UNIT 4

1. Understanding Key Performance Indicators (KPIs)

Also referred to as key success indicators (KSIs), KPIs vary between companies and between industries,
depending on performance criteria. For example, a software company striving to attain the fastest
growth in its industry may consider year-over-year (YOY) revenue growth as its chief performance
indicator. Conversely, a retail chain might place more value on same-store sales as the best KPI metric
for gauging growth.

At the heart of KPIs lie data collection, storage, cleaning, and synthesizing. The information may be
financial or nonfinancial and may relate to any department across the company. The goal of KPIs is to
communicate results succinctly to allow management to make more informed strategic decisions.

Categories of KPIs

Most KPIs fall into four different categories, with each category having its own characteristics, time
frame, and users.

Strategic KPIs are usually the most high-level. These types of KPIs may indicate how a company is doing,
although it doesn’t provide much information beyond a very high-level snapshot. Executives are most
likely to use strategic KPIs, and examples of strategic KPIs include return on investment, profit margin,
and total company revenue.

Operational KPIs are focused on a much tighter time frame. These KPIs measure how a company is
doing month over month (or even day over day) by analyzing different processes, segments, or
geographical locations. These operational KPIs are often used by managing staff and to analyze
questions that are derived from analyzing strategic KPIs. For example, if an executive notices that
company-wide revenue has decreased, they may investigate which product lines are struggling.

Functional KPIs hone in on specific departments or functions within a company. For example, the
finance department may keep track of how many new vendors they register within their accounting
information system each month, while the marketing department measures how many clicks each
email distribution received. These types of KPIs may be strategic or operational but provide the
greatest value to one specific set of users.

Leading/lagging KPIs describe the nature of the data being analyzed and whether it is signaling
something to come or something that has already occurred.

Consider two different KPIs: the number of overtime hours worked and the profit margin for a flagship
product. The number of overtime hours worked may be a leading KPI should the company begin to
notice poorer manufacturing quality. Alternatively, profit margins are a result of operations and are
considered a lagging indicator.

IT KPIs

A company may desire operational excellence; in this case, it may want to track how its internal
technology (IT) department is operating. These KPIs may encourage a better understanding of
employee satisfaction or whether the IT department is being adequately staffed. Examples of IT KPIs
include:
Total system downtime: This KPI measures the amount of time that various systems must be taken
offline for system updates or repairs. While systems are down, customers may be unable to place
orders or employees are unable to perform certain duties (i.e., when the accounting information
system is down).

Number of tickets/resolutions: This KPI is similar to customer service KPIs. However, these tickets and
resolutions relate to internal staff requests such as hardware or software needs, network problems, or
other internal technology problems.

Number of developed features: This KPI measures internal product development by quantifying the
number of product changes.

Count of critical bugs: This KPI counts the number of critical problems within systems or programs. A
company will need to have its own internal standards for what constitutes a minor vs. major bug.

Back-up frequency: This KPI counts how often critical data is duplicated and stored in a safe location.
In accordance with record retention requirements, management may set different targets for different
bits of information.
 2. What is Customer Retention and Satisfaction?

Customer retention refers to the process of engaging your existing customers so that they repeat their
purchase patterns and continue their association with your brand. Customer satisfaction represents
how content customers are with your brand and its offerings.

It is a metric used to measure how capable your products or services are of satisfying customers’
needs. If you have successfully met the expectations of your customers, you’ll see a direct impact on
your customer retention rate.

What Is the Relationship between Customer Satisfaction and Retention?

Although it is not necessarily true that a satisfied customer will remain associated with the brand, it is
very likely that they would be more willing to trust the brand again for their future purchases.

Customer satisfaction is very subjective, but it offers a higher probability of customer retention; the
former, and its correlation with the latter, depends on many factors including the product/service,
customer support, price fluctuations, market situation, target group and demographic.

Being satisfied is a far cry from being extremely happy with the product: it is merely the first pedestal
towards impressing your customers. For example, your customer support may be excellent and achieve
a good rating at the end of the month, however, most customers calling the support team complained
about the poor quality of the product.

In this case, the customers were satisfied with the customer service, but not so much the product itself.

Achieving optimal customer satisfaction requires excelling in all departments, along with offering
exceptional service at all touchpoints throughout the buyer’s journey. Only then will customer
satisfaction have a direct impact on customer retention.
Advantages of Improving Customer Satisfaction and Retention

Reduction in Marketing Costs

Marketing to new customers can prove to be a time-consuming and expensive affair compared with
marketing to existing customers. Retained customers are already acquainted, even satisfied, with the
brand, so engaging them to turn into loyal customers is a much easier and profitable feat.

Helps in Customer Acquisition

92% of customers trust recommendations from friends and family; a happy customer will positively
influence their network. They bring in more customers through organic word-of-mouth publicity,
which has a high penetration and conversion rate.

Boosts Brand Loyalty

Loyal customers are the cornerstone of business success. Having the unflinching support of loyal
customers is priceless. The first step towards increasing brand loyalty among your patrons is improving
customer satisfaction levels. When you satisfy your customers, they are likely to return to your brand
and it becomes easier to study their buying behavior to design strategies that boost brand loyalty.

Reduction in Marketing Costs

Marketing to new customers can prove to be a time-consuming and expensive affair compared with
marketing to existing customers. Retained customers are already acquainted, even satisfied, with the
brand, so engaging them to turn into loyal customers is a much easier and profitable feat.

Helps in Customer Acquisition

92% of customers trust recommendations from friends and family; a happy customer will positively
influence their network. They bring in more customers through organic word-of-mouth publicity,
which has a high penetration and conversion rate.

Boosts Brand Loyalty

Loyal customers are the cornerstone of business success. Having the unflinching support of loyal
customers is priceless. The first step towards increasing brand loyalty among your patrons is improving
customer satisfaction levels. When you satisfy your customers, they are likely to return to your brand
and it becomes easier to study their buying behavior to design strategies that boost brand loyalty.
 3. Strategies to Improve Customer Satisfaction and Retention

Listen to Your Customers

Kristin Smaby explains it best in Being Human is Good Business: “When customers share their story,
they’re not just sharing pain points. They’re actually teaching you how to make your product, service,
and business better.”

Most of the time, brands undermine customers’ opinions as chatter; only a brand that is sensitive to
customers’ needs understands the true value of reviews and feedback, or more importantly, the
impact it has on business growth. Customer feedback can be your gateway to achieving optimal
customer satisfaction and retention

Calculate Churn Rate

Customer attrition is a direct reflection of your customer satisfaction level and the effectiveness of
your marketing strategy. Analyzing and calculating your churn rate will help you gauge how satisfied
your customers are and how many you successfully retained. It will help you understand the reason
behind your customer attrition and aid in designing strategies that are more engaging and effective.

Analyze your Net Promoter Score

Net Promoter Score (NPS) is a marketing metric that helps to measure customer satisfaction and
retention rate. It asks customers to rate you as a brand in various aspects on a scale of 0-10. The
aggregate of all the customer ratings gives key insights on the company’s performance, customer
satisfaction levels, the effectiveness of marketing strategies and campaigns, and helps in forecasting.

Value your Customers

According to New Voice Media, “Feeling unappreciated is the number one reason customers switch
products and services.” Customers are sharp and observant. You can’t expect to retain customers by
providing substandard service and support.

Today, business is more than just monetary traction; if you do not regularly engage with your
customers and build a bond, there is a minimal scope of increasing business, let alone survival. A great
way to ensure customer satisfaction and improve retention is by offering them something in return for
their association.

You could engage them with loyalty programs or referral programs and incentivize their purchases to
make them feel valued and appreciated.

Improve Customer Experience

Lastly, customer satisfaction is not a one-step process. Amping up your game at every touchpoint will
have a considerable impact on customer satisfaction and retention. Improving overall customer service
ensures happy customers that are more than willing to return to the brand, time and again, for
whatever they may need.
Adopt Loyalty Programs

Loyalty programs can significantly impact customer retention and satisfaction. Rewarding customers
builds customer loyalty and encourages repeat purchase behavior. To know more about how loyalty
programs can improve customer satisfaction and retention rate, connect with Annex Cloud’s Loyalty
Experience Manager.

Now is the time to reassess your business strategy and invest in your most important asset—your
customers.
 4. A Definition of Customer Acquisition

Put simply, customer acquisition refers to gaining new consumers. Acquiring new customers involves
persuading consumers to purchase a company’s products and/or services. Companies and
organizations consider the cost of customer acquisition as an important measure in evaluating how
much value customers bring to their businesses. Customer acquisition management refers to the set
of methodologies and systems for managing customer prospects and inquiries that are generated by
a variety of marketing techniques. Some successful customer acquisition strategies include customer
referrals, customer loyalty programs, and the like. One way to think about customer acquisition
management is to consider it the link between advertising and customer relationship management, as
it is the critical connection that facilitates the acquisition of targeted customers in an effective way.

The Customer Acquisition Process

Customer acquisition requires forethought and strategies. In fact, there are many different customer
acquisition strategies that are used as part of the customer acquisition process. Some customer
acquisition methods are more effective with specific types of clients, but there are a few basic steps
that are included in any type of customer acquisition plan.

The first step of any basic customer acquisition plan is to identify quality potential customers. One
customer acquisition strategy involves reaching out to potential customers through call centers and
mailing lists. These customer acquisition methods allow companies to determine which individuals
and businesses express interest in or already use products similar to those of your company. Next,
companies qualify the leads a little further using various research methods to determine the viability
of the given lead. If the chances seem likely that you will be able to acquire this new customer, his
status is upgraded to that of prospect and assigned to a salesperson for further interaction.

Many customer acquisition programs then include establishing a relationship with prospects to
identify their needs and determine how the products offered relate to those needs. Salespeople also
attempt to identify unstated needs; these are based on data provided by ongoing conversations and
interactions with the prospects. Salespeople also can identify additional needs of prospects and offer
additional products so the prospects see a greater value from purchasing the products they already
are considering.

Customer Acquisition Cost

The last thing a company wants to do is spend more on acquiring customers than the customers spend.
The cost of customer acquisition (CAC) is the price companies pay to acquire new customers. In its
simplest form, the CAC is determined by dividing the total costs associated with acquisition by total
new customers, within a specific time period. The cost of customer acquisition is an important metric
for companies to consider, along with the lifetime value of a customer. Companies and organizations
need to get a return on investment (ROI) from marketing and sales campaigns geared toward customer
acquisition. The goal is to achieve a high lifetime value (LTV) to CAC ratio. A 3:1 LTV:CAC ratio is a perfect
level.

Benefits of Customer Acquisition

Using appropriate customer acquisition strategies helps companies to grow, and targeted customer
acquisition programs help companies acquire the right customers in a cost effective way. New
companies or those with less established products especially need to place a greater focus on
customer acquisition. As companies mature, they can shift their focus to customer retention. It’s
important to keep in mind that customer acquisition costs often are higher than customer retention
costs and therefore require a thorough analysis of the associated benefits. The acquisition benefits
also need to be fully quantified in order for companies to accurately gauge the relative value of their
customer acquisition process. For established companies to grow most effectively, they should find
ways to attract, satisfy, and retain customers.

To increase chances of retention, you need a 360-degree customer view of a customer’s behavior,
preferences and needs to deliver effective engagements. See how the core feature of the Intelligent
Engagement Platform, Customer DNA provides that holistic customer view.
 5. Employee performance: steps to measure, evaluate and improve

To stay successful in today’s market, businesses must find ways to maintain and bring out the best
performance from their employees. Not only does this help to hire, retain and develop the best talent,
but by helping staff to grow within their roles and responsibilities, the company can build a pipeline of
future leaders. All contributing to long-lasting success.

Working to improve employee performance is an ongoing process that involves measurement,

evaluation, and planning, but it's also a vital step to achieving company goals.

What is employee performance?

Put simply, employee performance is how a member of staff fulfils the duties of their role, completes
required tasks and behaves in the workplace. Measurements of performance include the quality,
quantity and efficiency of work.

When leaders monitor the performance of employees, they can paint a picture of how the business is
running. This not only helps to highlight what companies could be doing in the present to improve
their business, but this information also feeds into future growth plans.

However, placing a focus on employee performance doesn’t just benefit the business. It helps
employees to reach their full potential, while also improving overall performance – which can have
positive effects on morale and quality of work produced.

Lastly, but most importantly, when employees are under-performing, customers may be dissatisfied.
As a result, the entire business may be affected by poor performance and struggle to reach goals.

How is performance measured?

Every role is different so the metrics used to measure employee performance will ultimately depend
on the type of business the company and employees operate in.

But in general, the main ways to gauge performance are:

Quality of work

Standard of work produced is a key indicator of performance. Are employees putting in maximum
effort to ensure high-quality results? Are performance objectives being met? Quality of work provides
the basis to analyse all other elements of their performance.

Speed and efficiency

Looking at how much employees accomplish in an average week, month or quarter, how does this
match up to your expectations? Are deadlines met, vastly improved on, or is time wasted? Are corners
being cut to produce work quickly? Efficiency is the result of maximum output at least cost so this is
vital to be aware of within your company.
Trust and consistency

Ask yourself if you trust your employees to do all their work to a high standard and deliver it on time.
Do they work independently or do you feel that you often have to step in? Do they consistently display
company values? Are they punctual and present to the expected standard? High-performing
employees can be trusted with autonomy and continue to produce strong results without much
supervision.

Keep these performance metrics in mind when conducting individual employee performance reviews.

How to evaluate employee performance

Performance reviews can be daunting, for both employees and managers – but they’re a necessary
starting point.

Without proper evaluation of an individual employee’s performance, you may waste valuable time and
effort implementing improvement plans that don’t begin to tackle the real problem. Take time during
this stage to ensure that you get a complete and well-rounded review of the individual's performance
to provide a solid foundation for improvement plans.

360-degree feedback

As the name suggests, this method takes a look at feedback, opinions and assessments from a circle
of people. This includes team members, supervisors and others, that the employee works within the
company. By going beyond what the direct manager sees, you’re instead shown a well-rounded view
of performance. Look for any similarities in the 360-degree feedback from the different areas, as this
will identify areas for further improvement.
 6. 360 degree feedback template + what you need to know

Objective-based performance

With this method, managers and employees work together to develop performance goals and set clear
deadlines for completion. When employees are involved in the process of creating their objectives,
they can see how their individual goals contribute to larger company goals. This creates more
understanding of what needs to be done and why it’s important.

This method also helps to increase engagement and motivation for the employee while making it very
easy to define success and failure for the employer.

A twist on the SWOT

Many will already be familiar with a SWOT analysis, but for performance evaluation, it’s best to swap
‘weakness’ with ‘areas for development’. Think of ‘opportunities’ as future opportunities for the
growth of your employees and their development within the company, too.

Starting with strengths allows managers, but also importantly, employees themselves to say what they
feel they are good at – helping to indicate where employees might like to develop further. This method
can also be a great way to find out if the employee feels that anything about the business is holding
them back, or if they feel they are lacking important resources, for example.

By mapping out these different areas of performance, both the manager and employee can work
together to create a plan for development.

Ranked performance on scales

A traditional method is using numbered scales, such as 1 to 5 or 1 to 10, to rank an employee’s

performance in specific areas. These scales are commonly used as they’re easy to understand for both
employees and managers, allow for easy comparison between team members, take little
administration and can be adapted to any business needs. Managers or HR can set the criteria to be
ranked – often including behaviours, aptitude or projects completed.

Self-evaluation

In this method, the employee judges their own performance against questions set by the employer.
This method is most useful when used alongside a verbal performance review. Although some
employees may find it difficult to know where they stand, when you can spot the difference between
what the employee thinks of their own performance, and what you think – you will find some
interesting points to discuss in the meeting. This method also helps employees to understand what
the performance review will look at, which can ease any anxieties.

Give employee feedback publically on a company-wide feed with Perkbox

How to improve staff performance and productivity

Next, you need to take the findings from the evaluation and create an improvement plan which works
to fill any opportunities or areas of development that have been presented.
7. 9 effective steps to improve employee performance

1. Investigate why the employee isn’t meeting expectations

The list of reasons why an employee isn’t performing as expected can be endless. If you don’t get to
the bottom of these, it’s almost impossible to take the right steps to improve it.

Start with an open and frank discussion and find out if the employee feels anything is affecting their
ability to perform. It could be that they feel the business is holding them back from reaching their full
potential, they could be lacking resources, don’t feel aligned with company goals or aren’t receiving
the proper guidance or training.

It’s also possible that factors affecting work may be unrelated to work itself. Personal reasons such as
an employee may be going through a time of poor mental wellbeing or experiencing issues in their
personal life can also impact performance.

This conversation can provide a basis for you to give more effective support.

2. Discuss both the highs and lows

Performance reviews shouldn’t just be focused on what’s not going well – even though improvement
is your end goal.

Focusing just on areas for improvement could knock your employees’ confidence and could lead to
resentment if they feel that their hard work in other areas is going unnoticed. Be sure to let your
employees know what they’re doing well and point out any stand-out moments in performance since
their last review, as well as the areas for development.

When you recognise their hard work, employees will know that they’re a valued member of the team
and will continue to put this effort into their work. Nevertheless, when you do discuss challenges and
areas for development, you have to be clear about any problems. The easy road would be to ‘soften
the blow’, but by not being clear on what the problem is exactly, you’ll make any problems worse in
the long term and the relationship could become more hostile.

Make sure that the employee leaves the conversation with a clear understanding of their strengths,
any areas for development and the steps that should be taken to get there, as this will minimise stress.
When delivering feedback you must always consider your employee's wellbeing. It's a good idea to
check you're not giving them too much to do. Or, that they feel out of their depth.

3. Provide consistent feedback as they progress

The most efficient way to improve employee performance is to provide regular feedback. By frequently
feeding back, you can help employees stay on track as they work to improve, rather than any issues
being saved for a more formal review. By then, the effects of poor performance may have been
detrimental to the team or business.

Frequent feedback helps employees to become more comfortable with receiving feedback in general.
It can also stop any negative connotations that people associate with receiving feedback. That’s
because frequent feedback is more likely to be a mix of positive and constructive comments, which
can help to keep employees engaged and encouraged rather than disheartened.
It's important for performance improvement that employees know where they stand and how they’re
progressing. They’ll then be more aware of how they’re doing and what steps need to be taken to
improve further. Putting this information into a performance improvement plan can help both of you.

4. Create a positive workplace culture

A positive workplace culture helps to pave the way for higher engagement, greater motivation and
better performance.

Review elements such as how aligned employees are with the company vision and mission, the
employee benefits offered and how the business operates – for example, the work environment and
elements like flexibility or holiday policies.

The workplace culture should give employees the stage to perform to the best of their abilities. A
strong, high-performance workplace culture allows employees to be focused and engaged without any
negativities distracting them and with the support of a positive workplace to drive them forward.

The most simple way to find out if your workplace culture is right for your employees is to ask them!
Use a confidential survey tool to ask your employees what they think about how your business
operates. As this is a confidential platform, your employees will feel free to be honest about anything
that they would like to see improved.

Not only can this help you to make changes to anything in the business that may be affecting
performance, you can also show your employees that you value them by making changes based on
their suggestions. This helps to make your people feel valued but also improve engagement levels.

5. Prioritise learning and development

Often, poor performance can be attributed to a skill or knowledge gap. By creating a focus on learning
and development, employees are reminded of best practice, not to mention gaining new skills while
taking valuable steps along their career path.

Work with employees to create individual L&D plans as, when you give employees a say in how and
what they learn, they stay engaged and it helps to bring extra motivation.

6. Set measurable and realistic goals

To help drive performance improvement, an employee needs to know what’s being measured. This
way they can monitor their own performance and, in turn, work to improve this. If goals aren’t
measurable, employees are left guessing about whether they’re improving and they might feel that
their results are subjective to their manager’s opinions.

Secondly, goals must also be realistic. Of course, you want to aim big, but anything that feels too
unachievable could overwhelm employees and add to burnout. On the other hand, goals that are too
easy will not provide any motivation. Be sure to find the right balance right.

You also need to ensure that it’s clear when you expect these goals to be completed by. Set two dates,
one to come back and see how things are progressing, and another for an expected completion date.
7. Regularly recognise great work and improvement

When you recognise and reward good work, you're letting employees know that their effort is noticed.
By creating a process which allows for regular recognition, you keep high performers engaged. Who
then can lead by example and help others.

Our Celebration hub is a great way to make reward and recognition routine as it facilitates peer-to-
peer recognition. In addition to making it easier for managers to send rewards to exceptional
employees. You can learn more about Celebration hub in this quick introductory video.

One error that leaders often make is spending too much time focusing on under-performance and not
on the wins their teams achieve every day. To keep your teams happy and productive you must show
appreciation and not consistently criticise their work.

Reward and recognise your employees no matter where they are with Perkbox

8. Maximise job satisfaction

Often, employees only want to put in what they’re getting out of a role. If they feel they aren't getting
paid enough, aren't getting the benefits that they could be getting elsewhere, or feel like their
workplace is lacking in resources - they may not try as hard to perform. Take a look at rival employers
to ensure you are offering the right benefits to keep your staff happy, engaged and productive. For
example, if rival employers are offering their London-based employees a London weighted wage, you
should look into doing the same.

9. Act when you don’t see improvement

If you’ve worked with your employee to set clear goals, expectations and a plan for improvement, and
they still aren’t working to make a change – you have to act on this.

If you don’t, employees will feel that it’s fine to underperform or have to be micromanaged. This is
also demotivating for those who are performing well. As if they feel that poor performance receives
no consequences, they’ll wonder why they are putting effort in.

Address the issue and lack of improvement with a written or verbal warning. By marking how
important this issue really is with a warning, it can help employees to take more notice as they are
shown the severity of the situation.

Even little things which are left to fester can become bigger issues and drive down performance. By
monitoring development and acting on this, you’ll maintain a productive and performance-oriented
workplace.

10. Motivate your employees with digital tools

Maintaining a steady level of job performance is challenging. Employees are people and they naturally
go through peaks and troughs of productivity. You can, however, minimise the impact of the dips by
keeping your teams motivated.

Using an employee experience platform is an effective way of keeping your teams happy and
productive. As it positively influences many employee experience touchpoints, such as recognition.
With Perkbox your employees can show each other appreciation with Celebration hub. We believe
every employee should be able to send personalised recognition no matter where they're based. This
is why our reward and recognition features can be used globally.
 7. Benchmarking and its Process

What Is Benchmarking?

Benchmarking is a process where you measure your company’s success against other similar
companies to discover if there is a gap in performance that can be closed by improving your
performance. Studying other companies can highlight what it takes to enhance your company’s
efficiency and become a bigger player in your industry.

The Benefits of Benchmarking

Competitive Analysis

By identifying areas you wish to improve on in your business and benchmarking your existing
performance against competitors, your business can strive to enhance your execution tenfold. Using
benchmarking this way has allowed businesses to gain strategic advantages over competitors and grow
industry averages.

Monitor Performance

Benchmarking involves looking at current trends in data and projecting future trends depending on
what you aim to achieve. In order to know you have been successful, benchmarking needs to be a
continuous process. Monitoring performance is an inherent characteristic of it.

Continuous Improvement

As well as monitor performance, continuous improvement is an essential attribute of benchmarking.

This is because the aim of benchmarking is to improve a certain element of a business. This
improvement should not merely be something that improves once and is forgotten, but something
that improves over time and is continuous.

Planning and Goal Setting

Once benchmarking has been carried out, goals and performance metrics are set in order to improve
performance. These goals are new, more competitive targets for a company but they must be
achievable. If goals are unrealistic to achieve teams become demotivated and goals are destined to
remain unfulfilled.

Encourage Ownership

When companies look at their processes and metrics they need to ask hard questions to get all the
answers they need. This includes talking to everyone in the business and understanding their roles. By
asking these questions and gaining a better understanding of everyone’s role, ownership for processes
and performance is encouraged. This means that employees will take pride in their job and the work
they do. This pride leads to better performance and higher-quality end results.

Understand Your Companies Advantages

Benchmarking identifies where your company is right now compared to where you want it to go. If you
are looking at improving any process in your business, benchmarking is a way of looking at how you
can excel and become more successful through outlining the steps needed to achieve your goal.
 8. Benchmarking Process

Planning

The first stage of benchmarking is the most important in the process. Planning includes highlighting
what you want to improve, who you will benchmark yourself against, and how you envisage success.
Only once this step has been completed will you be able to move onto the next step as the results of
planning will focus on the information you need to collect and what success will look like.

Collection of Information

After planning, benchmarking is about collecting information on your processes and how competitors
do them. If you are looking to improve your customer service satisfaction rating you should understand
the processes involved in the department, how calls and communication are dealt with, and also how
it differs from your competition. Maybe you can talk to someone in another call center, or call the
center directly to gain first-hand knowledge of their processes. At this point, it is important to gather
as much information as possible.

Analysis of Data

Once you feel you have all the information you can gather, you can start to plot it and begin to
understand the shortcomings you may have. It is important to remember at this point in the process
that no business is perfect and you must have an open mind to be able to analyze information
objectively. Once findings start to be uncovered you can draft a report and start discussing the next
steps to achieve better performance in this area.

Action

Presenting findings to a department is never an easy thing, especially when you are proposing changes.
Gathering and analyzing information is only worthwhile when you can implement changes and better
the company in the process. Gaining buy-in from a department can involve concessions so make sure
the MVP you present is accepted and will likely equate to the success highlighted in the planning stage.

Monitoring

No plan is ever complete without monitoring results to determine how successful the plan has been.
The implementation phase will have highlighted metrics and goals for success within a time frame so
monitoring these is the only way of knowing the efficacy of the changes. Monitoring can be over a
short or long period of time depending on the desired outcomes.

Benchmarking Examples

Process Benchmarking: This type of benchmarking helps you to better understand how your processes
compare to others in your industry. By looking at other companies in the industry you can improve
your processes to make them more efficient and cost-effective.

Strategic Benchmarking: Strategic benchmarking, similar to process benchmarking, is all about

improving parts of your company through looking at others in the industry. Strategic benchmarking
relates to strategy and how to create a strategy that will allow you to be more competitive in your area.
Performance Benchmarking: Performance benchmarking is the hardest process to improve as it
involves learning about competitor performance metrics and procedures, and also making changes to
processes within your business on the lower levels. Introducing new processes is a challenging action
in any business as it requires buy-in from many different levels in the company. Performance
benchmarking can uncover findings that might not be possible to implement in the business without
creating a long-term change plan. These can be also the most effective and successful changes for a
company.
 9. BUDGETARY & NON BUDGETARY CONTROL TECHNIQUES

BUDGETARY CONTROL TECHNIQUES:

The various types of budgets are as follows

i) Revenue and Expense Budgets:

➢ The most common budgets spell out plans for revenues and operating expenses in rupee
terms.

➢ The most basic of revenue budget is the sales budget which is a formal and detailed
expression of the sales forecast.

➢ The revenue from sales of products or services furnishes the principal income to pay
operating expenses and yield profits.

➢ Expense budgets may deal with individual items of expense.

(e.g) such as travel, data processing, entertainment, advertising, telephone, and insurance.

ii) Time, Space, Material, and Product Budgets:

➢ Many budgets are better expressed in quantities rather than in monetary terms.

e.g. direct-labor-hours, machine-hours, units of materials, square feet allocated, and units
produced.

➢ The Rupee cost would not accurately measure the resources used or the results intended.

iii) Capital Expenditure Budgets:

➢ Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade physical
assets such as property, industrial buildings or equipment.

➢ It is often used to undertake new projects or investments by the firm.

➢ These budgets require care because they give definite form to plans for spending the funds
of an enterprise.

➢ Since a business takes a long time to recover its investment in plant and equipment, (Payback
period or gestation period) capital expenditure budgets should usually be tied in with fairly
long-range planning.

iv) Cash Budgets:

➢ Cash budget is an estimation of the cash inflows and outflows for a business or individual for
a specific period of time.

➢ Cash budgets are often used to assess whether the entity has sufficient cash to fulfill regular
operations and/or whether too much cash is being left in unproductive capacities.

➢ The cash budget contains the following details:

 1. It ensures sufficient cash for business requirements.

2. If there is any shortage of cost it can be adjusted through overdraft.

v) Variable Budget:

➢ The variable budget is based on an analysis of expense items to determine how individual
costs should vary with volume of output.

(e.g) Among these are depreciation, property taxes and insurance, maintenance of plant
and equipment, and costs of keeping a minimum staff of supervisory and other key personnel.

➢ Costs that vary with volume of output range from those that are completely variable to those
that are only slightly variable.

➢ The task of variable budgeting involves selecting some unit of measure that reflects volume;
inspecting the various categories of costs; and, by statistical studies, methods of engineering
analyses, and other means, determining how these costs should vary with volume of
output.

vi) Zero Based Budget:

➢ Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified
for each new period. Zero-based budgeting starts from a "zero base" and every function
within an organization is analyzed for its needs and costs.

➢ The idea behind this technique is to divide enterprise programs into "packages" composed
of goals, activities, and needed resources and then to calculate costs for each package from
the ground up.

➢ By starting the budget of each package from base zero, budgeters calculate costs afresh for
each budget period; thus they avoid the common tendency in budgeting of looking only at
changes from a previous period.

ADVANTAGES

There are a number of advantages of budgetary control:

➢ Compels management to think about the future, which is probably the most important
feature of a budgetary planning and control system.

➢ Forces management to look ahead, to set out detailed plans for achieving the targets for
each department, operation and (ideally) each manager, to anticipate and give the
organization purpose and direction.

➢ Promotes coordination and communication.

➢ Clearly defines areas of responsibility.

➢ Requires managers of budget centre’s to be made responsible for the achievement of budget
targets for the operations under their personal control.

➢ Provides a basis for performance appraisal (variance analysis).

 ➢ A budget is basically a yardstick against which actual performance is measured and assessed.

➢ Control is provided by comparisons of actual results against budget plan.

➢ Departures from budget can then be investigated and the reasons for the differences can be
divided into controllable and non-controllable factors.

➢ Enables remedial action to be taken as variances emerge.

➢ Motivates employees by participating in the setting of budgets.

➢ Improves the allocation of scarce resources.

➢ Economises management time by using the management by exception principle.

Problems in budgeting

Whilst budgets may be an essential part of any marketing activity they do have a number
of disadvantages, particularly in perception terms.:-

➢ Budgets can be seen as pressure devices imposed by management, thus resulting in:

➢ bad labour relations

➢ inaccurate record-keeping.

➢ Departmental conflict arises due to:

➢ disputes over resource allocation

➢ departments blaming each other if targets are not attained.

➢ It is difficult to reconcile personal/individual and corporate goals.

➢ Waste may arise as managers adopt the view.

➢ Responsibility versus controlling,

i.e. some costs are under the influence of more than one person,

e.g. power costs.

➢ Managers may overestimate costs so that they will not be blamed in the future should they
overspend.
 10. NON-BUDGETARY CONTROL TECHNIQUES

➢ There are, of course, many traditional control devices not connected with budgets, although
some may be related to, and used with, budgetary controls.

➢ Among the most important of these are: statistical data, special reports and analysis,
analysis of break- even points, the operational audit, and the personal observation.

i) Statistical data:

➢ For effective management control the various statistical data and reports can be used in
every organization.

➢ Tables , charts, graphs are examples of statistical data.

➢ Statistical data may be also in the form off ratios, diagrams, average, percentages.

➢ The prepared report are submitted to the supervisors and they can analyze to control
process.

ii) Break- even point analysis:

➢ An interesting control device is the break even chart.

➢ This chart depicts the relationship of sales and expenses in such a way as to show at what
volume revenues exactly cover expenses.

iii) Operational audit:

➢ Another effective tool of managerial control is the internal audit

➢ Internal audits another name is called operational audit.

➢ Operational auditing, in its broadest sense, is the regular and independent appraisal, by a
staff of internal auditors of the accounting, financial, and other operations of a business.

iv) Personal observation:

➢ It is a direct tool of control.

➢ It is time consuming process.

➢ Personal observation helps the managers to measure their subordinates characteristics and
attitude, skill to their job.

➢ This method helps to increase the sincerity of the workers due to observation by their
supervisors.

v) PERT AND CPM:

PERT

➢ The Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a
is a method to analyze the involved tasks in completing a given project, especially the time
 needed to complete each task, and identifying the minimum time needed to complete the
total project.

➢ These tools are widely being used in construction industry, planning and launching a new
projects, scheduling ship construction etc.

➢ It ensures improved management of resources by facilitating better decision making.

➢ It aims to have future oriented control mechanism for the organization.

CPM (Critical Path Method):

➢ The Critical Path Method (CPM) is one of several related techniques for doing project
planning.

➢ CPM is for projects that are made up of a number of individual "activities.”

➢ Longest sequence of activities in a project plan which must be completed on time for
the project to complete on due date.

➢ An activity on the critical path cannot be started until its predecessor activity is complete; if
it is delayed for a day, the entire project will be delayed for a day unless the activity following
the delayed activity is completed a day earlier.

vi) GANTT CHART:

➢ A Gantt chart is a type of bar chart that illustrates a project schedule.

➢ Gantt charts illustrate the start and finish dates of the terminal elements and summary
elements of a project.

➢ Terminal elements and summary elements comprise the work breakdown structure of the
project.

➢ Some Gantt charts also show the dependency (i.e., precedence network) relationships
between activities.