CBS Performance Measurement & KPIs 3 — Questions and Answers
Question 1: A retail chain tracks 'average transaction value' as a KPI. This metric is BEST categorized as:
- A process KPI
- An output KPI (Correct answer)
- An input KPI
- A capacity KPI
Correct answer: An output KPI
Average transaction value measures the result (output) of sales interactions rather than the activities or resources that drive them.
Question 2: Which scenario represents a risk of 'gaming' a KPI system?
- A sales team increases pipeline volume by adding unqualified leads to hit their activity metric (Correct answer)
- A finance team reduces expenses to meet its cost-reduction target
- A product team accelerates feature releases to improve delivery speed
- An HR team increases hiring to meet headcount growth goals
Correct answer: A sales team increases pipeline volume by adding unqualified leads to hit their activity metric
Gaming occurs when employees manipulate inputs or activities to hit a metric without creating real value.
Question 3: What is the PRIMARY purpose of a performance dashboard in strategic management?
- To replace the need for executive decision-making
- To provide real-time or near-real-time visibility into key metrics for informed decisions (Correct answer)
- To automate the correction of underperforming business units
- To standardize reporting formats across all company documents
Correct answer: To provide real-time or near-real-time visibility into key metrics for informed decisions
Dashboards aggregate and visualize KPI data to enable rapid, data-driven strategic decisions.
Question 4: An airline measures on-time departure rate. This KPI would be classified under which Balanced Scorecard perspective?
- Financial
- Customer
- Internal Business Process (Correct answer)
- Learning & Growth
Correct answer: Internal Business Process
On-time departure rate measures operational execution quality, which falls under the Internal Business Process perspective.
Question 5: When setting KPI targets, what does 'stretch target' mean?
- A target deliberately set below current performance to ensure consistent achievement
- An ambitious goal that requires significant improvement and innovation to reach (Correct answer)
- A target that adjusts automatically based on market fluctuations
- A rolling average calculated over the past 12 months
Correct answer: An ambitious goal that requires significant improvement and innovation to reach
Stretch targets push teams beyond comfortable levels to drive significant performance improvements.
Question 6: Which formula correctly calculates Net Promoter Score (NPS)?
- (Promoters + Passives) / Total Respondents × 100
- % Promoters − % Detractors (Correct answer)
- % Satisfied Customers / % Total Customers
- Total Positive Reviews / Total Reviews × 100
Correct answer: % Promoters − % Detractors
NPS equals the percentage of Promoters (scores 9–10) minus the percentage of Detractors (scores 0–6).
Question 7: A strategist recommends reducing the number of KPIs tracked from 40 to 8. The MAIN benefit of this change is:
- Reducing the cost of data collection systems
- Improving focus by concentrating attention on what matters most (Correct answer)
- Eliminating accountability for non-tracked areas
- Simplifying the annual budgeting process
Correct answer: Improving focus by concentrating attention on what matters most
Fewer, well-chosen KPIs drive focused action, whereas too many metrics dilute attention and obscure priorities.
CBS Performance Measurement & KPIs 3
A retail chain tracks 'average transaction value' as a KPI.
This metric is BEST categorized as: