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