Performance Measurement & KPIs Flashcards

What distinguishes a 'vanity metric' from a strategically valuable KPI?

Answer: Vanity metrics look impressive but do not correlate with strategic outcomes

Vanity metrics like total page views or social media followers can grow without driving business results.

A company sets a KPI of reducing customer churn rate from 12% to 8% annually. Which measurement approach BEST tracks progress?

Answer: Calculate the percentage of customers lost each period relative to the starting customer base

Churn rate is precisely measured by dividing customers lost in a period by the total at the start of that period.

In performance measurement, what does 'data normalization' help achieve?

Answer: It adjusts raw data to allow fair comparisons across different scales or time periods

Normalization removes scale distortions, enabling meaningful comparisons across business units, regions, or time periods.

A CEO wants a single metric that summarizes overall company health. Which approach BEST meets this need?

Answer: Develop a composite index weighting multiple KPIs by strategic importance

A weighted composite index synthesizes multiple dimensions of performance into a single actionable summary metric.

When a KPI shows consistent achievement quarter after quarter, a business strategist should FIRST consider:

Answer: Whether the target is too easy and should be raised

Consistently met targets may indicate that the bar is not challenging enough to drive continued improvement.

The 'lead time' KPI in a supply chain context measures:

Answer: The time from order placement to delivery to the customer

Lead time tracks the total elapsed time from when a customer order is placed until the product is delivered.

Which of the following represents a QUALITATIVE performance indicator?

Answer: Employee engagement narrative from focus groups

Qualitative indicators capture non-numerical insights such as themes, perceptions, or narratives from focus groups.