Linking Strategy to KPIs
If the strategy is to “Enhance customer loyalty,” which KPI is most relevant?
What is percentage of repeat customers?
In a strategy map, which dimension is typically shown at the bottom?
What is the learning & growth dimension?
Type of analysis that evaluates how changes in the amounts of various inputs affect related outputs (or vice versa).
It costs $8 in variable cost and $2 in fixed cost to make a part in-house. Buying it costs $9. Should the company make or buy and what are the relevant costs?
What is make (relevant cost $8 make vs $9 buy)?
Doctors : Medicine prescriptions; Accountants : ____________ ____________
What is prescriptive analytics?
The strategy is to “Improve employee skills to support innovation.” Which KPI best fits?
What is average hours of employee training completed?
A cause-and-effect link shows how improving employee training impacts customer satisfaction. Which two dimensions are being connected?
What are learning & growth and customer?
The CFO wants to see how profit changes if raw material costs increase by 10%. Which tool should be used?
What is sensitivity analysis?
Making a unit costs $12 variable and $5 fixed. Buying it costs $14. If fixed costs can’t be avoided, what’s the cheaper option and what are the relevant costs?
What is buy (relevant cost $12 make vs $14 buy, but unavoidable fixed makes total $17 make)?
Decision outcomes that are difficult to measure.
What are qualitative factors?
If the strategy is “Reduce waste in production processes,” which KPI is most directly linked?
What is scrap rate (or % of defective units)?
True or False: Strategy maps cannot be used to incorporate ESG objectives.
What is False?
The marketing director wants to examine outcomes if sales are 10%, 20%, or 30% higher than expected. Which tool is best?
What is scenario analysis?
Making costs $15 variable + $5 fixed. Buying is $18. If 40% of fixed costs are avoidable, should the company make or buy and what are the relevant costs?
What is make (relevant cost = $15 + $2 avoidable fixed [.4*$5] = $17 make < $18 buy)?
The original, historical cost of a piece of equipment is this type of cost.
What is sunk cost?
The strategy is “Maximize shareholder wealth.” Which KPI best aligns?
What is return on equity (ROE)?
A company’s strategy map shows “Increase employee engagement → Improve service quality → Increase customer retention → Grow revenue.” What type of relationship is this?
What is a causal chain?
A production manager needs to allocate limited machine hours across products to maximize profit. Which tool is best?
What is optimization (linear programming)?
Variable cost is $20, fixed is $6. Buying costs $24. If all fixed costs are avoidable, what should the company do and what are the relevant costs?
What is buy (relevant cost $20 + $6 = $26 make vs $24 buy)?
Major innovations that significantly alter the way things are done.
What are disruptive technologies?
A hospital sets a strategy to “Deliver superior patient outcomes.” Which KPI aligns best?
What is patient recovery rate or readmission rate?
Fill in the missing dimension: Learning & Growth → Internal Business Processes → ______ → Financial.
What is Customer?
Management wants to use different metrics to evaluate the return on a potentially large investment. Which tool should they use?
What is capital budgeting?
It costs $22 variable + $8 fixed to make. Buying costs $25. If 50% of fixed costs are avoidable and machine time could be used to earn $5 per unit in contribution margin elsewhere, what’s the best option and what are the relevant costs?
What is buy ($22 + $4 avoidable fixed + $5 opportunity cost = $31 make > $25 buy)?
A manager wants to find the sales volume required to break even. Which tool is best?
What is goal-seek analysis?