Key Performance indicators | VCE Business Management

hi everyone it's John Mitchell and in today's video we're going to look at what's a really critical aspect of business management which is key performance indicators of what you may see as kpis so kpis play a really significant role engaging a business's performance because they offer metrics or a Criterion that managers can use to evaluate the businesses ability to achieve their objectives now remember we've spent lots of time throughout this course discussing a whole range of strategies that managers can Implement to help achieve business objectives and it's the kpis that serve as that measurable Benchmark that really sheds light on the effectiveness of those strategies so kpis can help measure the effectiveness and the efficiency of different areas of the business and we've covered those terms before but just as a refresher Effectiveness is the businesses ability to achieve its objectives while efficiency is the business's ability to utilize their resources well and so by gathering and analyzing that kpi data managers are able to make informed decisions now it's not just about collecting data kpis do provide insights into the businesses overall performance so that managers can measure the success of Prior decisions that they've made as well as help them make informed decisions as they navigate the future for the business now in our study design there's 10 kpis listed and we're going to examine each one of those in this video so our first kpi is percentage of market share which is a measure of the proportion of sales that a business has compared to the total sales in the market and you'll often see that expressed as a percentage so I've got an example here of the supermarkets market share or Australian supermarkets market share so the total sales across Australia in great the grocery industry Woolworths has 37.1 percent of the total sales Kohl's has 27.9 and Ellie has 9.5 percent of those total sales so that means that out of every 100 that is spent on groceries throughout Australia 37.1 dollars would go to Woolworths 27.9 to Coles and 9.5 would go to ALDI so the higher market share is it often suggests a strong competitive position for a business and that could be because they've got compelling product offers or it could be that they've got successful marketing strategies or campaigns running whatever it is it's providing a level of confidence or demonstrating a level of competition and so the percentage can and likely will change over time because the market changes as well as each of the business is implementing different strategies throughout their journey to try and gain a competitive advantage next we have net profit so net profit is measuring the amount of money remaining after all expenses have been deducted from the revenue that's been earned from the business so it's a really crucial kpi because it indicates the financial health of the business now for example if we look at a supermarket they bring in Revenue through sales and so the more sales they bring in the more money that is flowing into the business now let's imagine that this supermarket has brought in forty thousand dollars in revenue for the month now before we calculate the profit we need to consider the expenses that the business has in actually generating those sales so the supermarket will have expenses for the cost of the goods that they are selling it could be that they rent their wage costs as well as a whole range of other costs that they would have now let's say that for this example for the month that the supermarket has 35 000 in expenses now that money that is leaving the business and so what is remaining is net profit therefore once the expenses have actually been deducted from the revenue the supermarket is left with a five thousand dollar net profit for the month now a business with a consistently increasing net profit is likely to be managing its cost efficiently as well as successfully driving Revenue through Revenue growth through sales and on the other hand a falling net profit May signal issues with costs prices that the business has it could be that their sales volume is dropping or it could be a whole combination of those issues rate of productivity growth is the kpi that assesses how efficiently a business is actually converting its inputs things like labor materials Machinery equipment into the final good or service which we know is called an output and so it measures the growth rate of the efficiency of the business over time and so a higher productivity growth rate that implies that a business is continually improving its processes because it's able to use fewer resources to produce its outputs and that can result in lower costs as well as faster production times number of sales is another kpi where the business is tracking the total goods or services that they've sold within a specified period of time such as daily weekly quarterly or even annually and so while it may seem very straightforward it can provide valuable insights into sales Trends across different times of the year could be the popularity of specific products that it's showing or it could even be the impact of a marketing campaign that's being implemented so while businesses want their sales to be increasing it's important that these kpis analyze with a combination of other kpis because High sales does not always mean High profits especially if the costs of the business are not controlled so a business could be releasing a really expensive marketing campaign now while the sales are increasing doesn't necessarily mean that the business is making profit if the sales the increase in sales has not offset the increasing costs of the marketing campaign next we have the right of Staff absenteeism which is looking at the number of days employees miss work over a particular period of time when they are expected to be there so while all employees will need time off to recover from illness from time to time high rates or increasing rates of absenteeism can signal potential issues with employee morale or job satisfaction because the employees are not wanting to be at work and so in response the business may be looking to make improvements to the workplace environment to try and attract their employees or make the environment far more attractive for employees and therefore they will be taking fewer days off another kpi that can identify issues with employee morale is the level of Staff turnover so the level of Staff turnover measures how often employees leave the business and need to be replaced so it's not just them leaving the business it's the rate in which they're leaving and need to be replaced so higher Staff turnover can be really costly to a business because there's expenses associated with the hiring and training of your new employees and also as employees leaving in a rapid rate it can also impact the productivity and the morale amongst the remaining staff so high levels of Staff turnover can indicate issues with the job satisfaction of the employees it could be around their compensation that they're not happy with their wage it could be that there's issues with the management style being used or even just overall the business culture so it's important that businesses look at the reasons why the employees are leaving but the level of Staff turnover can indicate that there's a an issue around staff satisfaction and employee morale next we have the level of wastage which is measuring the amount of resources that are discarded or not used effectively during the production process so reducing wastage can decrease cost because we need to remember that every resource that is used throughout a business costs the business money and so if part of those resources are going to waste then that is money that is going away so reducing wastage can decrease costs it can improve efficiency and it can't even lessen the business's environmental impact and so having a high level of wastage can cause managers to initiate change to try and improve things like their process efficiency or investing in better technology or even implementing Quality Control Systems to try and reduce the wastage that they're producing number of customer complaints is another kpi and it's measuring the amount of people that are dissatisfied with the business in some respect and have notified the business of their dissatisfaction so that dissatisfaction could be around product quality poor service delayed delivery or anything else that the in the customer is unhappy about and so it's important that the kpis are measured because it can help identify recurring problems in the processes or the products that need to be addressed in the business it can also help provide insights into customer expectations and experiences and they may change over time as the market changes and by tracking customer complaints it can enable the business to stay on top of those and actually Implement changes to be more relevant to their customers and also decreasing Trend in customer complaints it can be an indication of improved quality or even Service delivery so it can be important to track both ways that where the customer complaints are increasing or decreasing and it's important that businesses not only focus on reducing the number of customer complaints but they also focus on how to hand and although customer complaints because effective complaint management can help resolve the customer's issues really promptly and courteously and ensure that the customer is satisfied with the solution number of website hits gauges the number of times individuals are visiting a business's website and so a high number of website hits can often indicate successful digital marketing efforts popular products or service that the business has or even effective search engine optimization and it can also provide insights into customer behaviors on their website as well as their preferences and potential areas for improvement on the website and Google analytics or stack counter are popular tools that businesses can use to measure their website traffic and their consumer behavior on their website as well as their behavior in getting to their website and that can give the business important information about what's being effective on their website and areas they need to improve and finally we have the number of workplace accidents which is measuring the number of unplanned incidents resulting in personal injury or property damage and a higher number of accidents it can signal problems with the businesses safety protocols or procedures insufficient employee training or even a need to improve the equipment in the business and so businesses are strong allowing to keep the number low the number of accidents low or even to zero because all employees have the right to be safe at work and workplace accidents can also initiate significant changes within a business so that its members actually remain safe while at work so just to recap these kpis are providing a comprehensive overview of a business's performance and help managers make informed decisions for the future as well as analyze the decisions and the strategies that have been made and implemented in the past now each kpi gives a different view into the business's overall health and performance and they collectively provide a really comprehensive look into different aspects of the business and it's crucial because it helps managers make informed decisions set future objectives and decide on future strategies that they're going to implement for the business to help them achieve the business objectives and they can pinpoint areas that need Improvement and also recognize and reinforce the areas where the business is actually performing well so we need to remember that kpis are not just about collection of data they are about understanding and improving business performance so the next time you look at these kpis remember that you're not just looking at numbers but at the story of the businesses Journey towards its objectives so that brings us to the end of this video can't wait to see you in the next video where we're going to continue through this outcome and looking at reviewing performance and looking at the need for change but until then just remember that for questions activities and helping your vce journey then come on over to teachingbubble.com

Channel: VCEBizMan

Views: 2,417

Keywords: VCE Business Management, Business Management, Key Performance Indicators, KPI, TeachingBubble, Teaching Bubble

Id: a43y3s5Hp-c

Length: 11min 4sec (664 seconds)

Published: Mon Jul 03 2023