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Business Performance Metrics

What are they? Why are they used? How are they used? How does one go about developing their own metrics? Please provide an example.

Describe measurements vs metrics?

Also how do Kaplan Norton balanced scorecards fit into this?

Finally, if you could provide some sort of exercise for me to do in excel so I could create a metric, that would be awesome

Also, any links to websites that would further help me learn would be greatly appreciated!!!!!!!

Solution Preview

Business performance management (BPM) is a set of processes that help organizations optimize business performance. BPM is seen as the next generation of business intelligence (BI). BPM is focused on business processes such as planning and forecasting. It helps businesses discover efficient use of their business units, financial, human, and material resources.

BPM involves consolidation of data from various sources, querying, and analysis of the data, and putting the results into practice.

BPM enhances processes by creating better feedback loops. Continuous and real-time reviews help to identify and eliminate problems before they grow. BPM's forecasting abilities help the company take corrective action in time to meet earnings projections. Forecasting is characterized by a high degree of predictability which is put into good use to answer what-if scenarios. BPM is useful in risk analysis and predicting outcomes of merger and acquisition scenarios and coming up with a plan to overcome potential problems.

BPM provides key performance indicators (KPI) that help companies monitor efficiency of projects and employees against operational targets.

Metrics / Key Performance Indicators
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BPM often uses Key performance indicators (KPIs) to assess the present state of business and to prescribe a course of action. More and more organizations have started to make data available more promptly. In the past, data only became available after a month or two, which did not help to suggest to managers to adjust activities in time to hit Wall Street targets. Recently, banks have tried make data available at shorter intervals and have reduced delays. For example, for businesses which have higher operational/credit risk loading (for example, credit cards and "wealth management"), A large multi-national bank makes KPI-related data available weekly, and sometimes offers a daily analysis of numbers. This means data usually becomes available within 24 hours, necessitating automation and the use of IT systems.

Most of the time, BPM simply means use of several financial/nonfinancial metrics/key performance indicators to assess the present state of business and to prescribe course of action.

Some of the areas which top management analysis could gain knowledge from BPM:

1. Customer-related numbers:
- New customers acquired
- Status of existing customers
- Attrition of customers (including breakup by reason for attrition)

2. Turnover generated by segments of the Customers - these could be demographic filters.
3. Outstanding balances held by segments of customers and terms of payment - these could be demographic filters.
4. Collection of bad debts within customer relationships.
5. Demographic analysis of individuals (potential customers) applying to become customers, and the levels of approval, rejections and pending numbers.
6. Delinquency analysis of customers behind on payments.
7. Profitability of customers by demographic segments and segmentation of customers by profitability.

This is more an inclusive list than an exclusive one. The above more or less describes what a bank would do, but could also refer to a telephone company or similar service sector company.

What is important is:
1. KPI related data which is consistent and correct.
2. Timely availability of KPI-related data.
3. ...

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