. A
company can divide the number of successful engagements by the total number of
content distributions to understand what percent of customers answered the call to
action.
 Blog Articles Published Per Month: This KPI simply counts the number of blog posts
a company publishes in a given month.
 Clickthrough Rates: This KPI measures the number of specific clicks that are
performed on e-mail distributions. For example, certain programs may track how
many customers opened an e-mail distribution, clicked on a link, and followed
through with a sale

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CONCLUSION

To conclude Interestingly, as the concept of performance management evolves, so do the

practices associated with it. For instance, several organizations such as Netflix have entirely
abandoned annual performance management practices for what they call fluid performance
management, a more agile, continuous approach to managing performance.it is necessary to
diagnostic the situation of a company to know if actions should be put in place or
improvements . It must be emphasized that the replacement of annual for fluid performance
management does not eliminate the need for one-on-one feedback. In fact, it reinforces the
importance of regular feedback to ensure that employees work is aligned with the
organizations objective. And if necessary, managers can coach their employees and tweak the
workflow to facilitate the achievement of goals. From a technology perspective, we expect
smart machines, cognitive and artificial intelligence to become more prevalent including
capabilities that can actively recommend performance actions and engagement suggestions to
better meet individual goals. We also foresee a much more advanced use of capabilities that
offer a user experience that is seamless rather than disparate systems building performance
activities into the systems where work actually happens

Reference

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https://strategiccfo.com/articles/profitability/net-profit-margin-analysis/
https://www.investopedia.com/terms/o/operating-expense-ratio.asp
https://www.bdc.ca/en/articles-tools/money-finance/manage-finances/using-working-capital-
ratio
https://www.businessnewsdaily.com/2665-accounting-formulas.html

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