Measures Catalogue

The Catalogue of Performance Measures
Accompanying the book 'The Performance Prism - The Scorecard for Managing and
Measuring Stakeholder Relationships'
The Catalogue of Performance Measures contains over 200 different measures applicable
to all parts of an organisation.
They have been classified according to which facet of the Performance Prism they apply to.
Entries for individual measures can be found by following the Performance Prism facets in
the left hand column. Alternatively there is a search facility, enabling navigation of the
catalogue by keyword search. Refer to the '
How to use the catalogue' section for more information.
The catalogue was created by the Centre for Business Performance, Cranfield School of
Management in conjunction with the Centre for Process Excellence, Accenture (formerly
Andersen Consulting).
Purchase of the book entitles the purchaser to a single user licence for the Catalogue of
Performance Measures.
To register for information on future updates of the catalogue, to obtain further licences and
if you have any queries contact Dr Mike Kennerley at the Centre for Business Performance
(m.kennerley@cranfield.ac.uk).
Telephone: +44 1234 754919
Fax: +44 1234 757409
http://www.cranfield.ac.co.uk/som/cbp
The authors of the catalogue are grateful for the financial support of the Engineering and
Physical Sciences Research Council (EPSRC) (under grant number GR/K88637) and
Accenture (formerly Andersen Consulting).
Copyright Centre for Business Performance, 2000

All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic, mechanical, photocopying,
recording or otherwise, without the prior permission of the publisher and copyright owner.
The right of Professor Andy Neely and Dr Mike Kennerley to be identified as authors of this
work has been asserted by them in accordance with the Copyright, Designs and Patents
Act 1998.
Any person who infringes the above in relation to this publication may be liable to criminal
prosecution and civil claims for damages.
How to use the Catalogue of Performance

Measures
Identifying which measures to implement
The catalogue does not provide a checklist of measures that an organisation should implement.
Numerous process and frameworks have been proposed that can be used to identify the performance
measures that are appropriate to an organisation. The catalogue should be used in conjunction with
such processes and frameworks to help define how a measure should be calculated. Although it is
structured around the Performance Prism framework, the catalogue can be used to define measures
even if other measurement frameworks, such as the Balanced Scorecard, are being used.
Finding the appropriate measures in the catalogue
There are two ways to navigate the catalogue (i) using the Performance Prism structure and (ii) using
the search facility.
(i) The Performance Prism structure
The catalogue is structured around the Performance Prism. The Prism takes a Stakeholder-centric
view of performance measurement. It reflects the need to not only measure Stakeholder Satisfaction
but also Stakeholders Contribution to an organisations wants and needs.
The catalogue contains measures of each of the following distinct, but logically interlinked,
dimensions of performance:
Stakeholder Satisfaction
who are our stakeholders and what do they want and need?
Strategies
what strategies do we have to put in place to satisfy the wants and needs of these key
stakeholders?
Processes
what critical processes do we require if we are to execute these strategies?
Capabilities
what capabilities do we need to operate and enhance these processes?
Stakeholder Contributions
what contributions do we require from our stakeholders if we are to maintain and

develop these capabilities?
Each of the facets of the Performance Prism is divided into sub facets that provide further
categorisation of performance measures:
Stakeholder
Satisfaction
Customer Satisfaction
Employee Satisfaction
Investor Satisfaction
Regulator and Community Satisfaction
Supplier Satisfaction
Strategies
Corporate Strategy
Business Unit Strategy
Brand Product & Service Strategy
Operating Strategy
Processes
Develop Products and Services

Generate Demands
Fulfil Demand
Plan and Manage Enterprise (Plan
Enterprise, Plan & Manage Financial
Operations, Plan & Manage Operations,
Plan & Manage Human Resources, Plan
& Manage Stakeholder Relations).
Capabilities
Infrastructure
People
Practices
Technology
Stakeholder
Contribution
Customer Contribution
Employee Contribution
Investor Contribution
Regulator and Community Contribution
Supplier Contribution
Those of you who are seeking measures of Customer Satisfaction double click on
Stakeholder Satisfaction in the left hand column, then double click on Customer Satisfaction.
This will reveal a list of Customer Satisfaction measures. Clicking on a measure will reveal
detailed information regarding why and how to design that measure.
(ii) The search facility
Regardless of the framework or process used to identify the measures to be used by the
organisation, the search facility can be used to identify measures within the catalogue. To
use the search facility, select the search tab at the top of the left hand column. Enter a key
word and click on 'list topics' to produce a list of the entries that contain these terms.
For example entering the search term product development will identify all of the entries in
the measure that contain the term product and the term development. Entering the term in
quotation marks ("product development") will identify all entries in the catalogue that contain
the entire term.
BIM (B.I. Methodology)

- A repeatable process for achieving and sustaining the changes required to realise
business integration. This methodology contains process descriptions in the form of Phases,
Stages, Tasks and Task Packages.
Capabilities
- In the Performance Prism the capabilities of an organisation are regarded as its
competencies what it is capable of achieving. They are therefore determined by the
resources available.
Catalogue
(see Measures Catalogue)
Formula
- The defined means of measurement. For each measure in the Measures Catalogue there
is at least one suggested metric for the measure. For example the metric for Dividend
Performance may be "% increase in dividends per share per year".
Measure
- The means for assessing the performance of an organisation by using quantitative
features.
Measures Catalogue
- A comprehensive list of Measures applicable to most industries, each with a definition, a
formula and a synopsis. It underlies the Navigator and can be referenced at most stages of
the application.
Measures Tree
- A graphical representation of the key linkages between the measures of an organisation.
Each facet and the stakeholders are linked in the following order: Stakeholders SWANs
Strategies Processes Capabilities OWANs. Each facet component is listed with its
measure (red text) and its priority rating. Links between the facet components are shown.
Metric
- (see Formula)
OWAN
- Organisation Wants and Needs, termed as Stakeholder Contribution on the Performance
Prism are those things, both implicitly and explicitly, required by the organisation from the
stakeholders. For example an organisation may expect access to capital and credit from its
investor stakeholders, whereas product quality may be expected from the suppliers.
Performance Prism
- An advanced measurement model and framework to aid the identification and selection of
appropriate measures for any business or organisation. Each facet of the Prism represents
a different feature of an organisation: Stakeholder Satisfaction, Strategies, Processes,
Capabilities and Stakeholder Contribution.
Prism
- (see Performance Prism)
Processes
- Processes are methods or systems employed in an organisation. These are usually
dynamic in their nature, taking place over a period of time and involve an input and an
output. They can also be cross functional.
Regulators
- One of the five stakeholders, they include government and non-governmental
organisations, the legal system and the local community.
Sponsor
- Key individual or group within the organisation that is committed to achieving the
introduction of the performance measurement system and is the key contact between the
consultant and the organisation. It is usual for the sponsor to be a senior executive within
the organisation. They need to be in a position to make decisions and co-erse other
members within the organisation to buy into the strategy.
Sponsor Goal
- The overriding aim or objective of the project to which the measure design process is
being applied.
Stakeholders
- Those to whom the organisation is accountable to or responsible for. The Performance
Prism defines five types of stakeholders: Investors, Customers, Employees, Regulators and
Suppliers. The Navigator allows further specification of stakeholders within these
categories.
Strategies
- The definition of an organization's direction and intent. Strategies exist at many levels
within an organization, Corporate, Business Unit, Brands/Products/Services, and Operating.
SWAN
- Stakeholder Wants and Needs, termed as Stakeholder Satisfaction in the Performance
Prism are those things, both implicitly and explicitly, expected from the organisation by the
stakeholders. For example Investor Stakeholders may expect dividends or payment of loan
interest, whereas Employees may want a comparatively high salary.
Customer Satisfaction
Why should we measure it?
Measurement of customer satisfaction has received considerable interest in recent years. It is an
important measure as customers must be satisfied if they are to repurchase or recommend the
organisation to others.
RESENT RESEARCH - A survey by Xerox found that very satisfied customers are six times more
likely to repurchase product within the next 18 months than customer who are simply satisfied. This
suggests the importance of distinguishing between customers who are satisfied and those who are
very satisfied.
The satisfaction of customers is not an end in itself, for the next issues to consider are customer
attitudes and behaviour. Are customers, for example, sufficiently satisfied to repurchase the same
product or service or will they try a competitor's product or service next time? Are customers
sufficiently satisfied to recommend the organisation or its products and services to friends and
colleagues? Are customers sufficiently satisfied that they would be willing to pay a price premium for
the product or service? These are key considerations when designing the customer satisfaction survey
tool. Questions should be included to collect data on such attitudes and behaviours. Ultimately
organisations should use the measurement of customer satisfaction to identify the drivers of customer
satisfaction and loyalty so that they can develop long-term managed relationships with their
customers.
An important point to note is that perceptions of performance are often more important than the
company's actual performance in determining customer satisfaction. Even though the company's
performance is outstanding, if customers perceive it to be poor or no better than the competition their
satisfaction may well be low. If there is a shortfall between perceived performance and actual
performance, the virtues of performance must be emphasised.
It is also important to consider the importance that customers place on the different dimensions of
performance. It is no good being great at things that do not matter to the customers. The organisation
has to excel at the things that customers care about most.
Although there are surrogate measures of customer satisfaction contained within the catalogue, the
best way of assessing customer satisfaction is by asking customers. This is usually done through a
customer satisfaction survey.
How do we measure it?
Customer satisfaction survey
What do we need to consider when defining the measure?
Customers - those individuals or groups who purchase or consume an organisation's products and/or
services.
There are three main types of customer for the firm to address when measuring satisfaction:
consumers/end users, distribution chain customers, and downstream operations within the
organisation. Each organisation must define the 'customer' that is most important or appropriate to
them. An organisation may use the measure for more than one of the above groups and for different
market segments or products. Greater emphasis on the measurement of satisfaction, and improvement
action, should be placed on the most profitable customers or those who are considered most
important (e.g. for strategic reasons). Two other classes of customers should also be considered if
possible - the customers of the competition (potential customers) and former customers that have left
and are now buying from the competition (past customers). Each group can provide valuable insights
for improvement and potential customer acquisition.
When the customer is an external organisation it is important to identify who the individual customers
are within the organisation. People at different levels of the customer organisation will have different
requirements of the product or service offered. All of these should be considered as they may all
contribute to customer loyalty and willingness to recommend the organisation or its products and
services to others.
Customer satisfaction surveys often provide a numerical value for the level of customer satisfaction, a
percentage for example. Such index numbers indicate trends in satisfaction and allow correlations to
be identified in order to assess the drivers and consequences of customer satisfaction. Considerable
value in assessing customer satisfaction results can be gained from the identification of the drivers of
satisfaction. The customer satisfaction survey should assess the customers' perceptions of the
company's performance in terms of the various drivers of satisfaction and loyalty. Where possible the
drivers of customer satisfaction, which customers consider to be most important, should be converted
into operational measures within the organisation. Typical drivers include product or service cost,
product or service quality, after sales service, value for money, price vs. competition, responsiveness
and on time delivery performance. Measures such as recommendations to others and repeat purchases
also relate to the effect of customer satisfaction.
Analysis of customer satisfaction data should include identification of the drivers of customer
satisfaction and loyalty, identification of the dimensions of performance on which customers place
most importance and satisfaction and loyalty of different types or categories of customer.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Customer Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Customer Retention / Turnover / Loyalty

Customer Retention is an important indicator of customer satisfaction.
It focuses on the retention of customers, implying greater customer satisfaction with product and
service offered, and hence a longer term relationship with customers. As such, it is related to the
measure of 'length of relationship / contract with customer'.
Introduction of this measure is most appropriate where increased customer loyalty is a competitive
priority.
Customer loyalty is an important contribution that customers can make to the organisation as it ensures
repeat purchases, increasing future sales turnover. Loyalty to the company also implies that the
customer will buy products or services which are complementary to those originally purchased. This
will further enhance sales turnover.
Although they can be measured in the same way, customer retention and customer loyalty are
conceptually slightly different. Loyalty implies that given the choice, availability and full knowledge
of competitive products, customers will still purchase from the organisation to which they are loyal.
The measure of 'Customer Recommendations' will also be a measure of customer loyalty and should
be used with this measure.
RECENT RESEARCH
Indicates that companies can boost profits by almost 100% by retaining just 5% more of their
customers. Similarly, research reported by Royal Mail indicates that it costs 6 times more to get a
new customer than to maintain an existing one.
CAUTION
There may be a risk of exposure to changing customer preferences if reliance on the existing customer
base is too high.
% of existing customers that return to purchase from the company in a given period
% of orders / sales turnover which are from existing customer
% of customers with active accounts after a given time period
Orders - will include orders for existing and new products.
Existing customers - customers who have previously ordered from the company within a specified
time period. These customers may be target customers for repeat sales of the same product or new
sales of different, possibly complementary products. Profitable customers are those that should be
targeted, hence should be analysed separately. It is essential that the most profitable customers are
targeted. As a result it is important to consider customer profitability and customer retention together.
Customers - might include the immediate / direct customer and the ultimate consumer of the product.
Active accounts - are customer accounts where customers continue to make orders for products and
services or where contracts have not expired.
Analysis of the data from this measure can separate repeat purchases of the same product from those
who purchase different or complementary products. Organisations should focus this measure on
products and services which compete in particularly competitive markets to assess whether
customers can be retained even though there are many competitive alternatives.
Formula 3 focuses on the rate at which customers are lost to the business. This measure is most
appropriate where contracts or accounts with customers are maintained over a period of time. The
mobile phone market provides an illustrative example, customer retention is an important measure to
identify how many customers are leaving a particular network to join another.
Expected repeat order time scales will be dependent on the characteristics of the industry, including
the life cycle of the product in question, frequency with which new products or product enhancements
are brought to market, etc.
The time period covered by the measure is dependant on the nature of the industry or market.
Selection of the appropriate time period is essential if the measure is to be effective. The time period
must reflect customers' purchase decisions and be sensitive to competitors' promotions. If there are
minimum contract periods or periods covered by incentives and promotions then the time period
should assess the customer retention / loyalty after such periods have elapsed.
Data should be available within the sales order processing system and should allow comparison of
sales to new and existing customers.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Customer Contribution
Prism Facet 2:
Prism Facet 3:
Processes Sub-Facet 3: Generate Demand
Customer Response Time / Delivery Lead Time

Delivery lead time measures how quickly an organisation can deliver the required finished product or
service to the customer.
Where delivery lead time is a competitive priority, performance must be compared to that of
competitors as it will be a key factor affecting a customer's purchase decision and a significant
determinant of ultimate satisfaction.
The nature of this measure will differ considerably depending on the characteristic of the company
and market. In a 'make to order' environment the measure will include design of products and
services. In 'assemble to order' environments it will include demand forecast accuracy and
management of appropriate inventory levels.
Management of customers' perceptions of performance are critical if satisfaction is to be improved.
Even if lead times are shorter than all of the competition, it means nothing if current or potential
customers do not realise that is the case.
This measure should be used in conjunction with the measure of 'on time delivery' to measure whether
quoted due dates are met. It is possible to win orders by quoting unrealistically short lead times,
however this can have serious repercussions if the customer values on time delivery.
elapsed time from receipt of customer order to product / service delivery
Delivery lead time - is the time from receipt of an order from the customer to the time that the product
is delivered or is available for collection.
Orders - are the unit of transaction with the customer. This may include orders, financial transactions,
etc.
When using this measure it is important to define at what point an order is considered to have been
placed, as this marks the beginning of the measurement process. An order might be considered to have
been placed when an enquiry is made, when a request for a quote is submitted, when an order is
placed or when the customer confirms the order. Similarly it is important to define the point at which
delivery is considered to have been made, be it when delivery or installation is completed, when the
product being delivered is fully operational (might include training of users), when all services have
been provided or when payment is made. The way in which deliveries are confirmed must be
considered and agreed. Is the product delivered when it is despatched, when the customer signs for it,
or is confirmation of receipt by phone call required? Consideration may have to be given to the
reliability of external companies to whom delivery is contracted. In all cases it is important to
consider the lead time that the customer considers, as well as measuring the lead time of internal
operations.
The sales order processing system should provide the data to calculate this measure. The system must
record the date and time of customer order receipt. However, not all systems record the time and date
of delivery, as tracking of orders within systems often stops at the point of despatch.
Use of the measure should include analysis of each separate stage of the lead time to identify which
individual processes take the longest to execute and are most in need of improvement. Each process
can be benchmarked in order to identify improvement opportunities.
When using this measure particular consideration should be given to the unit of time that is used. In
many industries "Just In Time" delivery is required to the nearest hour or to a specified time. In such
circumstances early delivery is considered to be as bad as late delivery.
Prism Facet 1:
Prism Facet 2:
Processes Sub-Facet 2: Fulfil Demand
Prism Facet 3:
Sub-Facet 3:
Customer Recommendations / Willingness to Recommend

The willingness of customers to recommend a supplier to friends or colleagues is considered to be a
key indicator of their satisfaction with the performance of the business and is a key contribution that
customers can make.
Whilst measuring willingness to recommend assesses the satisfaction of existing customers this is
only potential contribution. Only the measurement of actual recommendations that have been made
assesses realised contribution.
It is important to consider the network of potential customers that can be reached by recommendations
from existing customers. It is possible for an organisation to encourage recommendation by prompting
customers, putting the idea into their mind.
Recommendations might be encouraged by offering rewards to existing customers for recruiting new
ones.
% of customers who recommend the supplier to friends or colleagues
average number of recommendations made per existing customer
% of customers who are willing to recommend the supplier to friends or colleagues
% of new customers (by number and value) that result from recommendations
Friend and colleague - those acquaintances of existing customers who are also potential customers.
They may be personal or professional acquaintances.
Existing customers - customers who currently purchase from the organisation / supplier. If sufficiently
satisfied, they might recommend the organisation / supplier to a potential customer.
New customers - customers who are new to the organisation / supplier.
Analysis of recommendations should include comparison of their source, including the type of
customer and/ or the products or services that they purchase. This will provide an indication of which
customers or groups of customers are satisfied enough to recommend to others.
Data regarding existing customers' willingness to recommend should be obtained from the customer
satisfaction survey. Actual recommendations should be recorded by asking new customers the reason
behind their purchase decision. In both cases the sales department will be responsible for the
collection, analysis and reporting of data for this measure.
Prism Facet 1:

Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Customer Feedback / Suggestions

Provision of feedback and suggestions allows customers to make a contribution to the effective and
efficient running of a supplier organisation. Feedback and suggestions allow identification of areas
for improvement which are in line with the wants and needs of the customer, thereby enhancing
customer satisfaction.
The nature of the feedback received from customers will also indicate the level of customer
satisfaction.
It is important that organisations proactively seek feedback and suggestions in order to improve
performance in line with customers requirements. This might be done as part of the customer
satisfaction survey or might be an extension of the complaints procedure, especially if complaints are
proactively encouraged. It is important that customers are encouraged to provide feedback and
suggestions and that there is a process in place to facilitate this. The success of the process will be
assessed by this measure.
The process of encouraging customer feedback and suggestions might include proactive market
research or the organisation of focus groups to discuss performance issues. This should include the
testing of assumptions regarding the drivers of customer satisfaction. As a result, suggestions made by
customers should also provide input to the strategy development process indicating important areas of
performance upon which to focus.
Causal analysis of suggestions and feedback will allow identification of the most important and
frequently made suggestions. The relative importance of suggestions and feedback must be
considered, as it is important that organisations do not take their eye off the most important
performance factors that are already being delivered, in an attempt to improve other less important
performance factors.
Suggestions will be more important if they are not prompted. The amount of feedback can be
enhanced by providing incentives or rewards for feedback and suggestions, however the effect of
such schemes should be considered when analysing the amount of feedback received.
number of suggestions / pieces of feedback received per customer in a given time period
% of customers that make suggestions / provide feedback in a given period
% of customer suggestions / feedback that are implemented / acted upon
average value of suggestions implemented
average lead time to respond to suggestions / feedback.
Suggestions / feedback - are contributions made by customers with the objective of improving the
operations of the organisation.
Customers - are those individuals or groups who purchase or consume an organisation's products
and/or services. There are three main types of customer for the firm to consider:
consumers/end users
distribution chain customers (or intermediaries)
downstream operations within the organisation. The organisation should encourage suggestions
and feedback from each type of customer as their requirements are likely to be different.
It is important to distinguish between end users and intermediary customers, as their requirements
from the organisation will be different, as will the processes used to collect their feedback and
suggestions.
Value of suggestions / feedback - is the value of implemented ideas or suggestions to the organisation.
This may be realised through increased competitive advantage (resulting in increased sales) or
improved operating efficiency or effectiveness (resulting in reduced cost). It may be possible to
measure the value of improvements, although it may be necessary to make a subjective assessment of
their value.
Lead time to respond - is the time from receipt of a suggestion or piece of feedback to the time action
is taken. Initially this action should be acknowledgement of receipt and notification of potential time
before action will be taken. There should be a standard benchmark lead time for acknowledgement. It
is important that customers are notified of the progress of their suggestions and are given reasons if
suggestions are not going to be implemented.
The importance placed on the feedback received from customers will depend on the importance of the
customer, based on the size of the account or the strategic importance.
The frequency of suggestions will be related to purchase frequency.
The % of suggestions that are acted upon will depend on how valid or useful the suggestions are.
Data for the calculation of this measure should be collected through the customer suggestion or
customer complaint scheme or that should be used to collect ideas and suggestions. The customer
satisfaction survey can also be used to collect data.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders
Customer Complaints / Returns

The purpose of this measure is to take a systematic approach to the identification and elimination of
customer complaints. Analysis of the causes of complaints and taking action to eliminate the root
cause of the most common ones is critical to ensure that customer service and satisfaction are
improved.
Complaints and returns provide the opportunity to identify errors in internal processes. It is important
that advantage is taken of the opportunity that complaints provide to recover customer satisfaction and
more importantly improve internal processes to ensure that the problems do not happen again. This
will stop defects, mistakes or problems also being experienced by other customers.
Returns are more likely to relate to product quality problems, whilst customer complaints can relate
to any dimension of the product or service provided.
Returns and many complaints result from defects that are not detected and resolved before products
are delivered to the customer. See the measure - 'Quality Performance'. Complaints and returns
should not result from defects that have been detected, as this suggests that no corrective action has
been taken.
In a small proportion of circumstances consideration should be given to the importance of on time
delivery to the customer in comparison to product or service quality. If on time delivery is more
important to the customer, it might be desirable to deliver the product or service and use the service
recovery process to rectify the problems in order to maintain customer satisfaction. This should only
be considered in the small number of cases where on time delivery is of overriding importance to the
customer.
CAUTION / RECENT RESEARCH
Caution must be taken when using this measure as it is a reactive measure. Recent research indicates
that only 5% of dissatisfied customers complain, the others don't repurchase. As a result it is
important to encourage all customers to complain and to make it easy for them to do so. In addition
more proactive measurement of customer satisfaction, such as opinion surveys, is required.
Complaints should be considered as a contribution by customers and used to help improve processes.
It is important to have an effective complaint recovery process.
% of orders that result in customer complaints / returns in a given period
number of customer complaints / returns received in a given period
Customer complaints - are feedback from customers who are dissatisfied with the product and or
service supplied by the organisation.
Returns - are a specific type of complaint, usually relating to product defects or products that are not
to the required specification.
The given period - will depend on the number of complaints that are received. If a high volume of
complaints is being received this measure should be calculated more frequently, until the number of
complaints falls.
etc.
Analysis of this measure should enable the identification and elimination of the root causes of
complaints and returns. Often this will involve improving the processes that cause them and those
which allow defects to reach the customer. This should allow identification of the processes that need
to be improved.
Analysis should also categorise complaints and defects based on their severity including, the effect on
the satisfaction of the customer (i.e. how important the customer considers the problem to be) and
possible safety implications. Further analysis of severity could also include how noticeable a defect
is or whether it affects the use of the product for its intended purpose, as opposed to being cosmetic,
which allows use until the problem is rectified.
Metric 1 provides a better indication of customer satisfaction as it puts performance in the context of
the volume of customer orders. Metric 2 provides an absolute measure that enables trends in
complaints to be analysed.
If not already in place, the organisation should implement specific business processes for encouraging
and collecting complaints and analysing their causes. It is also important to undertake more proactive
measures of customer satisfaction via, for example, the Customer Satisfaction Survey.
Data sources of complaints may be varied, including telephone calls, written correspondence,
complaint forms, E-mail, the Internet etc. It is necessary to have a tracking system to ensure that all
complaints are logged, resolved and their root cause identified and analysed.
As complaints are an important source of feedback from the customer regarding areas of performance
that should be improved, customers should be encouraged to make complaints. The organisation
should make every effort to make it easy for customers to complain.
Prism Facet 1:
Prism Facet 2:

Prism Facet 3:
Sub-Facet 3:
Customer Complaint Resolution

The successful resolution of customer complaints is essential if customer satisfaction is to be
maintained and enhanced.
RECENT RESEARCH - indicates that customers who complain to an organisation and have their
complaints satisfactorily resolved, tell an average of five other people about the good treatment they
received.
Another study found that, of the customers who register a complaint, between 54% and 70% will do
business with the organisation again if their complaints are resolved. This figure goes up to 95% if
the customers feel the complaints are resolved quickly.
This research highlights the fact that customer complaints should be considered a contribution by
customers, as they allow customer satisfaction to be recovered (and in some cases enhanced). Also
complaints provide information which can be used to identify shortcomings in processes, which in
turn can be improved. As a result valid customer complaints should be encouraged.
The research findings also highlight the importance of having an effective service recovery process to
that resolves problems caused by customer complaints. Despite the fact that the research seems to
suggest that customer satisfaction can be improved by causing complaints and then rectifying them,
further research indicates that only 5% of dissatisfied customers complain, the others don't
repurchase. So every effort should be made to prevent customers from receiving product or service
that might cause them to complain.
% of customer complaints that are resolved to the customer's satisfaction
Complaint resolution to the customer's satisfaction - is rectification of the original problem. The
service recovery process should revisit customers who have complained to ensure that their
complaint was successfully resolved.
It is essential that there is an effective service recovery process to ensure that complaints are
resolved. It is also important to undertake more proactive measures of customer satisfaction to assess
the impact of complaint resolution on satisfaction.
Analysis of complaints should identify and eliminate the root causes of complaints. This will involve
improving the processes that cause unsatisfactory product or service to be delivered in the first place.
Customer complaints and analysis of complaints should allow the processes that need to be improved
to be identified. If not already in place, the organisation should implement specific business
processes for encouraging and collecting complaints and analysing their causes.
Data for calculation of this measure should be collected as part of the service recovery process. The
process should record when complaints are received and when they are successfully resolved.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Customer Complaint / Defect Recurrence

It is essential that complaints and defects that are identified by the customer are dealt with and that the
organisation's service recovery process makes every effort to maintain and enhance customer
satisfaction. It becomes increasingly difficult to recover customer satisfaction and loyalty if the same
defect or cause for complaint recurs. As a result it is important that any defects or causes for
complaint are thoroughly investigated, their root causes identified and action is taken to ensure that
they do not recur.
Complaints and defects provide an opportunity to identify errors in internal processes. It is important
that advantage is taken of the opportunity that complaints provide to recover customer satisfaction and
more importantly improve internal processes to ensure that the problems do not happen again. This
will stop defects, mistakes or problems also being experienced by other customers.
This measure is closely related to those of
Quality Performance
Customer Complaints / Returns
CAUTION / RECENT RESEARCH
Caution must be taken when using this measure as it is a reactive measure. Recent research indicates
that only 5% of dissatisfied customers complain, the others don't repurchase. As a result it is
important to encourage all customers to complain and to make it easy for them to do so. In addition
more proactive measurement of customer satisfaction, such as opinion surveys, is required.
% of customer complaints / defects that have occurred before
average number of times a specific complaint / defect occurs before the root cause is eradicated
Defects - are a product or service's non-fulfilment of an intended requirement or reasonable
expectation for use or a departure from intended quality level or state. Defects are quality problems
which reach the customer.
Analysis of this measure should consider the root causes of complaints and defects to identify the
processes that cause them and those which allow defects to reach the customer. This should allow
identification of the processes that need to be improved. Defects and complaints must be clearly
defined by a monitoring system to allow identification of recurrence.
It is important that analysis of the measure identifies whether specific customers are affected by the
same defect or mistake. However, it is just as important that recurring problems are identified if they
are affecting different customers as it indicates whether the organisation is learning from complaints
and defects, identifying root causes and implementing corrective action.
Analysis should also categorise complaints and defects based on their severity including the effect on
the satisfaction of the customer (i.e. how important the customer considers the problem to be) and
possible safety implications. Further analysis of severity could also include how noticeable a defect
is or whether it affects the use of the product for its intended purpose, as opposed to being cosmetic
which allows use until the problem is rectified.
Data for this measure should be collected at all points of contact with the customer. They should be
brought together into a central database, usually housed in the sales / customer relations management
department. There must be close liaison with all areas of the business to ensure that root causes are
identified and corrective action taken.
Data sources of complaints may be varied including telephone calls, written correspondence,
complaint forms, E-mail, the Internet, etc. It is necessary to have a tracking system to ensure that all
complaints are logged, resolved and their root cause identified and analysed.
As complaints are an important source of feedback from the customer regarding areas of performance
that should be improved, customers should be encouraged to make complaints. The organisation
should make every effort to make it easy for customers to complain.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Processes Sub-Facet 3: Plan & Manage Enterprise - Operations
Time to Resolve Customer Complaints

The successful and rapid resolution of customer complaints is essential if customer satisfaction is to
be maintained and enhanced.
RECENT RESEARCH - indicates that of the customers who register a complaint, between 54% and
70% will do business with the organisation again if their complaints are resolved. This figure goes up
to 95% if the customers feel the complaints are resolved quickly.
This research highlights the fact that customer complaints should be considered a contribution by
customers, as they allow customer satisfaction to be recovered (and in some cases enhanced). Also
complaints provide information which can be used to identify shortcomings in processes, which in
turn can be improved. As a result valid customer complaints should be encouraged.
The research findings also highlight the importance of having an effective service recovery process to
resolve problems caused by customer complaints. Despite the fact that the research seems to suggest
that customer satisfaction can be improved by causing complaints and then rectifying them, further
research indicates that only 5% of dissatisfied customers complain, the others don't repurchase. So
every effort should be made to prevent customers from receiving product or service that might cause
them to complain.
It is also important that if it is going to take some time to resolve a complaint that the customer
receives an acknowledgement of the complaint and is kept up to date with progress of the complaint
resolution. Failure to keep the customer fully informed of progress will increase customer
dissatisfaction.
average lead time to resolve customer complaints to the customer's satisfaction
average lead time to acknowledge receipt of customer complaints
Complaint resolution to the customer's satisfaction - is rectification of the original problem. The
service recovery process should revisit customers who have complained to ensure that their
complaint was successfully resolved.
Acknowledgement of customer complaints - is notification to the customer that the complaint has been
received and that action is being taken.
It is essential that there is an effective service recovery process to ensure that complaints are
resolved quickly. It is also important to undertake more proactive measures of customer satisfaction
to assess the effectiveness of the service recovery process and the affect of rapid response to
complaints.
Analysis of complaints should identify and eliminate the root causes of complaints. This will involve
improving the processes that cause unsatisfactory product or service to be delivered in the first place.
Customer complaints and analysis of complaints should allow the processes that need to be improved
to be identified. If not already in place, the organisation should implement specific business
processes for encouraging and collecting complaints and analysing their causes.
Data for calculation of this measure should be collected as part of the service recovery process. The
process should record when complaints are received and when they are successfully resolved.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Market Share
Market share measures how successful the organisation has been in obtaining market share in its
chosen markets.
It reflects how competitive the company's products and services are in the market and indicates the
level of market penetration.
It measures the success of strategies designed to increase competitiveness of products in the market
place and provides an indication of customer satisfaction in comparison to that of competitors'
customers.
sales turnover as a percentage of total market sales value
Sales Turnover - is the value of sales and should be split into product or market categories to make
appropriate comparison with market data.
Total Market Sales Value - is the total sales turnover of all products sold by all companies in the
market.
Market - the market is that which the company defines as its target or that in which a specific product
competes.
Measurement of market share should be employed for each of the target markets in which the company
competes. Analysis of market share should consider the position held by specific products in relation
to those of competitors.
Analysis of market share trends over time will identify progress that is made towards the achievement
of market share targets. Analysis of these trends should allow understanding of the effectiveness of
specific actions such as promotional campaigns or product launches.
In some cases it might be difficult to define the boundaries of a market in order to define its size and
measure the organisation's share of it.
Total market sales data can be obtained from market research either conducted internally or by market
research companies. Care must be taken when using external data to ensure that it is accurate and
relates to the appropriate market segment.
Prism Facet 1:
Strategies Sub-Facet 1: Brand, Product & Service Strategy

Prism Facet 2:
Strategies Sub-Facet 2: Business Unit Strategy
Prism Facet 3:
Revenue / Turnover Growth

Measuring revenue growth allows the success of strategies to increase sales to be assessed. The
measure also allows comparison of an organisation's performance with that of its competitors and
market sector if it is used as a measure of relative performance.
This measure provides an indication of the level of customer satisfaction, as satisfied customers are
likely to increase the number and value of the purchases they make and will recommend that others
also purchase from the organisation.
Increasing revenue will also increase investors' satisfaction, as increased revenues suggest
operations are being improved and strategies to deliver future profitability are being implemented,
both of which will result in increased returns for investors.
Appropriate analysis of this measure should provide the organisation with an understanding of trends
in markets and product sales allowing strategic decisions about future products and markets to be
made. The measure also allows the identification of strategic response that the organisations must
make to changes in market circumstances, such as increasing or reducing output and the associated
resource decisions. Use of the measure should also include analysis sales trends by business unit.
% increase in revenue / turnover in a given time period
Revenue / Turnover - is income from the sale of goods and services.
An important issue to consider when using this measure is the point at which a sale is registered. This
point can vary considerably from industry to industry and will have a significant impact on the
performance of the measure that is reported. Typically sales are registered when payment is received
or when a contract is signed, however caution should be taken where there is a considerable delay
between delivery of the product or service and payment, especially when the contract involves
foreign currency transactions, for example.
The time period over which this measure should be used is dependant on the nature of the market in
which the organisation competes. If product life cycles are short, products are introduced frequently
and the market is susceptible to frequent changes in demand or fashion, the measure should be used
frequently and the horizon of the measure should be short, so that trends in demand are reflected in the
measure.
There are numerous ways in which this measure should be analysed in order to gain greater
understanding of the nature of the markets in which the organisation operates. Comparison should be
made by market; product or product type; industry sector and customer (including comparison of
existing and new customers).

Analysis of the measure should include comparison of revenue growth from existing products and
operations vs. revenue growth from new products as well as resulting from acquisitions and mergers.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction
Prism Facet 2:
Prism Facet 3:
Order Book vs. Forward Capacity

Comparison of the current order book with the availability of forward capacity assesses the ability of
the organisation to satisfy the current demand for its products, as well as considering the utilisation of
the capacity of the organisation. As such this is a measure of the effectiveness with which orders are
generated and the effectiveness of planning and managing the operation.
In addition the size of the forward order book will provide an indication of customer satisfaction.
If the order book is greater than the capacity of the organisation, this indicates that customer
satisfaction is high and that there is greater demand for the product than can be satisfied. This suggests
that promises have been made and orders accepted that cannot be fulfilled. As a result action will be
required to renegotiate delivery dates, acquire capacity or outsource activities in order to reconcile
the differences.
Where forward capacity is greater than demand, it is implied that demand is low and that the
resources of the organisation are going to be under utilised. Where this situation exists over an
extended period of time it implies that the organisation has too much capacity (which may be tying up
valuable capital) or that the generate demand process is not as effective as it could be.
forward order book as % of available capacity
Forward order book - is the amount of orders that have been received for the organisation's products
and services.
Forward capacity available - is the amount of capacity that is available over the period of the
forward order book.
When using this measure the appropriate unit of analysis should be defined which enables
quantification of capacity availability and comparison with the order book. Typically the unit of
analysis would be finished product or unit of production.
The time horizon for consideration of this measure should be the lead time of the product in question,
as there will be no more customer orders received for that period.
Use of this measure should include analysis by product and product group, as this will allow
understanding of the effectiveness of planning of different products. Variations in individual
schedules that recur should be analysed to identify their cause. Over a longer period variations will
indicate the effectiveness of planning and scheduling and of demand generation.
Data regarding the size of the forward order book should be available from the sales department
(generate demand process). Capacity availability should be assessed as part of the operations
planning process.
Prism Facet 1:
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Plan Enterprise
Prism Facet 3:
Perceived Value for Money

The objective of this measure is to understand the customers' perceptions of the value for money of
the product or service being offered. The customers perceptions of the relative value of their
purchase will be one of the determinants of their satisfaction.
Regardless of the dimensions of performance on which an organisation competes, target market
segment or the relative price of the product, the perception of value for money is important. The
measure of value for money is relative to the attributes of the product that is sold and is a measure of
the effectiveness of the company's pricing policy.
Value for money represents a comparison of the perceived value the customer gets from the product
or service with the price that is charged for it. This measure is linked to the measure of 'Sales Price
Benchmarks', as customers' perceptions of 'Value for Money' will be influenced by the relative price
of substitute products available in the market.
CAUTION
Although it is not the norm, for some luxury goods customers may value high prices for the exclusivity
that they provide.
customers' perceived value of the product or service as % of the selling price
% of customers who consider the company's products or services to be good value for money
Customers' perceived value of the product or service - is the financial value that customers and
potential customers place on the product or service offered.
Customers - are those individuals or groups who purchase or consume an organisation's products
and/or services. In the case of this measure it is important to also consider potential customers so that
a full understanding of pricing policy in comparison to market expectations is gained.
Selling price - is the price at which the organisation's products and services are sold to customers.
Good value for money - is the perception by the customer that the value of the product or service is
greater than the price charged.
When using this measure consideration must be given to discounts that are given to certain customers
or groups of customer as this will affect actual price and perceptions of value. These might include
special offers to encourage new customers, discounts for existing customers and corporate discounts
for corporate customers who purchase frequently and in large volumes. It is important that there is a
mechanism for capturing this information and that separate analysis is made of these circumstances.
The customers' perceived value of the product or service should be obtained through customer
satisfaction surveys. The survey should include specific questions regarding perceived value of
products and whether customers perceive the products and services they purchase to be good value.
Analysis of perceived value for money should be at product level and compared with product(s) in
direct competition within the market place / specific market sector.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Delivery Reliability (Delivery On Time In Full)

The measure of Delivery Reliability (Delivery On Time In Full) is designed to monitor the reliability
with which the company delivers to its customers on time.
It is measured in order to improve on time delivery performance which in many cases is an order
winning criteria. In other industries, on time delivery might be a condition of entry to the market,
hence the measure should be used to ensure 100% on time delivery.
Management of customers' perceptions of performance for this measure are critical if satisfaction is
to be improved. Even if performance is better than all competition, it means little if the customer
doesn't realise it is so.
In some industries or markets reliable delivery is more important than fast delivery. Hence quoted
lead times should reflect the balance between realistic, but competitively short lead times.
In some industries on time delivery may be referred to as punctuality.
This measure is closely related to that of Customer Response Time / Delivery Lead Time. Feedback
regarding actual lead times should be used to quote realistic due dates and improve reliability.
Similarly reduction in delivery lead times enables due dates to be met more reliably.
CAUTION
In some circumstances (such as 'Just In Time' supply) early deliveries are as undesirable as late ones,
this should be reflected in the design of the measure.
All component elements of the supply chain contribute to the delivery performance. Hence it is
critical to design this measure so that performance can be broken down to specific processes and subprocesses. This disaggregation of the measure will allow early identification of late deliveries,
which in turn allows the customer to be notified. Identification and elimination of root causes of late
deliveries will allow identification of the processes where improvement is most important.
% of orders delivered to the customer on time in full in a given period
etc.
On time - on time will usually be the time agreed with the customer. Separate analysis of the measure
can be made to determine where negotiated due dates are missed, but the delivery date is renegotiated
and the new date is met. A stricter measure than the agreed due date could use the date first requested
by the customer, as this will reflect whether the customers' original requirements have been met.
Consideration must be given to the unit of time in which measurement is made (i.e. week, day, hour,
etc.). Larger time units will result in apparent performance improvements even though reliability may
not be satisfactory. In many industries 'Just In Time' delivery is required to the nearest hour or a
specific time. Tolerances should be considered when defining what is meant by 'on time'. This may
include allowance in delivery time. In some industries delivering early is as undesirable as
delivering late.
In full - only orders or transactions that are complete should be considered to be 'on time'. This
prevents delivery of incomplete orders to manipulate the measure and achieve targets.
When designing and using this measure it is important to define the point at which delivery is
considered to have been made. In different circumstances this might be when delivery or installation
is completed, when the product being delivered is fully operational (might include training of users),
when all services have been provided or when payment is made. The way in which deliveries are
confirmed must be considered and agreed. Is the product or service delivered when despatched, when
the customer signs for it, or is confirmation by phone call required? Is it delivered when shipped,
when received or when paid for? Consideration may have to be given to the reliability of external
companies to whom delivery is contracted.
In all cases it is important to consider when the customer considers the product or service to have
been delivered as their perception of performance is what matters.
Data for calculation of this measure should be collected by the sales department. They should record
the due date when the order is taken and received feedback from those delivering the product or
service when delivery is completed. The sales department should use this data to understand actual
lead times so that they can quote and negotiate realistic lead times and due dates.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Quality Performance
Quality performance refers to the quality of the product or service that is being purchased by the
customer. Pre and post sales service are considered as a separate measure 'Quality of Service (Pre
and Post Sales)'.
While product quality is often considered in terms of defect rates, this only refers to one dimension of
product quality - conformance to specification. It is commonly acknowledged that there are seven
other dimensions of product quality (performance quality; features; reliability; durability;
serviceability; aesthetics; perception (Garvin, 1987)). Similarly there are considered to be five
dimensions of service quality - tangibles; reliability; responsiveness; assurance; and empathy (Berry
et al., 1988). Hence, while it may be possible to deliver a product that 100% conforms to
specification, it might still be possible to improve the product or service quality with regard to one of
the other dimensions of quality performance.
Shingo distinguishes between 'mistakes' (which are inevitable) and 'defects' (which result when a
mistake reaches a customer). Hence processes or devices should be put in place to ensure that
mistakes are detected internally and do not become defects which are delivered to the customer
(Shingo, 1986). This is the basis of Poke-yoke (mistake proofing). As such the measure of Quality
Performance assesses the performance of internal processes in delivering products which are mistake
free as well as providing an indication of customer satisfaction.
% of products / services that are 100% 'Fit for Purpose'
% of products / services delivered to the customer that are defect free
% of products / services that are completed mistake free
Product / service - is the commodity that is delivered to the customer in return for payment.
Customer - are those individuals or groups who purchase or consume an organisation's products
and/or services.
Fit for purpose - fitness for purpose relates to the degree to which the product or service meets the
customer's requirements.
Defects - are a product or service's non-fulfilment of an intended requirement or reasonable
expectation for use or a departure from intended quality level or state. Defects are quality problems
which reach the customer.
Mistakes - are product quality problems that occur during production. If they are not identified before
delivery of the product to the customer they become defects.
Analysis of this measure should identify the root cause of defects or mistakes so that actions can be
taken to rectify it and ensure that it does not occur again. This includes assessment of whether quality
assurance procedures identified the mistake before it becomes a defect which reaches the customer.
Emphasis on the measurement of quality performance should be based on the dimensions of quality
that the customer finds important.
Data for this measure should be collected and analysed by the quality assurance or quality control
department which is responsible for maintaining levels of quality throughout the organisation.
Collection of the data should include feedback from all areas of the business as all individuals should
highlight and report quality problems.
Care must be taken when assigning responsibility for quality problems. If penalties for causing
defects or mistakes are too great it might discourage individuals reporting them, allowing them to
remain in the product until further along the production or service delivery process where they
become more difficult and costly to rectify.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Quality of Service (Pre & Post Sales)

The objective of this measure is to assess the service and support provided with the product or
service purchased. This includes service provided pre and post sales.
Pre-sales might include product information or the ability to sample the product or service prior to
purchase.
Post sales service might include delivery and installation or warranties, insurance, spares provision,
maintenance contracts, breakdown call-outs, etc.
There are considered to be five dimensions of service quality - tangibles; reliability; responsiveness;
assurance; and empathy (Berry et al., 1988).
Service quality is considered to be more important:
where the purchase decision involves substantial investment of money and/or time;
where there is potential for repeat business or long term contracts;
where competition cannot rely on other dimensions of performance (such as price or product
quality) alone.
This measure assesses how well the organisation manages its relationships with its customers and is
a key measure of the amount of emphasis and effort the organisation places on the satisfaction of its
customers.
customer perception of quality of service
time to call out / problem resolution - time from fault / complaint report to arrival of solution /
problem resolution
problem resolution first time - % of faults / complaints that are satisfactorily resolved first time
spares provision - lead time to provide spares
spares provision - availability of spares when required
Service - is activity which provides the customer with support for the main product or service
purchased. This support might include assistance with the purchase decision (pre sale) or to ensure
that the customer is happy with the product or service following delivery (post sale), such as ensuring
machinery continues to operate effectively.
Faults - are problems with the product or service identified by the customer following delivery.
Faults include defects or breakdowns caused by normal wear and tear.
Complaints - are feedback from customers who are dissatisfied with the product and or service
supplied by the organisation.
As indicated in formula 1, assessment of service quality is based primarily on the perceptions of
customers. As such assessment of service quality should be included in the customer satisfaction
survey.
The questionnaire should investigate the attributes of customer service that the customer finds
important and include evaluation of performance. There should also be consideration of potential
attributes of service or attributes that are offered by competitors to assess whether their introduction
would enhance the service offered.
The other formulae indicate dimensions of service quality that can be measured internally. Formulae
2 and 3 refer to faults or problems reported by the customer and measure the time it takes to respond,
the time it takes to resolve the problem and the reliability and effectiveness of the problem resolution.
Formula 4 and 5 refer to the availability of spares which is appropriate when there are product
quality problems.
The data required to calculate this measure should be drawn together from a number of sources.
These include feedback from the customer (including complaints, customer satisfaction surveys,
feedback procedures etc.) and feedback from those responsible to providing service. This should be
brought together in a central source by the quality assurance function who should co-ordinate actions
to improve the service offered.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Service Level Agreement Achievement

Adherence to the service level agreement (SLA) is a key measure of a supplier's ability to deliver the
minimum required service to the customer.
The SLA will usually be between the supplier and the customer or the supplier and a regulator acting
in the interest of customers who do not have collective influence over the supplier.
The SLA will usually define the penalties that are incurred by the supplier for failure to achieve the
desired service level. Therefore this measure is linked to the measure of penalties for nonconformance to regulatory requirements. Penalties will reflect the impact that non compliance with
the agreement will have on the operations of the customer organisation or on the satisfaction of the
regulator.
The SLA establishes the minimum service requirements. As a result customer satisfaction is
conditional on adherence. Superior performance will be required if satisfaction is to be increased.
% of occasions the supplier organisation adheres to the service level agreement in a given period
average cost of penalties / fines for SLA non achievement
Service Level Agreement (SLA) - defines the minimum level of service that a supplier is
contractually obliged to provide to a customer. The 'service' in the SLA will refer to the dimensions
of performance that are most important. These might be based on delivery reliability or lead times,
but would probably also include levels of support services.
Penalties / Fines - are penalties imposed by customers or regulators as a result of failure to meet SLA
requirements. Typically these penalties will be financial in nature, and may result in loss of future
business, or other longer term effects.
Penalties - reflect a broader category of punishment made by suppliers and regulators which includes
non financial penalties.
Supplier organisation - is an organisation supplying goods or services to another organisation.
The given period for this measure should reflect the frequency with which products and services are
delivered. Measurement should allow trends in achievement to be analysed and problems identified
in sufficient time to take remedial action.
The unit of analysis for this measure is the transaction, whether that is discrete orders, financial
transactions, etc.
There should be analysis of the measure by the value of penalties. Higher penalties imply that non
conformance is more serious and hence likely to have a greater effect on customer and regulator
satisfaction. It is important to focus remedial and improvement actions on those dimensions of non
conformance which are most critical.
Processes should be put in place to ensure that root causes are identified and eliminated to ensure that
SLA achievement improves.
Data from this measure should be used when negotiating new service level agreements to ensure that
realistic conditions are included.
The process for managing relations with regulators and suppliers should include implementation of
measure for assessing whether the conditions of SLAs are achieved.
Prism Facet 1:
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Regulator & Community Satisfaction
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: Supplier Contribution
Customer's First Choice Supplier

This measure is an important measure of an organisation's competitiveness, as it assesses whether the
organisation is its customers' first choice supplier.
Understanding whether customers consider the organisation to be its first choice supplier is important
in establishing the competitiveness of the organisation and its products and services. As well as
assessing the quality of the product and service offered, performance with regard to this measure will
be dependent on the amount and quality of competition in the market.
Use of the measure should enable the organisation to identify its most competitive products and
services. Analysis and comparison of performance with competitor products should enable
identification of the drivers of competitiveness so that action to improve can be focused on the
criteria that the customers find important.
This measure is closely related to the 'Preferred Supplier Relationship' measure.
% customers for whom the organisation is the first choice supplier
% market sectors in which the organisation is the first choice supplier
First choice supplier - is the supplier to whom, given the option, a customer would choose to supply a
given product or service. The two metrics differentiate between specific customers and the markets
as a whole.
Metric 1 measures choices by customers in a given markets sector who choose the organisation as a
supplier, indicating whether the organisation offers the best product and service in that market and
whether preferred supplier relationships have been developed in that market.
Metric 2 measures the market as a whole. This is a broader measure as it assesses the number of
market sectors in which the organisation is considered to be the most competitive supplier of the
product or service in question.
Market sector - is a specific market or part of a market at which the organisation targets its products.
In some cases it might be difficult to define the boundaries of a market sector.
Analysis should be made by product to identify which are the most competitive and in which
improvement is required.
Use of the measure should include identification of the sources or drivers of competitiveness in each
market. This enables measurement of the organisation's performance against these criteria and
comparison with the performance of competitor products. Gaps in performance of these criteria
identify where improvement action is required to improve the competitiveness of products and
services in the market.
Data required for this measure must be obtained through market research, including that undertaken by
the organisation and by external agents or companies.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Preferred Supplier Relationships / Customer Choice

Identification of a supplier, as a preferred supplier, is an indication of a customer's satisfaction with
the product and/or service being offered by the supplier. Preferred suppliers are those who a
customer will turn to first to supply a specific product or range of products. Having a preferred
supplier scheme reduces the need for lengthy purchasing processes, thereby reducing the cost.
Selection of preferred suppliers ensures that purchases are made from approved suppliers. This
should ensure that suppliers are reliable and offer acceptable value for money.
This measure is linked to the number of alternative suppliers available. Although preferred suppliers
might be used, other alternative suppliers might provide attractive options in particular cases and
always offer insurance against one supplier's failure to deliver.
% of suppliers who are 'preferred suppliers'
% of goods and services supplied by 'preferred suppliers' (volume)
% of goods and services supplied by 'preferred suppliers' (value)
% of new opportunities exclusively offered to specific suppliers
Preferred Suppliers - are suppliers nominated to supply a certain range of goods or services.
Nominating preferred suppliers allows members of an organisation to purchase parts from suppliers
that have been approved by the organisation.
Exclusively offered opportunities - are new parts or services required by a customer which only the
specific (preferred) supplier is asked to supply.
It is important that the proportion of goods and services that is supplied by preferred suppliers is
measured by value and volume. The two measures might well provide very different results,
especially if there is a small number of very high value purchased goods and services or a large
number of very low value goods and services.
Data should be available through the purchasing process, which monitors and develops relationships
with suppliers and records transactions.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Supplier Satisfaction
Prism Facet 2:

Prism Facet 3:
Number of Alternative Suppliers

The absence of alternative accredited suppliers of a product or service increases supplier satisfaction
as it indicates that the customer is committed to purchasing, or has to purchase, the product or service
from that supplier. As a result reduction in the number of alternative suppliers (by choice) reflects
increase in customer satisfaction with the supplier.
Choosing to limit the number of alternative suppliers is an indication of commitment from the
customer to the supplier. The ultimate commitment being to single source parts. This commitment
might well be the basis for a close working relationship between the customer and supplier to their
mutual advantage, although most organisations limit the reliance on single suppliers by adopting dual
sourcing.
In some situations there are no alternative suppliers for particular goods or services. This can be
problematic for the customer as it provides the supplier with a strong bargaining position and reduces
the extent to which the customer can control the availability of goods and services they require.
Conversely increasing the number of alternative suppliers increases the flexibility, providing the
opportunity to choose the supplier who is best able to satisfy specific requirements at a specific
moment in time. This increases the ability of the organisation to ensure that purchased parts will be
available to fulfil demand or schedules.
average number of accredited alternative suppliers per purchased product or service
% of purchased products or services for which the customer has more than one accredited supplier
Accredited suppliers - are those suppliers who the customer is prepared to purchase specific parts
from. Accreditation often, but not always, involves a formal process of supplier evaluation.
Analysis of this measure should be by purchased product or service, as this allows understanding of
differences between the ability of suppliers to provide a different type of products and services.
Averaged over all purchases, the measure gives an indication of the level of single sourcing and risk
at the hands of suppliers.
CAUTION - single source of supply may not be ideal as it exposes the organisation to risk should the
supplier be unable to supply for any reason.
The procurement or purchasing function should be responsible for the collection and analysis of the
data to calculate this measure, as they are responsible for development of relationships with
suppliers.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sales Price Benchmarks

Sales price benchmarks aim to determine the price competitiveness of products in the market place.
They will be most important if competition in the chosen market is based on price, however a
competitive price will always be important even where competition is on other dimensions of
performance. This measure should be used when assessing the premium that can be charged for
superior performance of other dimensions of performance.
Comparison of prices against those of competitors is important in all markets as customers'
perceptions of 'Value for Money', and hence their satisfaction, will be influenced by the relative price
of substitute products available in the market. As a result this measure assesses the organisation's
understanding of the competitiveness of process in the market place and the effectiveness of its
pricing policy.
selling price per product (compared to that of competitors' products)
% of products with selling price that is higher than the average selling price of comparable
competitor products
selling price per product vs. market benchmark price
Selling price - is the price at which the organisation's products and services are sold to customers.
The selling price used for comparison should be that of specific products in comparison to similar
products that are available in the market.
Market benchmark price - is the price of comparable products that are available on the market. A
market price benchmark might apply in a specific market where typical or standard prices are
common. When competing on price the most important price for comparison is that of the cheapest
comparable product.
When making price comparisons, other attributes and dimensions of company performance should
also be considered. For example product and service quality or delivery performance may vary,
making prices less directly comparable. Consideration of alternative dimensions of performance
should be based on their importance to the customer. It will always be important for prices to be
competitive but superior product quality or lower lead times might allow the organisation to charge
higher prices than competitors.
Data regarding the organisation's own selling prices will be available from the sales department.
Competitor and typical market prices can be identified by market research and in many markets
pricing bibles exist which identify recommended retail prices. Feedback from customers regarding
their perceptions of comparative prices should also be considered, but should be used with caution as
they are always likely to be looking for price reductions.
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New Product / Service Quality - Fitness for Purpose

New Product / Service Quality measures the extent to which the new product or service launched is
fit for its intended purpose.
This includes the conformance of new products and services to design specifications and also
broader concepts of quality which relate to the fitness of the product or service to the purpose for
which it was designed. It is commonly acknowledged that in addition to the conformance to design
specifications there are seven other dimensions of product quality (performance quality; features;
reliability; durability; serviceability; aesthetics; perception (Garvin, 1987). Similarly there are
considered to be five dimensions of service quality - tangibles; reliability; responsiveness; assurance;
and empathy (Berry et al., 1988). Hence, while it may be possible to deliver a product that 100%
conforms to specification, it might still be possible to improve the product or service quality with
regard to one of the other dimensions of quality performance.
It should also be kept in mind that not all the dimensions of quality will be critical to each product or
service, depending on customer or market requirements and expectations. This is a very fertile area
for measures and one has to be careful to identify the correct mix.
The quality of new products/service has the following implications:
success of new product/service launch
ability to capture first mover advantage
reputation of firm
The measure of New Product / Service Quality measures how well the Develop Products & Services
process identifies customers' new product requirements and then converts them into designs and
products which conform to them.
% of New Products / Services that are 100% 'Fit for Purpose'
% of New Products delivered to the customer that are defect free
% deviations of technical parameters from design specifications
% deviations of marketability parameters from launch programme
Fit for purpose - relates to the degree to which the product or service meets the customer's
requirements.
Defects - are departures from the intended quality level or state, or a product or service's nonfulfilment of an intended requirement or reasonable expectation for use.
The technical parameters - cascade into a few key variables that relate to the performance of the
product/service in the field.
The marketability parameters - relate to key variables that serve as guideposts to successful product
launch (gathered from previous new product/service experience, market research, focus groups,
consulting advice). For example, quality of a vehicle includes both the technical parameters that
define the class of vehicle (size, degree of luxury, weight) and its marketability (ride, handling,
aesthetics), as perceived by the customer.
All defects or complaints from customers should be analysed to identify their cause so that they can
be eliminated to prevent recurrence. Analysis of trends over time will identify specific problem
areas.
There should be quality control processes in place to collect data relating to defects. The organisation
should also proactively seek feedback from customers regarding the new product or service's fitness
for purpose.
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Processes Sub-Facet 1: Develop Products & Services
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Product / Service Complexity

The objective of this measure is to assess how intricate the products and services that are offered to
the customer are. This includes measurement of the number of features that are incorporated within
products and an assessment of the complexity of the relationship between assemblies and sub
assemblies. Although normally focused on products it should be possible to define this measure to
assess the complexity or features of services offered.
Increased complexity implies that there are additional features included in the product or service
which are attributes of product quality. As such including additional features is considered to
increase product or service quality which should increase the satisfaction of customers with the
product or service as it increases functionality. This is particularly important if the organisation
follows a product differentiation strategy and competes in markets with technically complex products
where frequent product enhancements increase competitiveness.
As such the measure of product complexity measures how well the Develop Products and Services
process identifies additional features and incorporates them into new and existing products. The
measure is linked to the uniqueness of products.
CAUTION - although it is possible that increasing product/service complexity can result in increased
customer satisfaction, it must be ensured that all additional features or complexity that are added are
valued by customers. It will be counter productive to incur the additional cost and effort of increasing
complexity if it is not valued by customers.
There are considerable detrimental operational effects of increasing the complexity of products and
services. Increased complexity increases the number of materials and components required and the
complexity of activities required to complete the product or service. This will increase the cost and
lead time required to deliver products and services and the difficulty of producing products and
delivering services. This will also increase the intricacy of operations, increasing the skill levels
required and the possibility that defects or errors will occur.
average number of 'features' available per product or service
average number of parts / materials per product or service
average number of levels in the product bill of material
Features - are attributes of the product or service delivered to the customer. Assessment of the
number of features is likely to be subjective and should be compared to that of competitors' products
or services.
Parts / materials - are the components which combine to form the products and services produced and
delivered by the organisation.
Bill of material - defines the relationship between materials, components and sub assemblies. The
number of levels of the bill of material indicates the number of sub assemblies and activities that must
be combined to complete the product, indicating complexity.
Although typically this measure is used to assess product complexity, it should be possible to define
'features' that apply to services, which allows measurement of the complexity of services.
Analysis of product complexity should be compared to products offered by competitors or other
organisations in the market or market sector in which the organisation competes.
Analysis of complexity by product and by customer will provide insight into the competitive
advantage gained by increases in complexity, especially when considering sales on products or
services of varying complexity.
Measurement of complexity should always include consideration of the features that are demanded
and valued by the customer. If the addition of features that are not valued by the customer will
increase the cost, lead time and general difficulty of delivering products and services.
Data for calculation of this measure should be available from a number of sources. The number of
features requires subjective assessment undertaken by product design and sales and marketing
personnel. Numbers of parts and bill of material complexity should also be identified by product
designers or by the purchasing department who are responsible for acquiring parts and materials.
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Product Standardisation
The measure of product standardisation provides an indication of the variety of products or product
variants that are offered by an organisation. It assesses the amount of the product that is standard, as
opposed to the number of product variants or products that are customer specific. This is an important
measure of the attractiveness of the products offered to the market and also has a significant impact on
the operations of the organisation.
Provision of products or services that are standard can reduce the variety of features that are offered
by the organisation reducing product quality and potential customer satisfaction.
As with measurement of product complexity, while increasing the variation of products and services
offered (reducing standardisation) might increase product quality and customer satisfaction it can also
reduce responsiveness and increase cost of delivering products and services.
Increasing variation of products and services can be achieved by producing standard core products or
services which can be customised later in the production or service delivery process. This will
contain the costs and difficulties of increased product complexity while also allowing increased
variation in the products offered to the customer. This will be achieved by designing the product or
service and the production or delivery processes in a way which enables the production and
modification of standard products or services. This might include taking a modular approach to
production.
Although typically such a measure would be applied to products, it is also possible to define
standardisation in a way which allows measurement of services.
This measure should be used where there are variations in the requirements of specific products and
wherever customisation of products or services is necessary. When standardising products there is a
need to ensure that the customer is still getting the product that is required and that their choice is not
reduced.
In order to increase responsiveness to customer requirements the amount of standardisation should be
as great as possible and where possible customisation of standard products should be undertaken as
late as possible. This enables an inventory of standard products to be built, with customisation taking
as little time and resources as possible.
% of products that are standard
% of products that are customer specific
number of product variants offered
% of production lead time / production process / parts that are standard
average lead time / cost / manufacturing process for the skeleton product

Standard products - are products that are the same, i.e. there are no variations to products for
different customers or markets.
Customer specific products - are those that are tailored to customer requirements.
Product variants - are variations of standard products which suit specific customer needs. Product
variants might include limited variations from which customers can choose or the ability of customers
to have standard products or services customised to their requirements.
Production lead time / production process / parts that are standard - measures the amount of the
product that is standard indicating the degree of standardisation. Where possible, customisation
should be undertaken as late as possible to increase flexibility, allowing stock of standard products to
be built, with standardisation undertaken late in the process to respond to specific requirements.
Skeleton product - is the standard product which can be varied or customised to specific
requirements.
Analysis should compare the variation between different products offered by the organisation as well
as in comparison with competitors or others in the industry. Comparison of the amount of product that
is standard and the point in production that products are customised should be used to redesign
products and production processes to increase responsiveness.
Data should be collected by identifying the key constraint(s) or variable(s) in the production process,
monitoring their performance through monitoring and control of operations.
The unit of measure will vary depending on the priorities of the organisation and the market place and
the organisation's critical resources or variables.
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Proposal success rate/quotation conversion rate

Proposal success rate/quotation conversion rate is an important measure of the quality of quotations
and proposals that are prepared, but can also be used to provide an indication of the competitiveness
of the organisation.
At a primary level the measure assesses the success of the 'generate demand' process in developing
proposals and quotations that meet customer requirements. As such it assesses how well that process
identifies customer requirements and converts them into achievable proposals that are acceptable to
the customer.
Analysis of proposal success rate or quotation conversion rate over a considerable period of time
provides an indication of the competitiveness of the organisation. If failure rates are high in
comparison to industry standards it indicates that the organisation is unable to prepare competitive
quotes and is unable to satisfy its target customers.
Failure to convert quotations into orders may be due to a wide range of reasons and relate to any of
the criteria upon which the organisation competes or the required specifications of the product or
service. The main benefit of this measure is to ensure that the organisation has a full understanding of
those reasons and acts appropriately.
% of quotations or proposals that are converted into orders
average of the differences between the organisation's cost estimates and those of the winning
quotation during a given period
average of the differences between the organisation's estimates of quotation order winning criteria
and those of the winning quotation during a given period
Quotation / proposal - is a statement of an organisation's ability to satisfy a customer's demand for a
product or service. It will include specification of the way in which the organisation would satisfy the
demand and include the price, lead time or delivery date, support services offered, etc.
Cost estimate - refers to the cost (price) quoted by the organisation, in response to a call for
submission of bids.
Quotation order winning criteria - are the criteria upon which orders are won. They represent the
criteria which the organisation must satisfy in order to satisfy the customer. Although cost (price) is
often an order winning criteria, a separate metric is included to highlight the importance of
measurement and analysis of other order winning criteria such as product specification, on time
delivery, quality, etc. Where possible there should be specific quantifiable definitions for these
criteria to allow measurement. Examples of such definitions might include defect parts per million,
days lead time, etc.
Winning quotation - refers to the quotation submitted by the successful contractor. It is important to
compare the appropriate order winning criteria in order to indicate where performance should be
improved.
Causal analysis of failures is essential to understanding short falls in performance so that action can
be taken to improve. Causal analysis of individual quotations will allow understanding of why that
order was or was not won. More importantly analysis of causes over time will provide an indication
of recurring causes of failure and areas of performance in which the organisation is not competitive.
This indicates areas in which improvement effort should be focused.
Comparison of proposal success rate / quotation conversion rate with that of competitors and other
organisations in the industry is crucial if competitiveness is to be understood. The organisation should
be quoting for the same jobs as its competitors, as a result it should have an understanding of the
conversion rate of its competitors and the standard for the industry.
CAUTION - when using this measure it is important to consider actual performance against that
quoted. Orders can be won based on unrealistic quotes. However failure to deliver the conditions
stated in the quotation, upon which the order was won, will result in poor actual performance,
resulting in penalties imposed by customers and reducing the likelihood of future orders.
The data for this measure should be collected, analysed and reported as part of the 'generate demand'
process, which should record all quotations made, the success rate and reasons for failure.
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Processes Sub-Facet 3: Brand, Product & Service Strategy
Value of new accounts / customers

Measurement of the value of new accounts assesses the profitability of 'recruiting' and maintaining
new customers.
Research has found that new customers are generally less profitable than existing customers,
indicating the need to increase customer retention where possible. However it is inevitable that
organisations will lose customers and will have to gain new accounts in order to achieve organic
sales growth. As such finding new customers will usually be a key objective of organisations in order
to increase sales turnover.
Finding new customers is important to ensure that a 'critical mass' of customers is maintained
especially in emerging industries. Acquiring new customers will also provide insurance against over
reliance on the existing customer base. Over reliance on the existing customer base will have
considerable effects on the organisation if there are changes in demand or customer preferences.
Measurement of the value of new accounts and customers will be particularly important to
organisations when introducing new products or attempting to enter new markets as they will rely on
the attraction of new customers.
Measurement of the value of new accounts is important as it provides an understanding of the
profitability of new accounts which should be increased where possible.
sales revenue generated from new accounts / customers as a % of sales turnover in a given period
sales revenue generated from new accounts / customers as a % of average cost of acquiring new
accounts in a given period
New accounts / customers - are defined as those customers that have begun to purchase from the
organisation within a certain defined period of time. This duration will depend on industry and the
type of product or service. Where there is high customer turnover or where new products and
services are introduced frequently, the period that an account can be considered new will be shorter
than in other circumstances. Where the customer base is segmented, sales revenue from new
customers in different segments may have to be recorded separately.
Sales turnover - is the total revenue generated from the sale of all products to all customers.
Cost of acquiring new accounts - are the costs that are incurred in encouraging customers to purchase
from the organisation for the first time. These costs include advertising costs, discounts or incentives,
initial start-up costs, additional customer service to explain or demonstrate the features of the product
or service, etc.
As with the definition of 'new accounts', the given period for this measure will depend on the industry
or market sector in which the organisation competes. Where there is high customer turnover or there
is frequent introduction of new products the measure should be analysed over a short time period to
identify changing trends.
Analysis should compare different markets and market sectors in order to identify those that are most
profitable or valuable. This will help to identify where future efforts should be focused.
Data for calculation of this measure should be available from the accounting information system.
However additional analysis might be necessary to identify the costs and revenues that are
attributable to new accounts (as opposed to existing accounts). This additional analysis should be
carried out as part of the sales / generate demand process and based on customer account records.
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Mis-selling Claims Cost

Mis-selling involves the sale of products and services to customers for whom they are inappropriate.
Mis-selling can lead to claims with substantial financial implications for a company. Measuring the
size of such claims will enable monitoring, as well as timely corrective action.
The reason for most mis-selling claims is the creation of expectations that cannot be fulfilled. There
can be instances of either deliberate or accidental misrepresentation of facts relating to particular
products or services, perhaps during advertising, or due to factual errors contained in documentation
forming part of the purchase agreement. As such mis-selling claims cost is a measure of the 'generate
demand' process, assessing how well it identifies customer requirements, and selects and sells
products that are appropriate. Corrective actions could be a revised advertising policy (or changes to
documentation) or improvement/change of product or service specifications to match the rhetoric or
literature/ document contents.
The cost of mis-selling will not be limited to the direct, often monetary claims made by the clients or
customers. There will also be negative publicity and such claims will also affect the general level of
customer/client satisfaction and the brand image of the company. Therefore, it is important to take
adequate additional measures to capture the impact of mis-selling on satisfaction and brand image
during customer opinion surveys. Questions in the survey should aim to ascertain the customers'
opinion of how various aspects of the service meet the expectations created by product or service
literature/ documentation.
In many cases mis-selling is identified and penalised by regulators of the market, in which case misselling costs will form a measure of regulator satisfaction.
costs incurred from mis-selling claims in a given period
cost of mis-selling claims per period, expressed as a % of the total sales revenue
Mis-selling - is the sale of products and services to customers for whom they are inappropriate.
Mis-selling claims costs - refers to the total cost of customer complaints due to mis-selling. The costs
include:
direct financial claims made by clients/customers, or the direct loss incurred as a result of either
the return of the product or termination of the product or service agreement;
fines or penalties imposed by regulators;
legal and other administrative costs associated with such claims. If there are specific personnel
within the company, dealing with such claims, their time (in full or pro rated) will have to be
added as a cost.
Comparison of mis-selling claims with sales revenue provides an interesting insight into the value of
sales that is lost as a result of unrepresentative marketing.
Causal analysis should be undertaken into the reasons mis-selling was allowed to take place,
including identification of those responsible. Such causes might include lack of understanding of the
customer's requirements, lack of understanding of the implications of the product or service for the
customer, lack of control over product/service documentation, deliberate mis-selling, etc. In each
case corrective action should be undertaken to ensure that mis-selling, and the associated costs do not
recur.
Data for this measure should be collected and analysed by the sales department who are responsible
for managing relations with customers in conjunction with those responsible for managing relations
with regulators.
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Value of lost accounts / customers

Value of lost accounts represents the loss of revenue as a result of losing existing customers who
decide not to repurchase or who decide to cancel existing accounts or contracts. It also measures the
costs of attracting new customers to replace those who are lost.
Research has found that maintaining existing customers is more profitable than attracting new
customers due to a number of reasons. New customers incur start-up costs, they may need more
customer services attention and they may spend less than customers who have been with the
organisation for a long time. Further, companies with long-term customers can charge customers
more, because they are generally less price sensitive. Another advantage of having long-term
customers is that they provide free advertising, by way of promoting the product/service to friends
and family. Therefore, loss of old or even relatively new customers can be very expensive, and the
revenues that are lost are unlikely to be recovered even with the attraction of an equal number of new
customers.
The measure of customer profitability should be used when considering the value of lost accounts.
Losing accounts or customers that are not profitable should not be a concern, although the reason that
the accounts were lost should still be identified so that more profitable customers are not driven away
by the same cause.
average sales revenue from lost accounts / customers as a % of sales turnover in a given period
number of defecting customers X average cost of recruiting new customers
Lost accounts - are those customers who do not repurchase from the organisation or cancel existing
contracts.
New accounts - are defined as those customers that began to purchase from the organisation within a
certain defined period of time (see the measure of the 'value of new accounts/ customers').
Cost of acquiring new accounts - are the costs that are incurred in encouraging customers to purchase
from the organisation for the first time. These costs include advertising costs, discounts or incentives,
initial start up costs, additional customer service to explain or demonstrate the features of the product
or service, etc.
The 'given period' for this measure will depend on the industry or market sector in which the
organisation competes. Where there is high customer turnover or there is frequent introduction of new
products, the measure should be analysed over a short time period to identify changing trends.
Analysis of this measure should include comparison of the value of lost accounts with the value of
new accounts that are generated as this will determine the affect of losing accounts and customers on
overall sales turnover. Comparison should also be made of the profitability of lost customers with
that of new customers.
It is crucial that the cause of all lost accounts are considered and that analysis is undertaken to
identify where numerous customers are lost for the same reason. Corrective action should be taken to
eliminate the root causes of lost customers. This should focus most attention on the causes that occur
most frequently, especially when these causes lead profitable customers to defect. Even where the
loss of customers is not of great concern to the organisation (e.g. if the customer is not profitable) it is
important that the causes of the loss custom are understood and rectified so that loss of customers that
are profitable can be avoided.
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Value of existing accounts / customers

Value of existing accounts measures the value of maintaining the existing customer base rather than
finding new customers. It reflects the importance of increasing customer loyalty and retention in order
to increase the profitability of the organisation.
Research has found that existing accounts are generally more profitable than new accounts, indicating
that companies can boost profits by almost 100% by retaining just 5% more of their customers.
Similarly, research reported by Royal Mail indicates that it costs six times more to get a new
customer than to maintain an existing one. Causes of this include:
no effort is required finding new customers
the initial one time start-up costs do not apply
maintaining existing accounts may also be less expensive because existing customers are less
likely to need customer service, due to their familiarity with the product or service
it has been found that existing customers tend to spend more than new customers do.
Research in the auto service industry has found that overall, profit from a fourth-year customer can be
more than triple the profit that same customer generates in the first year. Also, companies with longterm customers can charge more, because long-term customers are generally less price sensitive.
Another advantage of having long-term customers is that they provide free advertising, by way of
promoting the product/ service to colleagues, contacts, friends and family.
Measurement of the value of new accounts is important as it provides an understanding of the
profitability of existing accounts. Where possible the value of existing accounts should be increased
as this will be easier and more cost effective than finding new customers.
This measure should be used in conjunction with the measure of 'customer retention / loyalty'.
sales revenue generated from existing accounts / customers as a % of the total sales turnover
sales revenue generated from existing accounts / customers as a % of the cost of maintaining an
existing account
Existing accounts - are defined as those customers that have purchased from the organisation for more
than a certain defined period of time. This duration will depend on industry and the type of product or
service and will be defined by the frequency with which new customers are attracted. The higher this
frequency the shorter the time before customers are considered to be an existing customer.
Cost of maintaining existing accounts - are the costs incurred in satisfying existing customers and
maintaining repeat sales. These costs include support services and regular sales contacts to encourage
additional sales.
As with the definition of 'existing accounts', the given period for this measure will depend on the
industry and market sector in which the organisation competes. Where there is high customer turnover
or there is frequent introduction of new products, the measure should be analysed over a short time
period to identify changing trends.
Consideration should be given to the value of new accounts when using this measure. This will
provide an understanding of the advantage that can be gained from maintaining the current customer
base by increasing customer retention and loyalty.
Analysis should compare different markets and market sectors in order to identify those that are most
profitable or valuable. This will help to identify where future efforts should be focused.
Data for calculation of this measure should be available from the accounting information system,
however additional analysis might be necessary to identify the costs and revenues that are attributable
to existing accounts (as opposed to new accounts). This additional analysis should be done in the
sales / generate demand process based on their customer account records. The type of information /
data required for this measure may be more readily available where customer records are routinely
maintained - such as in the telecommunications sector. In other industries, such as the retail food
sector, more indirect methods such as club cards or loyalty cards are used in order to maintain
adequate data.
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Accuracy of cost estimation / business cases

The accuracy of cost estimation / business cases is a crucial element of the planning process when
bidding for new contracts, planning projects and when setting target costs/budgets. It assesses how
accurately the consequences of plans are identified and their financial implications estimated.
This measure is particularly relevant in make-to-order situations, where quotes that include prices
and estimates of costs, have to be prepared.
Inaccurate estimates will result in projects and orders being taken on, under the assumption that they
will be profitable when this may not be the case. As a result they can lead to financial losses, loss of
competitiveness, and at times customer dissatisfaction, where cost cutting leads to undesirable end
products/services.
Estimates are often only as good as the data upon which they are based. Therefore, problems of
estimation may in fact reflect problems associated with information and/or communication. Accuracy
of estimates is also affected by the time available to bid.
% of occasions that cost estimation / business cases are 100 % accurate
estimated cost as a % of actual cost for a given job or project
Estimated cost - refers to the organisation's opinion of the cost required to complete a project or make
a product. In the case of a product, it is the value of the quotation submitted by the organisation, in
response to a call for submission of bids, or the target cost set at the beginning of a job.
Actual cost - refers to the actual cost of producing the product or delivering the service.
Analysis of differences between estimated costs and actual costs should identify the reasons the
estimates were inaccurate. This should include testing of the assumptions upon which the estimates
were made. This analysis should enable improvement in the estimation process enabling the accuracy
of future estimates to be improved.
In order to calculate this measure, and to review the estimation process, estimated costs should be
documented when preparing quotes. The actual cost can be calculated from the financial accounting
system.
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Processes Sub-Facet 1: Plan & Manage Enterprise - Financial Operations
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Project Cost Compliance

Project cost compliance monitors the frequency with which projects are completed within cost (or
within budget).
It is one of the key customer requirements (whether they be internal or external customers)
contributing to satisfaction/dissatisfaction. Therefore, 100% within cost completion should be the
aim.
This is an aggregate measure indicating a successful/unsuccessful end result. There should be an indepth analysis of project costs to identify the causes of over-budget completions (if any).
Whenever measuring and monitoring costs, consideration should be given to the impact of budgetary
control or changes in costs (e.g. cost reduction) on the other dimensions of performance (quality,
speed, on time completion, etc.)
% of projects completed within cost or budget during a specified period
cost or budget variance as a % of total cost for all projects undertaken during a specified period
Projects - are discrete pieces of work. They should be clearly defined with clear aims and objectives
in terms of not only cost, but also the scope of the work involved. Absence of targets may result in
blurring of performance.
Projects not complete in terms of the other customer requirements, such as quality or due date, should
not be considered as having fulfilled the within cost or within budget completion requirement.
Cost or budget should be governed by the amount contained in the contractual agreement, where one
exists, or by agreement with the customer (such as a verbal agreement). Where the customers are
internal, cost could refer to the budget or target cost set at the beginning of the project. It is also
important that the 'within cost' target is suitably adjusted to reflect the cost impact of any subsequent
design or specification changes that are agreed upon.
Cost or budget variance can be defined as the difference between the Budgeted Cost of Work
Performed (BCWP) and the Actual Cost of Work Performed (ACWP). Generally, a positive cost
variance (completion at less than target cost) is desirable. However, it will be crucial to ascertain
whether the initial target cost set was in fact unrealistically high. This may represent estimation
problems, which, if not rectified, can lead to losing out on new contracts.
It is essential that there is analysis of the causes of variations from budgets. This will enable future
planning to be improved as a result of the lessons learnt.
Each project should include a project cost monitoring process to ensure targets are achieved and
performance can be analysed following completion.
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On Time Project Completion

On time project completion monitors the frequency with which projects/ processes are completed on
time.
It is one of the key client / customer requirements contributing to satisfaction / dissatisfaction, for both
internal and external customers. 100% on time completion should always be the aim.
This is an aggregate measure indicating a successful/unsuccessful end result. There should be an indepth analysis of the causes of any late completion.
On time completion of projects will also affect cost target achievement. If projects over run it is
inevitable that additional resources will be used, resulting in additional costs.
% of projects completed on time during a specified period
project delay as a % of total project lead time
Projects - are discrete pieces of work. They should be clearly defined with clear aims and objectives
in terms of not only cost, but also the scope of the work involved. Absence of targets may result in
blurring of performance.
Projects not complete in terms of the other customer requirements, such as quality or due date, should
not be considered as having fulfilled the within cost or within budget completion requirement.
The planned project completion date should be defined by the date and time contained in the
contractual agreement, where one exists, or by another form of agreement with the customer (such as
verbal agreement). Where the customers are internal, the planned project completion date should be
set at the beginning of the project. It is also important that the planned project completion due date is
suitably adjusted to reflect the time impact of any subsequent agreed-upon (between manufacturer and
customer) design variations/changes.
It is essential that there is analysis of the causes of variations from planned project completion date.
This will enable future planning to be improved as a result of the lessons learnt.
Each project should include a project monitoring process to ensure milestones are achieved and
performance can be analysed following completion.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Project Completion to Quality Specifications

Project completion to quality specifications measures the frequency with which projects are
completed to the specification in the project.
It is essential that specifications are satisfied if customers (whether they be internal or external) are to
be satisfied. Therefore the target should be to complete 100% of projects within specification.
This is an aggregate measure indicating a successful completion of the entire project. It is essential
that there is more detailed analysis of the successful completion of specific sub-sections.
Problems associated with quality or compliance to specification will be reflected in the cost and
delivery date compliance, as any defects or non compliances will usually have to be rectified before
the project is completed. As a result the measures of 'Project Cost Compliance' and 'On Time Project
Completion' should also be used when considering specification compliance.
% of projects/ processes not complying fully with specifications, within the set time and cost
parameters, during a specified period.
Projects - are discrete pieces of work. They should be clearly defined with clear aims and
objectives, not only in terms of cost, but also in the scope of the work involved. Absence of precise
specifications will make it impossible to effectively monitor quality.
The quality standards may be as per purpose built specifications or may refer to industry-wide
accepted norms.
The set time and cost targets should reflect the time and cost implications of subsequent, agreed-upon
changes to design.
Each project should include a project monitoring process which should ensure that all specifications
are met.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Communications with Stakeholders

The satisfaction of the requirements of stakeholders is an important objective for most organisations.
Organisations are increasingly recognising that increasing the satisfaction, and harnessing the
contribution, of all of their stakeholders can have a significant effect on strategic objectives and
financial performance.
In order for organisations to satisfy their stakeholders it is important to identify their wants and needs
and take action that satisfies them appropriately. As a result it is important that the organisation
communicates with its stakeholders effectively.
Effective communication with stakeholders allows the identification of their wants and needs as well
as specific actions required to increase satisfaction. Effective communication also enables the
organisation to provide the stakeholder with any information they require to make decisions regarding
their interaction with the organisation (e.g. information to aid the customer's purchase decision or
investor's investment decision). Increasing the information provided to stakeholders allows them to
make more informed decisions.
Increased communication enables organisations to affect stakeholder perceptions of their
performance, highlighting where they performs better than the competition, for example. However
care must be taken that expectations raised can be met as failure to do so will have a significant effect
on stakeholder satisfaction.
Review and comparison of the information communicated with actual company performance allows
assessment of the accuracy of communication and hence its usefulness to stakeholders.
average number of communications with stakeholders in a given period
Communication - is the passing of any information to stakeholders that they require to make decisions
regarding their interaction with the organisation. Information might include financial and non-financial
performance measures and qualitative information. Communication might be in the form of reports,
press releases, meetings with investors, etc.
Information - in the context of this measure refers to any information that positively affects
stakeholders' perceptions of the organisation and helps them in making decisions about the
organisation.
The given period - the time period for consideration of this measure should reflect the perceptions
and needs of each of the stakeholders. Where stakeholders have frequent needs for information or
where stakeholder perceptions change quickly, the period should be short.
Analysis of this measure should include consideration of different stakeholders in the organisation i.e. investors, customers, employees, suppliers, regulators and communities. Each of the stakeholder
groups and individual stakeholders within these groups, will have different information requirements
and communication with them should be considered separately.
The data for this performance measure should be collected as part of the process within the
organisation responsible for communication with stakeholders (Manage Relations with Stakeholders).
Prism Facet 1:
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: All Stakeholders
Prism Facet 3:
Strategies Sub-Facet 3: All Strategies
Expenditure on Stakeholder Relations

Maximising satisfaction of stakeholders is an important objective of organisations and a key
determinant of their success and profitability. Organisations are increasingly recognising that
increasing the satisfaction and harnessing the contribution of all of their stakeholders can have a
significant effect on strategic objectives and financial performance.
In order for organisations to satisfy their stakeholders it is important to identify their wants and needs
and take action that satisfies them appropriately. As a result it is important that the organisation
effectively manages the relationship with its stakeholders so that their wants and needs are accurately
identified and effectively satisfied.
Measurement of the level of expenditure on the management of relations with stakeholders provides
an indication of the commitment to improving these relationships and assesses the efficiency of the
'manage relations with stakeholders' process.
As with all areas of expenditure within the organisation, expenditure on management of relations with
stakeholders should be controlled and reduced where possible. In order to do this effectively the
'level of stakeholder satisfaction' should be considered when using this measure.
% of PR expenditure spent on stakeholder groups
PR expenditure - is expenditure on attempting to influence perceptions of the organisation.
Stakeholder groups - are groups that have an interest in the organisation. These are grouped together
as investors, customers, employees, suppliers, regulators and communities.
Analysis of this measure should include comparison of trends in the level of expenditure levels on
stakeholder relations with trends in stakeholder satisfaction. This will provide the organisation with
an understanding of the effectiveness of the 'manage relations with stakeholders' process and the
efficiency with which it utilises its resources.
Analysis of this measure should also include consideration of different stakeholders in the
organisation - i.e. investors, customers, employees, suppliers, regulators and communities. Each of
the stakeholder groups, and individual stakeholders within these groups, will have different
requirements, hence the resources required to manage relations with them will be different.
The data for this performance measure should be collected as part of the process within the
organisation responsible for communication with stakeholders (Manage Relations with Stakeholders).
Prism Facet 1:
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: All Stakeholders
Prism Facet 3:
Employee Satisfaction
Several research studies have shown the importance of increasing employee satisfaction. They
highlight the contribution that increasing employee satisfaction can make to increasing customer
satisfaction and financial performance.
A survey by Gallup based on twelve work-place audit statements regarding employee
satisfaction shows that businesses where responses indicate that high employee satisfaction outperform rivals on traditional hard measures of:
Productivity by 22%; Customer Satisfaction by 38%; Profitability by 27%; and Employee
Retention by 22%
Sears, Roebuck and Company found that a 5 point improvement in employee attitudes will drive
a 1.3 point improvement in customer satisfaction, which in turn will drive a 0.5 % improvement
in revenue growth.
Research at the University of Sheffield shows that 12% of the variation between companies in
their profitability can be explained by job satisfaction.
These pieces of research indicate the effect on the organisation's performance of increased employee
satisfaction. In addition employee satisfaction is necessary to maintain a loyal work force increasing
employee retention, which in turn reduces the cost of recruitment.
Although there are surrogate measures of employee satisfaction provided within the catalogue, the
best way of assessing employee satisfaction is by asking the employees. This is usually done through
an employee satisfaction survey.
Employee Satisfaction Survey
Employee satisfaction surveys often provide a numerical value for the level of employee satisfaction,
a percentage for example. Where multiple surveys are carried out over a period of time, such index
numbers indicate trends in satisfaction and allow correlations to be identified to assess the drivers
and consequences of employee satisfaction.
Great value in assessing employee satisfaction is derived from the identification of the drivers of
satisfaction. Where possible, the drivers of employee satisfaction that employees consider most
important, should be converted into operational measures within the organisation. Such drivers might
include salary or benefit benchmarks, spend on training, working hours, working practices, health and
safety considerations, etc.
Perceptions of performance are more important than actual performance in relation to employee
satisfaction. For example, even though pay levels might be higher than that in other organisations, if
the employees don't realise that this is the case employee satisfaction will not be improved. It is
important therefore to consider and manage employees' perceptions when attempting to improve
employee satisfaction.
Prism Facet 1:
Stakeholder Satisfaction Sub-Facet 1: Employee Satisfaction
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Employee Turnover / Loyalty

Employee Turnover measures the rate at which employees leave the organisation.
Clearly the rate at which people leave provides an indication of the level of employee satisfaction
with the organisation, as dissatisfied employees are more likely to leave the organisation.
Employee Turnover also has considerable implications for the management of human resources and
the availability of skills and competencies necessary to undertake the operations of the organisation.
If employee turnover is high, the cost of recruitment, training and employee development will
increase. As a result, this measure is most important in the area of an organisation where the level of
skill or competence is highest. Especially where these skills and competencies provide a competitive
advantage to the organisation and they are costly to replace.
It is worth noting that employee turnover can also be too low. New recruits bring new ideas to
organisations. Hence there is a need to ensure that new people constantly join organisations. This may
require the loss of existing employees to make way for such new recruits.
% of employees that leave the organisation in a given time period
average length of service
age / service profile - percentage of employees that are of a given age / length of service
Employees - are people paid by an organisation to execute specific tasks.
Length of service - is the length of time an individual has been employed by the organisation.
The time period for this measure will be determined by the frequency with which people join and
leave the organisation. Where people join and leave the organisation frequently (i.e. where turnover
is high) it is important to calculate and analyse this measure frequently in order to identify trends in
performance and causes of fluctuations.
The employee turnover measure should include analysis and comparison by skill type. Trends of
particular skills leaving the organisation are important when planning recruitment and training
policies as well as policies for staff retention. This has serious implications if certain skills or
competencies which provide competitive advantage are lost or if senior managers leave and take
knowledge of strategies with them.
Analysis of the reasons for leaving is also important. A 'leavers interview' for all employees leaving
the organisation could be used to identify the many reasons employees decide to leave and assess
overall levels of satisfaction. Most substantial leavers debriefs should also be considered if key
people are leaving as they are likely to possess a significant amount of intellectual capital which the
organisation would like to identify and retain. If common and recurring reasons for leaving are
reported, operational measures should be implemented to track whether specific action can reduce
employee turnover. One example would be 'Average increase in salary on leaving', which should be
analysed by job or skill type.
The benchmark level of employee turnover will vary between industries and skill types. For example,
the benchmark for call centres, where skill levels are not high and substitute labour is readily
available, is in the region of 40%.
Formula 3 allows analysis of the proportion of employees that are within a particular age range or
who have been with the organisation for a certain period of time. This can be important when
planning recruitment to cover for retirement.
Where individual employees have important knowledge expertise or skills, consideration should be
given to the impact of losing those skills, especially if they are lost to a competitor. As a result some
organisations have classified their employees according to their value to the organisation. High
valued employees are managed differently and are offered significant incentives to encourage them to
stay. Analysis of the measure should reflect this categorisation of employees.
Prism Facet 1:
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprise - Human Resources
Prism Facet 3:
Capabilities Sub-Facet 3: People
Willingness of Employees to Recommend the Company as an

Employer
This measure is an important indicator of the level of the satisfaction of an organisation's employees.
Their willingness to encourage others to apply for employment with the organisation is the best
indication of satisfaction and can be a significant contribution to the organisation if high quality
candidates are encouraged to apply for jobs by existing employees. If a high proportion of jobs can be
filled by applicants recommended to apply by existing employees, and they fill the skill requirements
of the organisation, it reduces the need for the organisation to undertake widespread advertisement of
vacancies, increasing the efficiency of the recruitment process.
Whilst willingness to recommend indicates a potential contribution that employees could make, it is
only through the measurement of actual recommendations that realised contribution can be assessed.
% of employees who are willing to recommend the organisation as an employer to a friend
average number of applications / enquiries received regarding employment following
recommendation
% of applicants / appointees that have received recommendations from current employees
% of vacancies / skills gaps filled by recommendations
Willingness to recommend - is the willingness of current employees to recommend to others that they
should join the organisation.
Applicants - applicants for jobs.
Appointees - people appointed to take up employment with the organisation. The distinction between
applicants and appointees is an important one as it indicates whether those who have been
recommended to apply have the skills required by the organisation.
Recommendation - is where an existing employee recommends the organisation to someone as being a
good employer to work for.
Analysis of recommendations should identify the area of the organisation in which those
recommending work. This provides an indication of employee satisfaction in different areas of the
organisation, highlighting where there is a need to focus improvement effort.
Recommendations can be encouraged by bonus or reward schemes for the recruitment of new
employees, especially if they have specific skills which are being sought. This will bias the number
of recommendations but will encourage employees to become involved in the recruitment process.
This might improve the efficiency of the process and improve the recruitment of appropriate people
for the organisation.
Analysis should also identify the skill level of those joining the organisation following a
recommendation. This will identify whether current employees understand the skills requirements that
need to be filled within the organisation and whether they have developed a network of contacts that
enables them to recommend someone to fill vacancies or skills gaps.
Willingness to recommend data should be obtained from the employee satisfaction evaluation, i.e.
from the employee satisfaction survey, by including a question of whether employees would
recommend the organisation as an employer. Data regarding actual recommendations should be
obtained via the recruitment process by identifying where applicants heard about the organisation or
vacancy and what encouraged them to apply.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Employee Contribution
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Employee Improvement Ideas / Suggestions

Employees are a valuable source of ideas for improvement of operations. They have an in-depth
knowledge of current operations and can identify how they can be improved and how interaction with
other stakeholders could be improved. As a result harnessing the potential that they offer can be of
considerable advantage to the organisation.
Employee improvement ideas and suggestions indicate an important way in which employees can
contribute to improving the performance of the organisation. The measure also provides an indication
of employee satisfaction, as dissatisfied employees are unlikely to make suggestions to benefit the
organisation unless there is an additional incentive. The measure will also assess how well the human
resource management process encourages employees to make suggestions and provide feedback.
To be most effective the measure of improvement ideas / suggestions should evolve as performance
improves. Measurement of the number of ideas / suggestions (formula 1) should encourage increased
volume of ideas and suggestions. Once the volume of ideas and suggestions has increased it is
desirable that the sophistication of the measure is increased to encourage implementation of ideas.
Further sophistication could also assess the positive impact suggestions have on performance.
number of improvement ideas / suggestions made per employee in a given period
% of employees that make improvement suggestions
% of employees improvement ideas / suggestions that are implemented
average value of improvement ideas / suggestions implemented
lead time to respond to suggestions / feedback
Improvement ideas / suggestions - are contributions from employees with the objective of improving
the operations of the organisation.
Value of improvement ideas / suggestions implemented - is the value of implemented ideas or
suggestions to the organisation. This may be realised through increased competitive advantage
(resulting in increased sales) or improved operating efficiency or effectiveness (resulting in reduced
cost). It may be possible to measure the value of improvements, although it may be necessary to make
a subjective assessment of the value.
is taken. Initially this action should be an acknowledgement of receipt and notification of potential
time before action will be taken. There should be a standard benchmark lead time for
acknowledgement. It is important that employees are notified of the progress of their suggestions and
are given reasons if suggestions are not going to be implemented.
Analysis of feedback and suggestions should include consideration of the parts of the organisation
from which suggestions are received to understand which parts of the organisation are most proactive
in terms of performance improvement. It will also indicate in which areas employee satisfaction is
highest.
frequently made suggestions. The importance of suggestions and feedback must be considered, as it is
important that organisations don't take their eye off the most important performance factors that are
already being delivered, in an attempt to improve other less important performance areas.
Suggestions will be more important if they are not prompted. The amount of feedback can be
enhanced by providing incentives or rewards for feedback and suggestions, however the effect of
such schemes should be considered when analysing the volume of ideas and suggestions received.
performance in line with employee requirements. Many organisations implement suggestion schemes
to encourage ideas from employees. These may include incentives for the contribution and
implementation of ideas or suggestions which have a positive impact on the operations of the
organisation. Suggestions might also be encouraged through employee satisfaction surveys and
personal appraisals.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Absenteeism
Absenteeism measures the proportion of time that employees are present and available for work.
The level of absenteeism is an important input into the capacity planning process, providing an
indicator of the likely availability of employees and skills when required. As a result data from this
measure is an important input to planning and scheduling of all operations and activities.
Measurement of absenteeism is also considered to be an attempt to gauge the morale and attitudes
within the organisation. It is considered that the level of absence provides an indication of
commitment to the organisation as a proportion of absence is 'voluntary'. To use absenteeism in this
way, the level should be compared to a benchmark level for the region or industry.
the total number of working days lost due to absenteeism as % of maximum number of working days
available
the total number of working days lost due to absenteeism as % of number of employees
Working days lost - are those days on which employees are unavailable for work.
Working days available - are maximum number of days which employees would have been available
for work (i.e. excluding holidays, weekends and considering shifts where appropriate).
Use of the measure should include analysis based on a number of criteria. Such criteria include job
types and departments to identify where morale is lowest or accidents and illness are most common.
Analysis should also consider the causes of absence - determining the severity of the cause to assess
how willing employees are to attend work if they have an illness or injury that are considered to be
relatively minor, and whether the cause is an occupational illness or injury.
The data required to calculate this measure should be available from the personnel department who
should maintain records of absence and its cause.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Remuneration and Benefits Benchmark

Levels of remuneration are an important contributor to employee satisfaction.
Satisfaction will be adversely affected if salary levels are less favourable than those offered by
competitors or geographic norms.
As a result of poor employee satisfaction, human resources are likely to be more difficult to plan and
manage as existing employees are less likely to be committed to the organisation.
Furthermore, the competitiveness of salaries has considerable implications for the retention of
employees and the ability to attract new employees and hence ensuring the availability of the
necessary skills and capabilities.
CAUTION
Although less common, it is also possible that dissatisfied, demotivated or uncommitted employees
could be tempted to stay with the organisation by salaries above industry or geographic norms.
However, the Plan and Manage Human Resources process should address the issues of demotivation
and identify employees who are not committed.
average salary paid vs. competition / industry and geographical norms
benefits provided vs. competition / industry and geographical norms
Salary paid - the regular payment made to employees in return for the execution of usual duties.
Benefits provided - refer to additional payment or service offered to employees as part of the agreed
terms and conditions of employment. Benefits might include pensions, company cars, etc.
The use of company-wide average salaries produces little valuable data. An analysis by job or skill
type is essential to provide meaningful comparison.
The comparison for benchmarking of this measure should be as appropriate as possible for the
business and job in question, given the market for the skills in question.
Comparison vs. competitors is most appropriate when skills and competencies held provide
competitive advantage and competitors are likely to require similar skills.
Comparison with industry standards are appropriate when many businesses in the industry
require similar skills sets and hence are trying to recruit the same potential employees.
Comparison with geographical standards or norms is more appropriate where the skills required
are in abundance in a given area.

The personnel department (plan and manage enterprise - human resources process) will keep records
of the salaries and benefits that are given to employees. It will also be their responsibility to
undertake benchmarking activity to understand details of comparable geographical and industry
norms. Furthermore feedback from current employees and applicants for new jobs will provide
indicators of current norms.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Internal Promotion Opportunities

This measure assesses whether there are opportunities for current employees to gain promotion to
higher positions within the organisation.
Opportunities for promotion can be a major determinant of employee satisfaction.
If progression up the organisation is not rapid enough, dissatisfied employees are likely to leave the
organisation - affecting the Employee Turnover measure.
CAUTION
Exclusively filling senior management positions internally can prevent new ideas being brought into
the organisation and can reinforce current working practices, stifling change. An appropriate balance
between internal promotion and external recruitment should be maintained.
average lead time to promotion
average lead time for promotion from bottom grade to senior management
% of managers / senior managers who have been promoted internally
Promotion - is the raising of position or rank of an employee within the organisation. It is implicit
within this measure that vacancies are filled by promotion of existing employees, rather than
recruitment of new employees from outside the organisation.
Bottom grade - the lowest grade of employment in a given organisation or department.
Senior management - is the collective body of employees who manage or direct the organisation.
Promoted internally - should include those who have been promoted from the bottom and those who
have been recruited to management positions and then progressed to senior management positions.
Average lead time for promotion from bottom grade to senior management (formula 2) might be a
notional time as there may be no senior managers who have been promoted from the lowest grade in
the organisation. Hence this formula should be linked to the '% of senior managers who have been
promoted internally' (formula 3).
The average lead time to promotion should include analysis at each level of the organisation and each
job type. This analysis should include the department of part of the organisation from which the
promoted employee originates and the position promoted to.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Numerical Labour Flexibility (Hire & Fire)

The measure of labour flexibility assesses how easily an organisation can vary the size of its
workforce in line demand.
It is an important measure to assess an organisation's ability to adapt to changes in circumstances and
demand. It assesses the ability to acquire and dispose of the appropriate skills and labour required to
satisfy demand. This measure is particularly important for organisations that are prone to cyclical
fluctuations and seasonal peaks and troughs in demand for their products and services. Implicit in this
measure is the assumption that the organisation has the ability to reduce headcount and dispose of
specific skills when they are no longer required.
This is a particularly important measure to use where there are big fluctuations in demand for labour
or particular skills.
Increasing flexibility is an important objective for organisations, however it could also have a
negative effect on employee satisfaction. Increasing numerical flexibility will usually be achieved
through use of short-term contracts or temporary employees. Use of such employment policies are
contrary to stability for employees and as such can negatively affect employee satisfaction.
When using the measure it is important to also consider the 'Labour / Skills Availability' measure
which assesses whether the appropriate skills are available when required.
It is most appropriate to use this measure in relation to unskilled jobs as there is likely to be greater
availability of surplus labour in the market. Where specific skills are required it will be more
difficult to acquire the skills from the labour market, so it is more likely that the skills will be kept
within the organisation.
average length of employment contract
average lead time to recruit / lay off employees
average cost of recruiting / laying off employees
% of workers employed on short-term contracts
% of workers who are temporary workers
Employment contract - is the contract defining the terms and conditions of employment. Whilst
normally used in the context of employees of an organisation, in this case it can also include workers
employed via employment agencies. Regardless of the likelihood that contracts will be renewed, or
the number of consecutive contracts that particular employees have been employed on, the length of
currently held contracts reflects the organisation's flexibility.
Recruiting - relates to the process of bringing in the workers required to fulfil demand.
Lay off - is the process of disposing of employees who are no longer required by the organisation.
Short-term contract - are employment contracts of a fixed term.
Temporary workers - are workers brought in to undertake a specific activity over a short period of
time. Often they are employed by a third party, an agency, which is paid for their provision. In this
case the employment agency incurs the employment costs of the individual contract employee.
Use of the measure should include analysis by:
job type - this should include consideration of level in the organisation
by contract type / employment conditions - full time / part time, permanent / temporary staff
skill type - employees with key skills are likely to be kept on permanent contracts to ensure that
they are kept within the organisation. Of course this adds to the employee's security.
When using the measure it is important to consider the availability of the required skills within the
labour market. Scarce skills, especially those providing competitive advantage, should be acquired
and effort should be made to keep the employees within the organisation.
The data for this measure should be available within the personnel department's records.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Transferability of Skills
Transferability of skills refers to the ability to use specific skills for different jobs. This will affect
the ability of employees to transfer from one job to another.
Transferability of skills is a capability that an organisation will be keen to develop as it means that
employees can be transferred between locations or jobs to satisfy changes in demand. In order to
achieve transferability of skills it is necessary to plan training and staff development appropriately
and to design jobs in such a way that transferable skills can be utilised.
As well as measuring capabilities and the effectiveness of human resources planning process,
transferability of skills will also positively affect employee satisfaction. Employees are keen to
acquire skills that will enable them to enhance their careers. Investment in training, which goes
beyond the employee's current job, indicates a commitment to employees and their personal
development.
The availability of training and staff development can encourage people to join and stay with an
organisation. This might be important in organisations where salaries are not the most competitive.
Development of skills that are transferable between jobs within the organisation is important to
enhance the flexibility of an organisation's workforce - enabling employees to work on a number of
different jobs.
CAUTION
Skills may be transferable to jobs with other organisations. Caution must be taken when providing
employees with an abundance of transferable skills, as it may lead to valued employees leaving the
organisation. This might include employees leaving to join competitors.
% of skills held that are transferable to other jobs / operations
% of skills held that are transferable to other employers
Skills - are specific competencies appropriate for a particular job or set of jobs. Skills are both of a
manual and cognitive nature.
Transferable skills / capabilities - are those which can be transferred to other jobs or tasks.
It may be difficult to define how transferable skills are. This may require a subjective judgement
made by the personnel or the training department.
Analysis of the measure should include investigation of the transferability of different types of skill.
For example analysis of the difference between manual and cognitive skills. Analysis should also
consider how transferability varies at different organisational levels.
Data for calculation of this measure should be collected by the human resource planning process as
part of an on going programme of personal appraisal.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Transferability of staff skills / training

Providing transferable skills can make an important contribution to employee satisfaction. Investment
in training which goes beyond the employee's current job indicates a commitment to employees and
their personal development.
The availability of training and staff development can encourage people to join and stay with an
organisation. This might be important in organisations where salaries or other benefits are not the
most competitive.
Development of skills that are transferable between jobs within the organisation is important to
enhance the flexibility of an organisation's workforce - enabling employees to work on a number of
different jobs so that cover is available in the case of absence, for example.
CAUTION
Skills may be transferable to jobs with other organisations. Caution must be taken when providing
employees with an abundance of transferable skills, as it may lead to valued employees leaving the
organisation, possibly to join competitors.
% of training / staff development that provides transferable skills / capabilities
% of training expenditure that provides transferable skills
Training / staff development - is the provision of skills to current employees of the organisation. It
includes any activities provided or funded by the organisation to enhance an employees skills or
capabilities and also includes internal and external training courses and 'on the job' training.
Transferable skills / capabilities - are those skills and capabilities which can be transferred to other
jobs or tasks.
Consideration should be given to the transferability of skills provided by each training course or staff
development activity. In theory the greater the transferability the better, although in practice there is
sometimes a need to equip individuals with very specialist skills.
The human resource planning process or department is responsible for monitoring the provision of
staff development and training. It is necessary for them to make a qualitative assessment of the
transferability of skills provided in order to calculate this measure.
Prism Facet 1:

Prism Facet 2:
Prism Facet 3:
Applications per vacancy

Measurement of the number of people that apply for each job that is advertised assesses the number of
people who want to work for the organisation.
It provides an indicator of the perceived attractiveness, to potential employees, of the organisation as
an employer. This provides an indication of the perception of the organisation by people outside it.
These perceptions will be influenced by numerous factors including, existing employee word of
mouth.
The measure also assesses how well the recruitment process advertises vacancies, including targeting
advertising to people who are likely to apply.
average number of applications received per vacancy
Applications - are requests by potential employees to join the organisation. In the case of this
measure applications are responses to adverts for specific jobs rather than speculative applications.
Vacancies - are posts within the organisation which are currently unoccupied by an employee. In this
case they are the subject of adverts to recruit people. Although it is also worth tracking the number of
unsolicited applications, as this provides an indication of people's perception of whether or not the
organisation is a desirable place to work.
Analysis of the measure should include by job or skill type as this will indicate the appeal of the
company in different employment markets.
The data required to calculate this measure should be readily available within the manage human
resources process who receive and record all applications for each job advertised.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Rejected Job Offers

The measure of rejected job offers is a measure of the appeal of the organisation to potential
employees and the perception of the organisation as an employer.
It is related to the measurement of employee satisfaction as it assesses whether people want to work
for the organisation.
It provides a measure of the recruitment process since it indicates the amount of time and resources
that are wasted trying to recruit people who subsequently decide against joining the organisation.
It also indicates how well the people involved in recruitment are able to identify applicants
interviewed that don't want or intend to join the organisation.
It has implications for the ability of the organisation to recruit people with the skills and
competencies it requires to compete.
% of job offers that are rejected by applicants in a given time period
Job offer - is the offer of employment within the organisation to an individual.
Rejected job offer - is a job offer to an individual who subsequently decides not to join the
organisation.
Applications - are requests by potential employees to join the organisation.
The time period for this measure will be dependant on the volume of job offers made. The higher the
volume, the more frequently the measure should be used and analysed, so that trends in rejected offers
can be identified promptly and appropriate action can be taken.
It is important for the organisation to analyse offers rejected by the job type or skills of the job offer.
The more costly or difficult to acquire the skill, the more important that the appropriate applicant
agree to join the organisation.
In addition, if it is possible to identify the reason for the applicant rejecting the offer, this would
provide useful information when reviewing recruitment policies and will indicate perceptions of the
organisation.
The personnel department (plan and manage enterprise - human resources process) should monitor all
stages of the recruitment process including the number of offers made and those rejected. In
calculating and reporting this measure, this process or department should undertake analysis of the
reasons that offers have been rejected so that any necessary action can be taken to reduce them.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Safety Incidents
This measure assesses the number of incidents that occur within the organisation which risk the safety
of its employees in some way.
The number of safety incidents at work is an indication of the employees' working environment.
Higher than industry average number of safety incidents will have an adverse effect on employee
satisfaction and discourage employees from joining or staying with the organisation.
Safety incidents are regulated by Health and Safety authorities / regulators and will usually be
covered by safety procedures / codes of practice.
Regulators represent the employee in regard to safety incidents and as such measure affects
compliance to regulator requirements and regulator satisfaction.
number of safety incidents / accidents in a given period
employee days lost due to safety incidents in a given period
number of fatalities in a given period
Safety incidents - are incidents where safety policies / codes of practice are breached. They include
incidents where injury or ill health is caused by a 'safety' incident at work.
Employee days lost - are days where an employee is absent or unable to undertake his or her usual
job due to injury or ill health caused by a safety incident at work.
Fatalities are deaths of employees which occur whilst at work or representing the organisation.
Analysis should be made of the root causes of all incidents, accidents and fatalities, so that action can
be taken to eliminate that cause and ensure that the incidents do not recur.
The plan and manage human resources process should report all safety incidents, their causes and
their impact on the individuals concerned. It is their responsibility to ensure that practices and
procedures are in place to maintain a safe working environment.
Prism Facet 1:
Prism Facet 2:

Prism Facet 3:
Working Hours
The length of working hours is a basic feature of an employees terms and conditions of employment
and has a significant effect on employee satisfaction. Long working hours are likely to have a negative
effect on employee satisfaction.
When measuring working hours, it is important to do so in the context of the terms and conditions
offered by competitors or other organisations to which employees could move. Employees'
perceptions of the terms and conditions available elsewhere will affect their satisfaction, so
comparable terms and conditions must be maintained. Although working hours might be longer than in
other organisations this might be compensated for by other benefits, such as pay.
The employee satisfaction survey / analysis of reasons for employees leaving should include analysis
of the significance of long working hours. Use of this measure is important where long working hours
are identified as causing dissatisfaction and employee turnover.
CAUTION
The measure should reflect actual hours worked. Although contracted working hours may be the same
as the industry or geographic norm, there may be the expectation that longer hours are worked.
Under or over recording of the hours worked can have serious implications for the accurate charging
of time to specific accounts, customers or budgets. It can also cause problems in planning project
resources / resource availability.
average annual / weekly working hours
average number of hours overtime in a given time period
Working hours - are those hours actually worked by employees of the organisation as part of their
terms and conditions, with the addition of overtime. The measure should consider actual hours
worked rather than those charged or recorded.
Overtime - is work undertaken beyond that of standard contracted hours, whether paid or unpaid. It
includes voluntary and compulsory overtime. Consideration must be given to whether overtime is
compulsory and whether there is an expectation that a certain amount of overtime is undertaken.
Analysis of the measure should reflect this.
It is important to compare performance with that of competitors and other companies in comparable
industries. This can be done through benchmarking activities.
This measure should be analysed by job type as there may be significant differences between
managerial and subordinate positions.
The data for this measure should be available from the manage human resources process which is
responsible for recording work undertaken.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Employee Satisfaction with Training Programme

Employee satisfaction with training programmes gives an indication of the quality of training
programmes as perceived by the participants. It measures whether the organisation designs or selects
courses that satisfy the requirements of their employees and whether they are delivered in a manner
that is accessible to those who attend.
It is important to ensure that satisfaction with training courses is maximised and that they are
delivered in the most accessible manner possible, as this will affect the amount that is learnt and the
effect courses have on individuals and the organisation.
Trainee feedback is important as an indicator of the impact of training and of possible future
improvements to particular training programmes.
The feedback will also indicate whether the training programme actually meets the requirements of
the participants. Follow-up training programmes may also be conducted based on feedback
information.
This measure should be used in conjunction with the 'impact of training programmes on the
organisation' measure which assesses the benefit that the organisation gets from the training course.
% of training course participants that are satisfied / highly satisfied with the course or programme
% of training course participants that are dissatisfied / highly dissatisfied with the course or
programme
Training course / programme - any activity provided or funded by the organisation to enhance an
employee's skills or capabilities. Training includes internal and external training courses and 'on the
job' training, although in the case of 'on the job' training it may be more difficult to identify specific
'units' of training and the training is less likely to be voluntary.
The level of satisfaction with training courses can be assessed based on the responses to course
evaluation questionnaires. Those responding with predominantly 'very satisfied' responses are likely
to fall into the highly satisfied category. The survey questionnaire may be designed for each question
to carry equal weighting or alternatively, they can be weighted by some pre-determined criteria.
The survey should contain attribute satisfaction questions covering all aspects of the training, such as,
delivery style, contents, facilities, handouts, and level of involvement of participants. It may also be
beneficial to administer the survey in two stages, one on completion of the course to assess initial
perceptions of the course and the second at a later date to establish whether the course material has
achieved its objectives (e.g. improving job efficiency or effectiveness).
Measurement of satisfaction with training courses and their impact should be considered, along with
their cost, when deciding training strategies and the portfolio of training that is offered.
Analysis of employee satisfaction with training programmes should include consideration of who
delivers the course and of the method of delivery.
It is important to identify the method of delivery to which employees are most receptive, as this will
have a significant effect on the advantage gained from the course for the individual and the
organisation. Where possible the method of training course delivery should be tailored to the subject
or audience. Whether courses are delivered in-house or are contracted out, satisfaction with delivery
should be reviewed with participants. This is particularly important if considerable amounts are
being paid to external organisations for courses.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Training Spend
The level of an organisation's expenditure on training and staff development is an important indicator
of the organisation's commitment to employee development and skills enhancement.
Analysis of an organisation's spend on training is important in identifying where training is focused in
comparison to skills requirements in order to deliver competitive advantage.
The willingness to invest in training is also an indicator of the organisation's commitment to the
personal development of its employees which will also contribute to employee satisfaction.
Those organisations participating in national employee development schemes, such as Investors In
People in the UK, will find this measure to be essential rather than optional.
Some national governments and industrial associations provide training grants to organisations, in
which case this measure becomes important for the purposes of claiming the grant offered.
expenditure on training and staff development per employee in a given period
Training / staff development - is any activity provided or funded by the organisation to enhance an
employees skills or capabilities. Training includes internal and external training courses and 'on the
'offers' of training and the training is less likely to be voluntary.
Spend on training includes training that is bought from outside suppliers and training that is provided
in-house. For in-house training and development it may be necessary to attribute a notional cost.
There is also a need to consider the value of 'on the job' training.
As well as company-wide analysis per employee, further analysis by job grade or type allows greater
understanding of the areas of the business in which training is being focused in comparison to areas
where there are skills shortages or requirements.
It may also be useful to compare training spend that is job related to that which is not. There are a
number of incentives for organisations to invest in non-job related training. These include:
provide employees with new skills that will allow them to change jobs within the organisation
to develop an employees willingness and ability to learn so that training with greater work focus
can follow or
to enhance employee satisfaction
The desired level of expenditure per employee will vary between organisations. Spend is likely to be
higher in organisations requiring higher skill levels to be competitive, or where benefits such as
training and personal development are important to maintain a satisfied and committed workforce.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Training Take Up
Training take up measures the willingness of an organisation's employees to undertake education and
training. This provides an indication of how willing employees are to improve their skills and
abilities in order to improve their contribution to the organisation.
It is also a measure of the future success of training programmes and an indication of their design. It
indicates whether the human resource management process designs or selects training courses that
employees want to attend, as well as employee satisfaction with the training programmes.
Where participation levels are found to be undesirable, the reasons could be found and corrective
measures taken.
% of training courses that are fully subscribed
% of offers of training that are accepted
% of places that are taken on training programmes
Training - is any activity provided or funded by the organisation to enhance an employee's skills or
capabilities. Training includes internal and external training courses and 'on the job' training, although
in the case of 'on the job' training it may be more difficult to identify specific 'offers' of training and
the training is less likely to be voluntary.
As well as company-wide analysis per employee, further analysis by job grade or type and
department or function allows greater understanding of the areas of the business in which training is
being taken up. This should be compared to areas in which specific skills shortages exist or where
performance could be improved.
It may also be useful to compare training take up that is job related and that which is not. There are a
number of incentives for organisations to invest in non-job related training. These include:
to provide employees with new skills that will allow them to change jobs within the
organisation
to develop an employees willingness and ability to learn so that training with greater work focus
can follow
to enhance employee satisfaction
While it is important to encourage training of all types, if take up of non-job related training is higher
than that of job related training it might indicate that employees are using the organisation's resources
to obtain skills which they can then take with them to employment in another organisation.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Frequency of New Training Programmes

The frequency with which new training programmes are made available assesses the effort that the
organisation applies to the development of its human resources. This indicates the organisation's
desire to increase the satisfaction of its employees, to enhance its capabilities and to ensure that it has
the appropriate skills available to satisfy demand and enhance its competitiveness.
It is important to make sure that new training programmes reflect what is actually required, and that
they are well received by the employees. Otherwise, the organisation will end up having a series of
new training programmes, which are of no benefit either to the organisation or to the personnel.
As a result the measures of 'impact of training programmes on organisation' and 'employee's
satisfaction with training courses' should be considered with this measure.
number of training programmes introduced per period
The period of analysis of the measure is dependent on the frequency with which new training courses
are introduced.
Successful training programmes are those that are well accepted, well attended, and meet with the
requirements of the organisation in terms of performance enhancement, and the employees in terms of
personal development. As a result other measures of the success of training courses should be used in
conjunction with this measure. These include 'training course take up', 'impact of training programmes
on organisation' and 'employees satisfaction with training courses'.
When using this measure consideration should be given to the subject of courses introduced. Course
subject should reflect the wants and needs of employees and the skills gaps that need to be filled
within the organisation.
The training department, within the human resource planning process, should control and report the
number of training courses that are introduced.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Availability of Training Courses

Availability of training courses vs. personnel development requirements gives an indication of the
match between training requirements and training offered.
A mismatch will result in unsuccessful training programmes, dissatisfaction among
participants/prospective participants and will be a waste of company resources. It will also mean that
the required skills are not developed.
Training requirements should relate to organisational requirements and to the requirements of
employees. Organisational requirements should be identified via the skills audit or inventory which
identifies skills gaps and the need for skills development to enhance competitiveness. Employees'
requirements will be identified through personal appraisals and the development of personal
development plans.
% of training courses that match organisational requirements
% of training courses that match employee's personal requirements
average number of courses requested, but not offered
Number of courses requested should include all desired courses, whether a formal request is made or
not.
Requirements - refer to both employees personal expectations toward personal development, as well
as the organisations expectations aimed at personnel and skills development.
The identification of requirements and determination of whether there is a match between training
courses and requirements will be subjective. Employee satisfaction surveys and surveys on the
satisfaction with training courses should be used to identify whether requirements are being met,
whilst the process of undertaking a skills inventory or audit will identify whether organisational
requirements are met.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Occupational Health and Safety Assessment

In order to ensure that an organisation's workplace environment poses minimal occupational risk, the
steps taken to develop a positive health and safety culture and to control risks need to be measured.
Organisations achieving success in health and safety, measure performance against predetermined
plans and standards, assess their implementation and effectiveness in order to identify the need for
possible remedial action. Monitoring activities also signals management's commitment to health and
safety objectives in general and is an essential part of developing a positive health and safety culture.
Successful organisations use a number of key performance indicators relating to overall health and
safety performance, and the management of improvements as the basis for reviews at the highest
level. While each organisation needs to develop its own specific measures, companies leading the
way in terms of workplace health and safety have considered the following:
assessment of the degree of compliance with performance standards
identification of areas where performance standards are absent or inadequate (those areas where
further action is necessary to develop the total health and safety management system)
assessment of the achievement of specific objectives
accident, ill health and incident data, accompanied by analyses of both the immediate and
underlying causes, trends and common features.
The most commonly used safety measures are accident frequency rates and severity rates.
number of reported accidents or lost-time injuries in a given period total hours worked during the
period
number of hazard inspections/safety programme audits completed versus planned per year
total number of days lost due to injury per year total hours worked per year
Time lost due to injuries - instances where individuals are physically or mentally unable (as
determined by a competent medical person) to work on a scheduled day or shift.
Comparing reported accident and injury information is just one way of assessing a firm's safety
performance. In many firms, particularly those with fewer than 100 employees, reportable injuries
represent only a small proportion of the total number of injuries to employees. Records of more
minor, non-reportable injuries, and of 'near misses', may also be converted into accident rates and
used to monitor trends over time or between different parts of the organisation.
A low accident rate, even over a period of years, is no guarantee that risks are being effectively
controlled and will not lead to injuries, ill health or casualties in the future. This is particularly so in
organisations where there is a low probability of accidents, but where major hazards are present. In
such cases, the historical incidence of reported accidents can be an unreliable, deceptive indicator of
safety performance.
As an organisation's understanding of its risks and their control develops, the frequency and depth of
inspection may be changed to improve the monitoring process. This may involve the redesign of
inspection regimes, inspection forms and checklists.
Caution must be used when using accident frequency and severity rates as they are downstream
measures and have little predictive value.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Investor Satisfaction Level

The catalogue contains many surrogate measures of investor satisfaction, however the most effective
way of assessing investor satisfaction is by asking actual and potential investors.
As with measurement of the satisfaction of other stakeholders, a survey offers the most effective way
of assessing satisfaction and the determinants of it. Although few companies undertake investor
satisfaction surveys they provide a valuable way of understanding how to encourage investors to
invest in the organisation.
Ensuring that investors and potential investors are satisfied is important to ensure that money to fund
operations can be acquired when necessary. Making an investment in an organisation represents a risk
for any investor, as a result they must be happy with the return they expect on their investment. The
expectations of return will be based on recent performance and information provided by the
organisation indicating what future performance is likely to be.
investor satisfaction survey
regular communication with / feedback from investors
Investors - are individuals or institutions that have invested, or have the potential to invest, in the
organisation. Institutional investors are the most significant and influential investors in most cases.
Communication - is the passing of any information to investors that they require to make investment
decisions. Information might include financial and non-financial performance measures and
qualitative information. Communication might be in the form of reports, press releases, meetings with
investors, etc.
Investor satisfaction surveys might provide a numerical value for the level of investor satisfaction, a
percentage for example. Such index numbers indicate trends in satisfaction however greater value can
be derived from the identification of the drivers of satisfaction. The investor satisfaction survey
should assess the investors' perceptions of the company's performance in terms of the various drivers
of satisfaction. The survey should identify ways in which their satisfaction could be improved,
including what additional information could be provided.
Analysis of this measure should include consideration of how different types of investor perceive the
organisation. Attention should be focused on increasing the satisfaction of the most important
investors and most likely potential investors.
The data for this performance measure should be collected by the organisations external relations
department who should control the communication with investors.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Investor Turnover
Investor turnover measures the rate at which investors sell their shares in the organisation. This
measures the investors' satisfaction with the performance, and potential future performance, of the
organisation in comparison to their expectations and in comparison to that of other companies in their
sector.
The measure also assesses the contribution investors make to the organisation. The lower the turnover
rate, the longer investors hold their stake in the business, indicating their level of loyalty.
Investor turnover will be determined by the investors' confidence in the operations and future
profitability and hence their confidence of receiving a return on that investment. Investors' confidence
in the organisation and its future performance (i.e. investor satisfaction) will be determined by recent
performance of the organisation, the perceived reliability of predictions of future performance and
investors' confidence in the management of the organisation. As a result there are close and important
links between this measure and those of 'Investors' Perceptions of Management' and 'Performance
Against Promises'. These measures should be considered together. Feedback from investors should
be used to identify shortcomings in performance of these other two measures and identify ways in
which they can be improved.
Investor turnover provides a useful measure of the attractiveness of the organisation to investors and
hence the ability of the organisation to raise funds. Low turnover indicates that investors are loyal and
do not wish to dispose of shares. High turnover with a rising share price indicates that the company is
a popular one to invest in, indicating that it is performing well and satisfying investors. High turnover
with a falling share price indicates performance that is poorer than expected.
Whilst high turnover has positive implications for attracting new capital as investors are likely to be
able to sell on shares should they need to, consideration should be given to whether such short-term
investors will be willing to support the organisation in times of difficulty.
There are numerous sources of investment capital including equity (share issue), fixed interest bonds,
bank borrowings and venture capitalists. Although it is important to consider the turnover of each of
these groups, consideration of shareholder turnover is the one which is most significant, and on which
attention should be focused.
% of shareholders that sell their shares in the organisation in a given time period
average length of shareholding / investment in the organisation
Share - shares in the ownership of the company.
Shareholder - holders of the equity (shares) of the company (i.e. the owners of the company).
Shareholding - length of time for which shares in the company are held.
Investment - is any application of money which is intended to provide a return to the investor by way
of interest, dividend or capital appreciation.
When measuring the level of investor turnover it is important to consider it in the context of turnover
in the market as a whole. In general investor turnover is growing rapidly. In the 1960s less than 20%
of shares changed hands annually. In 1999 over 80% of shares changed hands (Byrne, 1999).
Investor turnover will vary considerably depending on the industry in which the organisation
competes. Byrne (1999) indicated that on average investors in new Internet-based organisations such
as Amazon.com and Yahoo! only hold shares for seven or eight days, as opposed to organisations
such as General Electric and Johnson & Johnson for which average turnover is over 30 months.
Analysis of the data from this measure should include comparison of the turnover of different types of
investor in the organisation. For example, different types of institutional investor (such as those with
specialist sector interests and knowledge) or individuals.
There should also be comparison of performance against competitors, organisations in the
appropriate market sectors and industries and with the market as a whole.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Investor Contribution
Prism Facet 2:
Prism Facet 3:
Profitability
Measures of profitability assess the percentage profit generated as an indication of the 'productivity'
of asset utilisation and the amount of profits generated from sales.
Clearly profitability provides one of the key measures of the success of the business, reflecting the
efficiency and effectiveness of all parts of the organisation. Investors place great importance on
trends in profitability and it is a key driver of investor satisfaction.
These measures of profitability can be used to compare the efficiency of one company against
another.
Return on Assets: Profit (before interest and tax) Total Assets
Return on Sales: Profit (before interest and tax) Total Sales Turnover
Profitability (Earnings) per share: (Profit after tax - preferred stock dividends) / number of
ordinary shares
Profit (before interest and tax) - is operating profit (turnover - cost of sales - overheads) before the
deduction of interest and tax.
Total Sales Turnover - is the total value of sales.
Total Assets - all of the assets of the company.
Preferred Stock Dividends - are dividends paid to preference shareholders (i.e. those entitled to a
share of the company's profit before ordinary shareholders).
The profitability of a company will be dependant on the business they are in. For example in a
service industry, such as advertising, there is likely to be a high return on assets simply because there
are very few assets.
Earnings per share measures the earnings that are available to the owners of common stock (ordinary
shares).
It is important to compare profitability with that of competitors and other organisations in the market
sector in which the organisation operates.
Data for this measure should be available from accounting systems and statutory financial statements.
Prism Facet 1:

Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Shareholder Value Added (SVA)

Shareholder Value Added measures whether a business generates wealth or value. The measure
includes consideration of the cost of capital which is largely ignored by profitability measures.
The inclusion of the cost of capital encourages managers to think about whether they are creating or
destroying value for the owners of the organisation (the shareholders).
The measure indicates several ways in which performance can be improved:
earn more profit without using more capital
use less capital or lower the cost of capital
increase investment in projects that generate rates of return that are greater than their costs of
capital
curtail investments in projects that generate rates of return less than their costs
Net Operating Profit (after tax) - (total capital multiplied by total cost of capital)
Net Operating Profit (after tax) - operating profit after the deduction of interest and tax.
Total Capital - is the sum of all of the assets, working capital and other long term investments.
Exponents of SVA suggest that employee training costs and R&D cost should also be included as they
can be considered to be long term investments.
Total Cost of Capital - is a weighted average of borrowed capital (interest paid on borrowings) and
the cost of equity capital (investors opportunity cost of investing in the company - see the cost of
capital measure).
Data for the calculation of this measure should be available from the companies accounting systems
and financial statements. Assessment of the cost of equity capital should be based on the growth of
equity markets and the average growth in dividend receipts.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Market Capitalisation
Market capitalisation is the total value of all of the shares in the company. It is based on the market
price of the company's shares at any given moment and provides an indication of the company's value.
Market capitalisation provides a snapshot of the stock market's perception of the value of the
organisation at any point in time.
Monitoring trends in market capitalisation over time indicates changes in investors' perceptions of the
organisation and as a result it provides one of the key indicators of investor satisfaction. Comparison
of trends in market capitalisation with competitor organisations and the rest of the market sector is a
key benchmark of the organisation's performance.
number of ordinary shares issued multiplied by the market price
% change in market capitalisation in a given period
Ordinary shares - the shares in the company which entitle the holders to the remaining devisable
profits after prior interests (e.g. creditors and preference shares) have been satisfied.
Issued shares - are shares that have been issued to the market and are in circulation.
Market price - the price of each of the company's shares on the equity market at a given moment.
Market capitalisation - number of ordinary shares issued multiplied by the market price.
Data to calculate this measure is available based on current market value of the company which is
available in the financial press.
Comparison of this measure with other organisations in the same industry sector is useful in assessing
the relative value of businesses in the sector.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Brand Equity / Brand Value

Brands are intangible assets that provide competitive advantage to an organisation. A strong brand is
believed by many to be the most important marketing asset a firm can manage.
Strong brands increase the confidence of the consumer in the product, increasing customer loyalty and
allowing firms to charge price premiums over unbranded or poorly branded products. Strong brands
enable organisations to earn greater volumes or margins and a strong and sustainable competitive
advantage. As such, in addition to making a significant difference to consumer behaviour, strong
brands also influence investors by giving a better understanding of the true value of a company. For
example Interbrand, the international brand consultants, calculate that the Coca-Cola brand represents
60% of the company's market value. As a result the importance of reporting the value brands to
investors has grown, and brand value is increasingly being reported in company accounts.
Brands are often a significant motivation behind mergers and acquisitions, with would-be acquirers
viewing strong brands as the best way of achieving growth, especially in mature markets. This
reflects the significant investment required to create a strong brand. As a result it is important that
organisations accurately evaluate their brands.
Brand equity measures the strength of the brand in the market place. It reflects the long-term effects of
marketing, effects that cannot be captured by short-term measures such as sales and profitability.
Research conducted by Tim Ambler of the London Business School has established that 62% of firms
use brand equity as a measure of performance, although relatively few of them use it as a means of
valuing the financial worth of brands.
Despite its importance the valuation of brands remains subjective. There are a variety of methods for
evaluating Brand Equity, each of which has its drawbacks.
price premium
additional cash inflows resulting from the brand
survey of consumer awareness / preference
historical cost of brand development
replacement cost
the Interbrand method
Brand identifying symbols, words, or marks that distinguishes a product or company from its
competitors.
Brand Equity the intangible asset that the firms marketing activity builds. It represents the
perception in the minds of the consumer, built up over time through use, advertising and distribution.
Brand Value depicts the financial worth of the brand equity.
Price Premium - is the additional price that is charged for a branded product. It is established by
benchmarking the unit price of the branded product against a comparable unbranded product in the
market.
Additional cash inflows resulting from the brand - assesses the additional cash flows generated as a
result of the brand by multiplying the price premium by volume sold. This enables consideration of
the impact of the price premium on volumes as well as the brand value. This metric should consider
potential future additional cash inflows to make an assessment of the potential future value of the
brand.
Survey of consumer awareness / preference - is a subjective assessment of the consumers' perception
of the brand. Such market surveys are important to assess the strength of the brand in the market,
however their subjectivity means that the reliability of data for valuation purposes can be variable.
Historical cost of brand development - is a fairly straightforward sum of the investment made to
develop the current brand. This investment will include advertising and other promotion, R&D,
distribution etc. Other costs such as management time might also be included, care must be taken
when defining which costs have been incurred in developing the brand. This measure is limited as it
only reflects investment in the brand, not its impact.
Replacement Cost - is the value that a third party would place on the brand i.e. the cost of reestablishing the brand.
The Interbrand Method - Interbrand is an international branding consultancy that has developed a
brand valuation methodology that is recognised by auditors, tax authorities and stock exchanges in
many countries. The method combines hard factual information such as market share with more
subjective judgements about a brand's 'strength' in order to determine brand-related profit. The
subjective judgement provides a structured approach for incorporating in the brand valuation factors
such as market leadership, brand stability, size and stability of the market, internationality of the
brand, long-term trend of the brand, support for the brand (including investment in promotion) and
protection of such as trademarks. This method attempts to accommodate the inherent uncertainty in the
market and hence brand equity.
Whilst brand equity is a powerful measure of performance it is hard to use as a short-term measure as
it can take a long time for marketing expenditure to create a strong brand. Equally it can take a long
time for brand value to dissipate even if marketing support is reduced. As a result brand equity or
brand value should be used to assess effectiveness of past marketing activity and the future impact of
current activity.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Investor Risk / Gearing

This measures the amount of risk taken by investors based on the level of debt and comparison of
borrowing and equity levels.
Companies existing largely on borrowed money are susceptible to problems if repeated losses are
incurred as problems are likely to occur paying interest or repaying loans. If a company is doing well
being highly geared is positive for investor satisfaction as return on investment will be higher. If the
company is doing badly high gearing increases investors risk of loss and reduces chances of a return
on the investment made.
The appropriate mix of borrowings and equity depends on the type of business.
total borrowings total capital employed
prior charge capital total capital employed
level of provisions for bad debts
% increase in provisions in a given time period
% of occasions that net earnings cover interest repayments
Gearing - is the relationship between borrowed money and equity (referred to as leverage in the
United States).
Total Borrowing - is the total amount borrowed by the company including long- and short-term loans.
Total Capital Employed - the total funds used by the organisation for its operations. This includes
borrowings, equity capital and prior charge capital. Reserves may also be included in the
denominator.
Equity Capital - is the total value of ordinary shares in the company.
Prior Charge Capital - those classes of capital, the holders of which have a claim on the profit and
assets of the business before ordinary shareholders. Prior charge capital includes preference
shareholders and debentures.
Debt - is money borrowed from banks or other sources.
Provisions - are amounts retained as reasonably necessary to cover any liability or loss which is
either likely to be incurred, or certain to be incurred but uncertain as to the amount or the date on
which it will arise.
The data for this measure should be obtained from statutory accounting information.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Profitability Growth
Measures of profitability assess the percentage profit generated as an indication of the 'productivity'
of asset utilisation and the amount of profits generated from sales. Profitability growth indicates the
growth in profitability of the organisation.
It provides investors with indication of the ability of the organisation to generate profit and increase
that profit over time.
Profitability growth is an important measure as it is one of the key measures that investment analysts
track and try to predict. It is often referred to as earnings growth.
Comparison of profitability per share with dividends per share provides an indication of the
proportion of profits that are distributed to shareholders. This comparison indicates whether the
organisation's priority is to reward shareholders in the short term or reinvest profits in the business.
% increase in profit (earnings) per share per year
Profit - is defined as the profit, based on the consolidated profit and loss, after tax, minority interests
preference shares but before extraordinary items.
Analysis of the measure should include comparison of profitability growth from productivity
improvements vs. profitability growth from acquisitions and mergers.
It is important to compare profitability with that of competitors and other organisations in the market
sector in which the organisation operates.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Dividend Growth
Dividend growth indicates the growth in profits that are distributed to shareholders.
This provides an indication of investor satisfaction as it measures whether the return that investors
are gaining is increasing. It is a useful measure as it allows comparison of performance with
competitors and other organisations and as such it is a key benchmark for comparative performance.
In many countries financial analysts tend to give dividend growth a high weighting in their analysis of
companies.
Dividends are one of the benefits that investors gain from investing in an organisation in addition to
profits made from selling shares following any increase in share price.
% increase in dividends per share per year
% increase in total amount of dividends distributed to investors per year
% of profit circulated as dividend per year
Dividend - is the share of the organisation's profits and cash flow that are distributed to shareholders.
Total dividend - is the sum of all of the dividends paid out to shareholders.
Share - is a share in the ownership of the company.
Analysis of the measure should show the trend in dividend growth over the medium to long-term. This
gives an indication of the long-term value of holding the organisation's shares. Although this should
be considered in parallel with increases in share price.
Regional / national differences in attitudes towards dividend policies should be considered when
comparing the performance of business units in different countries.
The data required to calculate this measure should be available from the statutory accounts and
accounting information system.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Investor Recommendations
The willingness of investors to recommend investment in the organisation to others is a key indicator
of their satisfaction with the performance of the business. It also represents an important contribution
that existing investors can make to the organisation as it increases the availability of funds.
Whilst measuring willingness to recommend assesses the satisfaction of existing investors this is only
potential contribution. It is only by measuring actual recommendations that have been made that the
realised contribution can be assessed.
Investors will consider recommendations from numerous sources when considering whether to buy,
hold or sell shares. Such recommendations might come from existing investors (colleagues or
friends), the media or financial advisors, such as brokers.
The level of recommendations indicates the satisfaction of those making recommendations with the
organisation as a place to invest capital. As such understanding recommendations from existing
investors is an important measure of their satisfaction with the investment they have made in the
organisation. Investor satisfaction in the organisation and its future performance (i.e. investor
satisfaction) will be determined by recent performance of the organisation, the perceived reliability
of predictions of future performance and investors' confidence in the management of the organisation.
As a result there are close and important links between this measure and those of 'Investors'
Perceptions of Management' and 'Performance Against Promises'. These measures should be
considered together. Feedback from investors should be used to identify shortcomings in performance
of the other two measures and identify ways in which they can be improved.
% of investors who recommend to others that they invest in the organisation
average number of recommendations made per existing investor
% of investors who are willing to recommend to others that they invest in the organisation
% of new investors (by number and value) that result from recommendations
average number of recommendations to invest from financial media / advisors / brokers
Investors - are institutions or individuals that have invested, or have the potential to invest, in the
organisation.
Others - are potential investors who receive advice on where to make an investment.
Financial media - includes specialist investment publications, the financial pages of newspapers and
radio and television programmes, for example.
Advisors - financial experts who advise investors and potential investors where their investment
should be made.
Brokers - are agents who execute the publics buying and selling instructions in return for a
commission.
CAUTION - When using this measure it is important to beware of excessive hype as a result of large
numbers of recommendations. Excessive hype will result in the company being overvalued which
will have implications for the expectations of long-term performance, as it is likely that the value of
the organisation will fall to a realistic level, which will have a detrimental effect on investor
satisfaction.
Analysis should include identification of the sources of recommendations to understand the opinions
of those who exert some influence over investors. Comparison of recommendations with the levels of
investment will provide an understanding of who has the greatest influence over investors and hence
over the level of investment. This will allow the organisation to focus attention on satisfying those
with most influence so that they will continue to recommend the organisation, improving satisfaction
of potential investors.
The process of planning and managing relationships with investors should be responsible for
monitoring investments and recommendations. They should manage public and external relations,
monitoring recommendations and relationships with those who can recommend to potential investors.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Investor Feedback / Suggestions

Provision of feedback and suggestions allows investors to make a contribution to the effective and
efficient running of the organisation. Feedback and suggestions allow identification of areas for
improvement which are in line with the wants and needs of the investor, therefore enhancing investor
satisfaction. The nature of the feedback received from investors will indicate the level of investor
satisfaction.
performance in line with investor requirements. This might be done as part of the investor satisfaction
survey or might be a proactive process to encourage and facilitate feedback. The success of this
process will be assessed by this measure.
The process of encouraging investor feedback and suggestions might include proactive face-to-face
meetings with investors or the organisation of focus groups to discuss performance issues. This
should include the testing of assumptions regarding the drivers of investor satisfaction. As a result,
suggestions made by investors should also provide input to the strategy development process,
indicating important areas of performance upon which to focus.
frequently made suggestions. The importance of suggestions and feedback must be considered, it is
important that organisations do not take their eye off the most important performance factors that are
already being delivered in an attempt to improve other less important areas of performance.
Suggestions will be more important if they are not prompted. Performance can be enhanced by
providing incentives or rewards for feedback and suggestions, however such schemes should be
considered when analysing performance.
There are close and important links between this measure and those of 'Investors' Perceptions of
Management' and 'Performance Against Promises'. These measures should be considered together.
Feedback from investors should be used to identify shortcomings in performance of the other two
measures and identify ways in which they can be improved.
number of suggestions / pieces of feedback received per investor in a given time period
% of investors who make suggestions / provide feedback in a given period
% of investor suggestions / feedback that are implemented / acted upon
average lead time to respond to suggestions / feedback
Suggestions / feedback - are contributions made by investors with the objective of improving the
operations of the organisation.
organisation.
the value.
is taken. Initially this action should be an acknowledgement of receipt and notification of potential
time before action will be taken. There should be a standard benchmark lead time for
acknowledgement.
It is important that investors are notified of the progress of their suggestions and are given reasons if
suggestions are not going to be implemented.
The size of the investment should be considered when analysing this measure. The larger the
investment the greater consideration that should be given to their feedback.
Data for the calculation of this measure should be collected through the investor suggestion scheme
that should be used to collect ideas and suggestions. The investor satisfaction survey can also be used
to collect data. Such suggestion schemes could be executed at the annual general meeting where
investors are brought together.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Performance Against Promises / Accuracy of Performance

Forecasts
This measure assess whether the organisation delivers the performance that it promised to its
investors. The accuracy of performance forecasts and the delivery of promised performance are
important in gaining the trust of investors and contribute to the measure of Investors' Perceptions of
Management. Development of such trust and belief that promises are going to be delivered is
important if potential investors are going to invest in the organisation.
It is important that organisations deliver the performance that they promise if investor satisfaction is
to be maintained and improved.
When forecasts are provided, an informal contract is made between the organisation and its investors.
As a result failure to deliver promised levels of performance exposes the organisation to potential
legal action by investors who were expecting the promises to be kept or were expecting a certain
return.
While most of the promises and forecasts made to investors will focus on expected financial
performance, it is also important that non-financial performance promises are realised. Investors
want non-financial information as it provides an indication of future financial performance.
% of promises to investors that are delivered
% of forecasts that are 100% accurate
average deviation (%) from performance forecast
organisation.
Promises - are promises of future performance made to investors by the organisation's management to
encourage them to invest. Promises might relate to performance (such as profit, sales or return on
investment) or might relate to completion of specific activities such as development of a new product
or successful implementation of an improvement initiative.
Forecasts - are specific prediction of future performance. These might include profit levels, sales
turnover or return on investment.
In analysing the measure it is useful to categorise by the magnitude of the prediction or forecasts (e.g.
predictions about sales of specific products vs. predictions about total sales turnover).
In some cases it may be difficult to identify specific and discrete promises or forecasts. It may be
desirable for the organisation to make predictions and forecasts as vague as possible to provide
leeway for performance variances.
In order to calculate the measure, promises made to investors should be recorded during the process
of communicating with investors. Actual performance will be available from statutory and market
performance reports.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Investors' Perceptions of Management

Many investment decisions are based on the investors' perceptions of, and confidence in, the
management of the organisation. As a result it is important that there is measurement of investor
confidence in the way in which the organisation is managed. Therefore this is a significant measure of
investor satisfaction and provides an indication of the investors perception of future performance.
In order to manage these perceptions it is necessary to have an effective process for the management
of relations with investors. This process might include providing information about the organisation,
its management and its achievements. This measure will assess the effectiveness of such a process.
The measure is closely related to that of performance against promises / the accuracy of performance
forecasts, which will identify the level of understanding management have of future operations and
performance.
This measure is closely related to that of investor satisfaction and investor feedback / suggestions.
% of investors who are satisfied with the management of the organisation
% of investors who are confident in management predictions
average perception ranking of investors' perceptions of management
Satisfied with management / confidence in management - is the level of satisfaction that investors feel
regarding the management planning and control of the organisation and hence their confidence in the
delivery of future performance and return on investment.
Perception ranking - is the average response to investor survey questions regarding confidence in the
management of the organisation. Questions should include a scale which allows respondents to rank
their perceptions.
By their nature perceptions are very subjective. As a result, measurement of perceptions of
management must be via survey (see Investor Satisfaction) or feedback from face-to-face meetings.
Both approaches allow ranking of the investors confidence in the organisation's management. This
ranking should be made as objective as possible.
Use of both questionnaires and meetings allows investigation of the way in which perceptions are
developed and the factors affecting investors' perceptions of management. This allows the
organisations to understand how investors' perceptions can be changed. This could include altering
strategies in order to enhance perceptions and investor satisfaction or provision of additional
information regarding current activities.
Use of the measure should include analysis by type of investor (e.g. equity vs. loan capital) and by
size of investment. The size and importance of an investor is an important consideration when using
the measure.
Use should be made of the tools to survey investor satisfaction to collect the data for this measure.
This includes investor satisfaction surveys and mechanisms to collect investor feedback and
suggestions. Furthermore it is possible to use external agencies to conduct surveys to assess investor's
perceptions of management.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Employee Productivity
Productivity is a key measure of the contribution that employees make to the organisation and is a key
benchmark of the efficiency and effectiveness of an organisation.
Typically measures of value added per employee relate sales and profit to the number of employees
required to generate them. Value analysis of processes within the organisation can also be used to
identify where value is added in the organisation. This can then be attributed to more specific groups
of employees.
This is a key measure that can be compared with other organisations to benchmark performance with
competitors and organisations in the same or similar industries.
average sales turnover per employee
average profit per employee
value added per employee
Sales turnover - is the total income from the sale of goods and services.
Profit - is the sales turnover less expenditure.
Value added - can be calculated in two ways: (i) sales turnover less the cost of goods and services
bought; (ii) employee costs plus depreciation plus operating profit.
The measure should be analysed by location or region to compare the efficiency and effectiveness of
similar processes. When using the value added metric, the value added by indirect support processes
will often be difficult to specify.
Much of the data for this measure is available through the financial accounting reports and statutory
accounts. Estimation of the specific value added of a process or employee will require additional
analysis.
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Prism Facet 2:
Prism Facet 3:
Strategies Sub-Facet 3: Operating Strategy
Margin Performance
The profit margin generated from customer, markets and market sectors is an important measure of the
value that organisations get from supplying customers and markets. The profit that is generated is the
main reason that organisations provide goods and services to a customer, although there may be
strategic reasons for supplying certain key customers or markets.
The measure assesses the level of profit raised from a customer account as a proportion of the level
of business done (i.e. sales).
Clearly profit margins provide one of the key measures of the success of the business, reflecting the
efficiency and effectiveness of all parts of the organisation. Investors place great importance on
trends in profitability and it is a key driver of investor satisfaction.
This is an important measure for the organisation to use when deciding which customers or markets to
target or in which products to invest time and money.
profit as % of sales turnover (per customer, market and market sector)
Profit - is operating profit (turnover - cost of sales - overheads) before the deduction of interest and
tax. In this case profit refers to the profit raised from a specific customer, market or market sector.
Sales Turnover - is the total value of sales. In this case sales turnover refers to the sales generated
from specific customers, markets or market sectors.
The profitability obtained from customers, markets or market sectors will be dependent on the
business that the organisation is in, including the value of goods and services supplied.
Analysis of this measure should investigate the differences in profitability between different
customers, products or market segments providing an indication of where performance improvement
effort should be focused.
Data for this measure should be available from accounting information systems.
Prism Facet 1:
Strategies Sub-Facet 1: Corporate Strategy
Prism Facet 2:

Prism Facet 3:
Sub-Facet 3:
Capital Availability / Accessibility

This measures how easy it is for an organisation to obtain capital to fund investment. The major
contribution that investors can make to an organisation is to make capital for investment available
when required to fund operations or new activities.
The ease with which investors make capital available to an organisation, and the amount of capital
they make available, will be determined by the investors' confidence in the operations and future
profitability and hence their confidence of receiving a return on that investment. Investors' confidence
in the organisation and its future performance (i.e. investor satisfaction) will be determined by recent
performance of the organisation, the perceived reliability of predictions of future performance and
investors confidence in the management of the organisation. As a result there are close and important
links between this measure and those of 'Investors' Perceptions of Management' and 'Performance
Against Promises'. These measures should be considered together. Feedback from investors should
be used to identify shortcomings in performance of the other two measures and identify ways in which
they can be improved.
Investor satisfaction and confidence in future performance will not only determine the availability of
capital but also the cost at which that capital is offered. As such this measure should be used in
conjunction with the cost of capital measure.
% of investors approached who are prepared to make an investment in the organisation
value of funds made available by investors
Investment - is any application of money which is intended to provide a return to the investor by way
of interest, dividend or capital appreciation.
organisation.
Sources of capital include Equity (share issue), Fixed Interest Bonds, Bank Borrowings and Venture
Capitalists (where applicable). When seeking capital organisations should consider which of these
are most appropriate, including which are prepared to provide capital at the most acceptable cost to
the organisation. As such the data collected should be analysed based on the sources approached.
Trends of this measure over time will provide an indication of changes in investors' perceptions of
the organisation and should be considered in the context of trends in the performance of the
organisation and efforts to improve investor satisfaction.
Raising capital, and making decisions regarding the sources of capital, is the responsibility of
financial analysts and senior management of the organisation. As such they should collect the data for
this measure and use it when making such decisions.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Cost of Capital
The cost of capital assesses the cost of funds to finance an investment or project. This provides an
input into investment decisions so that shareholders value can be maximised.
Measurement of the cost of capital is important as an organisation clearly has the objective of
obtaining capital where cost is lowest so that investors can maximise the contribution they can make
and profitability can be increased.
The cost of capital also provides a measure of the economic performance of the firm, putting the
accounting profit into the context of the cost of funding operations. Accounting profit must exceed the
cost of capital - see the Shareholder Value Added measure.
The cost of capital should include the cost of borrowed capital (interest paid on borrowings) and the
cost of equity capital (investors' opportunity cost of investing in the company). Although when
considering the cost of capital to the company (i.e. investors contribution), the opportunity cost of the
investment is not important. Opportunity cost can seldom be measured precisely as it is based on
investors' expectations which are largely unobservable.
Measurement of the cost of capital encourages managers to think about whether they are creating or
destroying value for the owners of the organisation.
weighted average cost of capital
marginal cost of capital as a % of capital
Cost of capital - is the cost to the organisation of receiving investment funds from the organisation.
This cost is mainly determined by interest rates but also includes dividends.
Weighted Cost of Capital - is the average cost of the combined sources of finance weighted according
to the proportion that each element bears to the total pool of capital available, e.g.
Equity Market Value - 800,000; Rate - 10%; = Cost 80,000
Debt Market Value - 400,000; Rate - 15%; = Cost 60,000
Total Market Value - 1,200,000 Cost 140,000. Therefore the weighted average is 11.67%
Marginal cost of capital is the additional cost incurred as a result of raising the capital in question.
Marginal cost should be compared with marginal revenue (return on investment). Economic theory
suggests that shareholder wealth is maximised where marginal cost = marginal revenue.
Dividends paid to investors are also a cost of capital. As a result the measure of Dividend Growth
should also be considered when using this measure.
Analysis of the cost of capital should consider the sources of capital and the differences in cost of
capital dependent on the source of capital chosen.
Interest rates are available from the source of the capital. Opportunity costs are identified by
estimating the return investors would receive by investing elsewhere.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Cash Flow Performance

The calculation of cash flow performance highlights the important distinction between cash flow and
profitability. Although an organisation may be trading profitably, its receipts may not exceed its
expenditure in the short term, as a result of delays in receiving payments from customers.
Primarily companies go out of business due to lack of cash. Cash flow is therefore very important in
analysing the financial health of a company. Investors should look closely at the reasons if there are
large cash outflows.
Statutory cash flow statements assess the historical flow of cash. Cash flow projections should also
be made to predict the availability of cash for future operations and assessment of whether there are
funds available to satisfy future investment plans.
Assessment of projected cash flow allows the organisation to plan future funds including arranging
loans or overdrafts in advance, reducing the cost of borrowing. Investors will take a particular
interest in whether projected cash flow will cover future expenditure and investment plans.
Cash inflow - cash outflow
Cash inflow - is the money received by the company. Cash inflow includes such items as the cash
generated from operating activities; return on investments (dividends and interest received); sale of
assets / businesses; financing (new shares / loans).
Cash outflow is the money paid out by the company. Cash outflow includes such items as interest
charges; dividends to shareholders; tax; investments (fixed assets, new business etc.); financing
(repayment of existing loans).
Cash flow is often analysed before and after financing (issue of shares and borrowing or repayment of
loans).
When analysing cash flow it is also important to identify the proportion of cash that is 'free' cash
flow, i.e. available for use by the organisation rather than already dedicated to another use.
It is important that analysis of cash flow considers projected cash flow as well as current cash flow,
as projected cash flow provides a better understanding of future availability of finance.
The data to calculate cash flow is available in statutory financial statements. Cash flow projections
are usually made during the business planning process.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sales as a Proportion of Fixed Assets

This measures the amount of fixed assets that are required to produce a certain level of sales. This is
a measure of the efficiency with which the organisation uses its fixed assets.
It is an important measure for investors as it provides an indication of the organisation's operational
efficiency and effectiveness and is a key measure that allows comparison of performance with that of
competitors and other organisations in the same industry.
sales turnover total fixed assets
Total sales turnover - is the total value of sales
Fixed assets - are assets held by the organisation for retention, rather than being held for resale. Fixed
assets include land, buildings, plant, machinery, vehicles and furniture.
The measure should be analysed over time so that the trend can be monitored. The measure allows the
comparison of the performance of different businesses in the same industry. However this measure is
not suitable for comparison of performance between different industries.
When using the measure consideration should be given to the way in which different organisations
carry out their activities. Specifically an organisation which outsources a large proportion of its
activities will have a higher sales : fixed assets ratio than one that executes all processes and
activities internally.
The data for calculation of this measure is available within the statutory financial accounting
information and accounting information systems.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Availability of Non-Financial Information

Non-financial information provides information regarding the operations of the organisation and the
achievement of targets and strategies. As a result, such information provides an indication of the
likely future financial performance of a business. A number of key performance measures indicate the
competitiveness of the company in its chosen market and the efficiency and effectiveness of the
company's operations. As a result, provision of non-financial data allows investors to understand the
operational performance which will affect future financial and equity market performance.
The exact non-financial data will vary from organisation to organisation. The key measures should
allow a model of the business to be built which links non-financial determinants to be linked to
financial outcomes and hence equity market performance.
CAUTION
In many cases investors would like all the internally reported non-financial performance data to be
reported externally to help decision making. However the organisation must balance satisfaction of
investors with the protection of competitive advantage and the release of sensitive information which
might be of value to competitors.
% of internally reported non-financial measures that are communicated to investors
% of non-financial performance measures / information requested by investors that are provided
Non-financial performance measures - are non-accounting performance measures that are reported
within the organisation to monitor operational performance.
organisation.
Communication - is the provision of information to investors to help them make investment decisions.
Communication might be in written form (such as performance measures and reports) or verbal form
(such as face-to-face meetings).
The data for this performance measure should be collected by the organisation's external relations
The performance measures / information requested by investors should be identified by monitoring
requests from investors and feedback from investor satisfaction surveys.
Comparison of non-financial information provided by other organisations, in company reports for
example, will provide a benchmark for the amount of information that should be provided in order to
satisfy investors. Similarly, feedback from investors and requests for information should be
considered when deciding what information to communicate widely.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Clarity of Communication with Investors

The provision of clear and helpful information to investors is important as it allows them to make
more informed decisions about their investment. This makes potential investors more likely to invest
in the company and gives them a better understanding of future performance.
This measure is linked to that of the accuracy of forecasts communicated to investors, which assesses
the quality of information that is communicated.
% satisfaction of investors with the clarity of information provided by the organisation
% of investors that are satisfied with the clarity of information provided by the organisation
Communication - is the provision of information to investors to help them make investment decisions.
Communication might be in written form (such as performance measures and reports) or verbal form
(such as face-to-face meetings).
Information - in the context of this measure refers to any information that helps investors make
investment decisions. This information should be both financial and non-financial in nature.
Clarity - refers to the clarity of presentation of information so that it is clear, unambiguous and easy to
interpret. In the context of this measure clarity of information also refers to accuracy of the
information presented and its usefulness in making investment decisions and predicting future
performance.
Data regarding the clarity of communication and information is qualitative in nature. As a result it
should be collected from the investor satisfaction survey. The questionnaire should also be used to
identify how the measure can be improved by finding out what information investors would like and
how its communication could be improved. Alternatively an independent survey on Annual Reports
would provide an understanding of the utility of the information presented and indication of possible
improvements.
BEWARE - When considering communication with investors care must be taken to avoid issues of
insider trading or providing mis-leading information. Information must be made widely available to
avoid accusations of only notifying certain groups of investors and caution must be taken against
divulging too much privileged information which might constitute insider trading. Similarly the
information provided must be accurate to guard against litigation for investors' losses resulting from
performance predictions which are not realised.
Prism Facet 1:

Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Frequency of Communications with Investors

Increasing the information provided to investors allows them to make more informed decisions about
their investment. This enables potential investors to invest in the company with a better understanding
of future performance.
Review and comparison of the information communicated with actual company performance allows
assessment of the accuracy with which it helps predict future performance. This allows assessment of
how useful the communication is.
This is an important measure for organisations to consider as generally there is a need for an
organisation to increase the frequency of communication with investors so they have a better
understanding of current performance and can make more informed decisions about investments.
However the organisation must consider what the most appropriate frequency of communication with
each type of investor is. This might be based on typical frequency for the industry.
Although it will be desirable to increase the frequency of communication, consideration must also be
given to the cost of communication, especially if it is going to include circulation of written material.
Increased frequency of communication might also necessitate a dedicated resource for co-ordination
purposes.
number of times performance data is provided to investors in a given time period
number of times qualitative information is communicated to investors in a given time period.
Performance data - is hard, quantitative data about organisational performance. Such performance
data should include financial and non-financial measures of organisational performance.
Qualitative Information - is information that investors require to help them with their investment
decision that cannot be quantified in hard performance data. Information might include changes in
management style, personnel or structure. Such information might be communicated via press releases
or during face to face meetings with investors.
organisation.
Communication - is the passing of any information to investors that they require to make investment
decisions. Information might include financial and non-financial performance measures and
qualitative information. Communication might be in the form of reports, press releases, meetings with
investors, etc.
Time Period - the time period for consideration of this measure would normally be annually.
Traditionally financial performance data would be provided to investors twice a year, non-financial
information (qualitative and quantitative) can be provided more frequently. For dynamic stocks
communication should be more frequent to reflect the rapidly changing nature of purchasing decisions,
reflecting the changing circumstances of the market and the company.
BEWARE - When considering communication with investors care must be taken to avoid issues of
insider trading or providing misleading information. Information must be made widely available to
avoid accusations of only notifying certain groups of investors. Similarly the information provided
must be accurate to guard against litigation for investors' losses resulting from performance
predictions which are not realised.
Analysis of this measure should include consideration of different types of investor (e.g. institutional
investors, individuals etc.) as they are likely to have different information requirements.
Consideration should also be given to the frequency with which different modes of communication
are used (e.g. meetings, mail outs, press releases, etc).
The data for this performance measure should be collected by the organisations external relations
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Conformance to Financial Reporting Standards

Reporting standards are designed to ensure that information that is published regarding the financial
status of an organisation is accurate.
It is essential that accurate information is provided to investors so that they can make appropriate
decisions on investments.
The reporting of financial information is closely regulated by statute, accounting standards and stock
market regulations. The accuracy of financial reporting is verified by the company's auditors.
This measure is intended to assess whether the organisation is meeting reporting standards and hence
providing investors with the information they require to make decisions. Conformance to reporting
standards ensures that the minimum information is provided and hence provides a starting point for
establishing the information required to satisfy investors.
number of non-conformances to financial reporting regulations in a given time period
Non-Conformances - are instances where inaccurate information is reported. Non-conformances
should be identified by the company's auditors before being reported to the public.
Financial Reporting Regulations - are regulations governing the way in which financial information is
reported. The regulations are nation specific. Examples of regulatory bodies include statute,
accounting standards and stock market regulations.
Time Period - will normally be a year as it mainly relates to annual published accounts.
Data for this measure should be available in auditors' reports, but often it isn't. It is important that
mechanisms are in place to ensure that reporting standards are met.
Prism Facet 1:
Prism Facet 2:
Stakeholder Satisfaction Sub-Facet 2: Regulator Satisfaction
Prism Facet 3:
Sub-Facet 3:
Lead Time to Produce Financial Reports

The speed with which financial reports are produced is a key measure of the efficiency and
effectiveness of the finance department.
To maximise the utility of financial data and financial reports they should be available to those who
require them as quickly as possible. However the speed of report circulation will be affected by the
quality of report, including the amount of information reported and the amount of data analysis
included.
The speed with which reports are available will affect the satisfaction of their intended audiences,
including internal management and investors. However satisfaction will only be improved and
maintained if the financial reports contain the information they require and it is all accurate.
The speed with which reports are produced will be affected by the way in which the finance
department is organised and the support systems available. Where possible information systems and
procedures should be organised so that as many of the financial accounting transactions as possible
are completed before the end of the accounting period in question, so that all effort can be placed on
report writing and analysis.
average lead time to produce and circulate financial reports
Financial reports - are documents which are used to report the financial performance of the
organisation internally and externally. There will be a wide variety of reports produced by the
finance department for a variety of internal and external parties.
Analysis of the lead time to produce financial reports should include consideration of type of report
produced. This should include comparison of the lead time to produce statutory accounts, reports for
circulation to investors and other external parties, reports for internal management use, etc. The
audience will significantly affect the amount of time and effort taken to produce reports. Particular
issues will revolve around whether the audience is internal or external and who is in the audience.
Consideration should be given to the amount of analysis of data that is undertaken and included within
the report. It is possible to produce reports very quickly which simply present data from accounting
systems (e.g. statements of expenditure against budget). It will take longer for experts in the finance
department to undertake analysis of the data that might provide greater insight.
Regardless of the intended audience, the satisfaction of the recipient of the financial report in question
should be considered when using this measure. Effort to enhance reports and provide more
information and analysis should only be undertaken where this will be valued.
Dates on which reports are produced can easily be recorded by the finance department or the
recipients of the reports. As financial statements always refer to specific periods in time it will be
relatively easy to calculate the elapsed time since the end of that period.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Regulator Satisfaction
Increasingly regulators are becoming highly significant stakeholders in organisations. Often they have
considerable influence over the conduct of the organisation and the way in which it operates.
Assessment of regulator satisfaction indicates how well the organisation understands and interprets
the regulator's requirements and acts to satisfy them.
In most circumstances satisfaction of the regulator and regulator requirements is a precondition to
market entry. If regulators are not satisfied the organisation quite simply will not be awarded a
licence to operate.
In many cases regulators represent the interests of other stakeholders or the community in which the
organisation operates. This might include particular minority stakeholders, who are not organised
collectively.
Regulators might include industry specific regulators, environmental regulators, regulators of
competition, health and safety regulators, accreditation bodies (e.g. ISO), etc.
Regulator Satisfaction Survey
There are a number of surrogate measures of regulator satisfaction. Assessment of regulator
satisfaction could be made via a survey, although more often the organisation is in close contact with
the regulator and can therefore assess satisfaction more directly.
Analysis of the regulator satisfaction should focus on the key areas with which the regulator is not
satisfied. Specific operational measures may then have to be implemented to monitor performance in
these areas.
This measure is linked to the measures of:
non-conformances to regulatory requirements
the costs or penalties of those non-conformances.
Use of this measure should include analysis of the level of satisfaction of each of the different
regulators for the organisation. This allows improvement attention to be focused on those regulators
whose satisfaction is lowest and on those regulators who have the greatest influence over the
organisation.
Prism Facet 1:

Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Regulator League Table Performance

Increasingly regulators are becoming highly significant stakeholders in organisations, exerting
considerable influence over them and the way in which they operate. Regulators can impose a wide
range of sanctions on organisations that do not satisfy their requirements. As a result satisfaction of
regulatory requirements is a key measure that can have wide ranging implications for the management
of an organisation's operations.
Regulator League Table Performance provides an important assessment of regulator satisfaction,
indicating how well the organisation understands and interprets the regulators requirements and acts
to satisfy them.
League table performance is an important measure as it compares the organisations performance with
that of others regulated by the same body. As such it indicates how well the organisation is
performing and improving in the context of general improvement of regulator compliance in the
industry.
In most circumstances satisfaction of the regulator and regulator requirements is a precondition of
entry to the market, with regulators needing to be satisfied in order for an organisation to obtain a
licence to operate.
In many cases regulators represent the interests of other stakeholders or the community in which the
organisation operates. This might include particular minority stakeholders who are not organised
collectively.
Regulators might include industry specific regulators, environmental regulators, regulators of
competition, health and safety regulators, accreditation bodies (e.g. ISO), etc.
current position in regulator league table (consider as a proportion of the total number organisation
in the league table)
change in regulator league table position since last publication
Regulator league tables - are tables which rank regulated organisations in terms of the performance
criteria that the regulator considers important. Performance tends to be a weighted average of a
number of performance criteria. In addition to aggregated league tables, regulators frequently publish
league tables of individual performance criteria. Performance in each of these individual league
tables should be measured and analysed in the same way as the aggregated table.
Change in regulator league table position since last publication - reflects the way in which the
organisation's performance has changed in relation to the performance of other regulated companies.
As a result even though effort has been dedicated to improving regulator satisfaction, league table
position will go down if other organisations have improved more.
Analysis of performance should identify the criteria for defining the position in the league table. This
will identify the drivers of regulator satisfaction. Identification of these drivers will enable attention
to be focused on the criteria which receive the highest priority. Frequently regulators produce league
tables ranking organisations in sub categories of performance which reflect these drivers.
Analysis of the regulator satisfaction should focus on the key areas with which the regulator is not
satisfied. Operational measures should then be implemented to monitor performance in these areas.
Analysis should also identify where performance is most in need of improvement, indicating where
improvement action should be focused.
Measurement should consider league tables produced by each of the regulators that have influence
over the organisation. However improvement attention should be focused on the regulators who have
the greatest influence, i.e. those that can impose the greatest penalties or revoke the organisation's
licence to operate.
This measure is linked to the measures 'non-conformances to regulatory requirements' and the 'costs
or penalties for those non-conformances'.
Data for calculation of this measure is available from the regulators concerned. Typically league
tables are published to allow the general public to consider the performance of organisations.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Non-Conformance to Regulations
Increasingly regulators are becoming a highly significant stakeholder in organisations with
considerable influence over them and the way in which they operate. Non-conformance to regulations
assesses the frequency with which the organisation fails to meet the regulator's requirements.
A variety of regulators might be concerned with any individual organisation. These might include
industry specific regulators, environmental regulators, regulators of competition, health and safety
regulators, accreditation bodies (e.g. ISO), etc.
Satisfaction of regulatory requirements is often a condition of entry to the marketplace and nonconformance can often be penalised by sizeable fines. As such measurement of conformance is
essential, as are procedures to ensure the identification and elimination of problems which might
affect future conformance.
In addition to penalties imposed by regulators, non-conformances can also affect public perception of
the organisation. Environmental accidents often attract media attention and can damage public
perceptions and hence sales and profits.
The frequency of non-conformance is closely linked to the measure of the cost of non-conformance, as
frequent instances of non-conformance will increase the number of fines incurred.
number of non-conformances to regulations in a given period
Non-conformances - are incidents where the organisation does not satisfy regulations or meet
regulator's requirements. Non-conformance will be defined by the regulator. Non-conformances will
vary in severity and will often be accompanied by penalties or requirements for corrective action.
Analysis of this measure should identify and eliminate the root causes of non-conformances. Action
should be taken to implement processes and procedures to make sure that future activities conform to
regulations.
Analysis by regulator should also be carried out. This will enable the identification of the regulators
who have the strictest requirements. Improvement efforts should be focused on those regulators who
have the greatest influence over the organisation. This includes those who will impose the largest
fines, who can impose the greatest restrictions on the organisations, or who can take away the
organisation's licence to operate.
Further analysis should relate this measure to the cost of non-conformances which will reflect the
severity of the issue.
In order to collect the data for this measure it is important that the organisation has a process to
manage relationships with regulators. This process should record occurrences of non-conformance
and analyse their causes.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Cost of Regulatory Non-Conformance

Increasingly regulators are becoming highly significant stakeholders in organisations with
considerable influence over them and the way in which they operate. The regulator's influence is
usually exerted by imposing fines or penalties on organisations that don't conform to predefined
requirements. This measure assesses how well the organisation understands and interprets the
regulators requirements and acts to satisfy them. The value and number of fines reflect nonconformance to regulator's requirements.
The value of fines incurred will usually reflect the magnitude of the non-conformance. A number of
small fines might add up to the same value as one large fine for a serious offence, therefore the
magnitude of the overall non-conformances would be similar.
The number of fines that are incurred will affect the time and resource the regulator needs to regulate
the organisation - affecting regulator satisfaction.
The more fines an organisation incurs the more closely the regulator is likely to investigate its
activities in order to identify further actual and/or potential non-conformances.
The measure is linked to 'Repeat Penalties' as the more occasions a fine is incurred for a particular
non-conformance, the more frustrated the regulator is likely to become. It is likely that fines will
increase if an offence is repeated and no corrective action or ineffective corrective action is taken.
Fines take resources away from the organisation, which could be invested in other operations. In
addition fines, and the lack of regulator satisfaction that they imply, can attract unwelcome publicity
which can have a negative impact on sales turnover, especially when the fines are issued because of
non-conformances that the customers or consumers considered to be sensitive.
number of fines / penalties levied in a given period
value of fines / penalties levied in a given period
Fines - are financial penalties imposed by regulators as a result of non-conformance.
Penalties - reflect a broader category of punishment made by regulators and include non financial
penalties. Non financial penalties might include restrictions on operations, pricing controls, orders to
undertake remedial action, etc.
The number of fines levied - measures the frequency with which the organisation fails to conform to
the regulator's requirements.
The value of fines levied in a given period - measures the financial burden placed on the nonconformance by the regulator. This provides an indication of the regulator's perception of the severity
of the non-conformance.
The given period for this measure should reflect the frequency with which regulators judge the
organisation and impose fines.
Use of the measure should include identification and elimination of the root causes of nonconformances so that they do not recur. This should include implementation of processes to identify
and rectify such root causes.
Analysis of the measure should include consideration of the size of fines, as this will reflect the
severity of the problems which have caused non-conformance.
There should also be analysis by regulator to identify which regulators have the most stringent
requirements. Focus should be placed on satisfaction of the most significant regulators and
expenditure should be focused on them. The most significant regulators are those who can impose the
greatest penalties and/or restrictions on the organisation.
Organisations should have a process for managing relations with regulators. This process should
identify who is responsible for collecting and analysing the data for this measure and co-ordinating
action to improve conformance.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Cost of Compliance to Regulator Requirements

This measure reflects the costs involved in conforming to the requirements of the regulator. These
costs reflect the costs of imposing disciplines and implementing procedures to ensure that the
activities of the organisation conform to the regulator's requirements. This will include training of
employees and might also include procedures for monitoring and controlling performance and
managing relations with stakeholders.
The cost of compliance to regulator requirements can have serious implications for the
competitiveness of the organisation. This is particularly the case if competing with organisations with
lax regulatory requirements. The cost of conformance to regulator requirements can be a major factor
in location decisions for new facilities, if for example regulations are less strict in one country than
another.
average expenditure on compliance to regulator requirements in a given period
Expenditure - is any money spent on satisfying regulator requirements. This expenditure will include
both preventative and corrective expenditure. Preventative expenditure includes putting in processes
and equipment to ensure that the organisation conforms to the regulator's requirements. Corrective
expenditure is that which is required to resolve any non-conformance issues raised by the regulator.
Such expenditure may be in order to avoid a fine, following publication of a regulation or a warning,
or to avoid being fined again for an existing offence.
Regulatory requirements - are conditions placed on the operations of the organisation by regulators
who represent the interests of other stakeholders and the community as a whole.
The given period for this measure should reflect the frequency and amount of expenditure on
compliance to requirements. The higher the level and frequency of expenditure, the shorter the period
should be so that analysis of the measure can identify trends in expenditure.
Expenditure is likely to be greater where new regulators or regulatory requirements are imposed on
organisations as action will be required to ensure compliance to requirements.
Costs of compliance should be compared between locations, including potential locations, and should
be taken into account when considering the location of operations.
There should also be analysis by regulator to identify which regulators have the most stringent
requirements. Focus should be placed on satisfaction of the most significant regulators and
expenditure should be focused on them. The most significant regulators are those who are likely to
impose the greatest penalties or restrictions on the organisation.
Compliance to regulator requirements should include identification and elimination of the root causes
of non-compliance to ensure that compliance is maintained. Related expenditures should be built into
the cost of compliance.
Organisations should have a process for managing relations with regulators. This process should not
only identify who is responsible for maintaining relationships with the regulator, but also who should
be responsible for collecting and analysing data for this measure and co-ordinating action to improve
the efficiency and effectiveness of conformance.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Repeat Penalties for Non-Conformance to Regulator

Repeat penalties assesses how well the organisation resolves non-conformances to regulator
requirements and successfully implements corrective actions and management processes to ensure
that non-conformances are not repeated.
It is likely that fines will increase if an offence is repeated and no corrective action or ineffective
corrective action is taken.
It is essential that organisations identify and eliminate the root causes of all non-conformances. Hence
there is a need to implement processes and procedures to ensure that non-conformances are
eliminated. As such this measure will assess whether the process of identifying and eliminating nonconformances is working effectively.
percentage of fines / penalties for non-conformance which occur more than once in a given period
average value of repeat penalties for non-conformance
Non-conformances - are incidents where the organisation does not satisfy regulations or meet the
regulator's requirements. Non-conformance will be defined by the regulator. Non-conformances will
vary in severity and will often be accompanied by penalties or requirements for corrective actions.
Penalties - reflect a broader category of punishment imposed by regulators which includes nonfinancial penalties. Non-financial penalties might include restrictions on operations, pricing controls,
orders to undertake remedial action, etc.
The time period for this measure should be based on the frequency with which the regulator judges
the organisation's performance and imposes penalties. There should also be analysis by value of the
fine, as larger fines imply that the non-conformance is more significant implications and hence likely
to have a greater effect on the satisfaction of regulators and communities.
This measure requires analysis of the type of non-conformance to assess whether there have been
repeat offences.
It is essential that analysis seeks to identify and eliminate the root causes of non-conformances,
thereby ensuring that penalties do not re-occur.
If not already in place, organisations should implement a process for managing relations with
regulators part of which should record the occurrence of non-conformances and analyse their root
causes.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Community Relations and Outreach Assessment

Community Relations (CR) represents a long-established area of corporate public affairs activity.
However, increased community and public expectations and changing corporate needs have forced a
shift in the direction and purpose of CR activities. Focusing on issues such as retraining workers and
partnering with environmental activists has become an integral aspect of the community relations and
outreach programmes.
Many leading companies, especially manufacturing enterprises, actively work with the communities
where plant/facilities are located. Several different approaches to community relations and outreach
can be identified, including: (i) inviting community leaders and the general public into their facilities
to review the environmental safeguards and to hear first hand the company's commitment; and (ii)
employee participation in any of a wide range of environmental and social benefit projects such as
recycling programmes, cleaning up streams and parks, talking to school groups, etc.
Communities directly impacted by company operations are particularly important stakeholders - they
are often the people most immediately affected, or at risk, by the organisation's manufacturing and
processing activities. Attentive companies perceived by their neighbours to have potential
environmental problems often establish community-involvement groups, bringing community leaders,
citizens, activists and others together with company management and employees to openly share
concerns and solve problems collaboratively.
INDUSTRY EXAMPLE:
El Salvador's largest beverage company, La Constancia, is recognised as a leader in the area of
community relations and outreach within South America. La Constancia is one of the few companies
in the operating region to establish a corporate philosophy, targets and measures relating to
conservation and overall environmental quality and the promotion of sustainable development. The
company specifically focuses on improving the level of education around environmental protection in
the country and concentrates on such areas as: (i) consumer recycling initiatives, (ii) solid waste
reduction from consumer product containers, (iii) a natural landscape preservation campaign, and (iv)
sponsorship of the National Environmental Award to be given to outstanding individuals or
organisations for their protection of the environment.
number of community partnerships with one or more non-profit organisations during previous
period
number of publicly-oriented corporate environmental reports (CERs) and community newsletters
distributed during previous period
number of plant tours (e.g. open houses) and community advisory panel meetings conducted during
the year versus previous period
expenditure of community partnerships as % of operating costs

Community partnerships - are co-operative activities undertaken with community groups or within the
community in which the organisation operates. This community may be local, national or global in
scope.
Publicly-oriented corporate environmental reports (CERs) and community newsletters - are methods
of communication with communities.
Plant tours - are opportunities for the local community to tour the organisation's facilities, providing
understanding of activities.
Community advisory panel meetings - are meetings between the organisation and community groups to
plan community partnership activities.
Until recently, the practice of CR has been guided largely by trial and error and individual wisdom.
However, if community relations and outreach is to be considered an integral partner in the corporate
business strategy, it needs benchmarks and standards for programme development.
Quantitative and qualitative evaluations (e.g. benchmarking studies, opinion surveys, questionnaires,
and focus groups) are commonly used to assess key community relations activities' effectiveness
and/or impact. Two-way communication with community stakeholders can be fostered through
consumer advisory panels, policy dialogues, meetings with advocacy groups, or similar activities.
Measures should describe how the organisation relates to the communities in which it operates. For
example, several companies such as Eastman Kodak and IBM gather performance-related information
reflecting the degree to which their respective company shares pertinent facility-specific
environmental information with the local communities in which it has facilities.
Successful companies have found that in order for a community relations and outreach programme to
be successful, it is important that employee community involvement is encouraged, supported, and
recognised through policies and incentives such as release time to volunteer, awards and recognition
programmes, and matching employee gifts.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Level of Support for Local Communities

Involvement in local community activities is designed to develop and maintain a positive relationship
with the local community and positive perceptions of the organisation.
Positive perceptions of the organisation in the local community can facilitate reciprocal contribution
by the community. Such contribution might include willingness of the local labour market to join the
organisation, acceptance of planning applications, provision of infrastructure to support operations,
tolerance of less sociable activities (e.g. activity at unsociable hours, noise pollution, etc.)
number of local community projects undertaken made in a given period
expenditure on sponsorship of local community projects in a given period
Local Community Projects - might include support for ongoing projects in the community or
sponsorship of specific events, such as open days, etc.
Local Community - the local community is that in which the organisation considers that it operates.
This might be at the level of town or city. For larger organisations the local community might be
national or even international, depending upon the aspirations of the organisation.
Expenditure - will include financial donations and donations in kind, such as secondment of
employees to local community projects.
Analysis of the measure should include the level of community considered as local. Often national
and international communities should be considered separately.
The data for calculation of this measure should be collected by external relations, who will be aware
of the majority of the community initiatives in which the organisation is participating. This measure
will monitor the way in which the organisation uses its budget to improve relationships with
communities.
Prism Facet 1:
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage Enterprises - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Environmental Protection Spending Level

Increased attention is being paid to the environmental impact of manufacturing and service
organisations. Progressive environmental policies and expenditures demonstrate a company's
commitment to protecting the environment and indicate a well developed sense of corporate social
responsibility.
The financial community (banks, insurers and shareholders), one of the most important target groups
for company communications, is increasingly evaluating corporations on the basis of their
environmental liabilities and environmental expenditures.
Assessing and reporting on environmental costs and expenditures has been made mandatory by
several OECD-member countries. In Germany, the Chemical Industry Association has started to
publish annual figures of both capital and operating expenditures, using standard definitions.
level of R&D expenditures devoted to projects/activities/processes with environmental
significance during a given period
expenditure on "clean" production technologies and equipment as a % of total equipment costs
during previous a given period
% of company annual sales revenue devoted to community and industry-sponsored pollution
prevention and environmental protection programmes/activities during previous a given period
Expenditure - is any money spent on satisfying regulator requirements. This expenditure will include
expenditure on preventative actions and corrective actions.
Investments in environmental protection initiatives and capital improvements can differ from
company to company, depending on a number of factors, including a company's sector, size and
culture. Manufacturing companies confront a wide range of environmental challenges, while retail or
service-sector firms often face a smaller range of challenges. Larger enterprises typically have at
their disposal more resources to devote to environmental spending, and often have dedicated staff
committed to such an undertaking.
Financial resources spent on environmental protection (capital and operating costs) is of growing
interest to external audiences.
While environmental protection is an integral part of project design and operations, some companies
have found it difficult to identify that part of the cost (expenditure) that is purely environmental (e.g.
improved energy efficiency systems). Accounting for environmental expenditures, even in the same
company, faces many problems, e.g. deciding whether the expenditure has to be considered
"environmental" or whether it is undertaken only for economic reasons. The adoption of a new
technology often implies an improvement in environmental performance, even if the investment is
made without considering environmental issues.
Even when expenditures are properly accounted for, data can be misunderstood by external
stakeholders. For instance, is a company undertaking expensive investments for environmental
protection from a proactive posture, or is it just paying for years of mismanagement of the
environment? The problem can only be partially solved by explicitly showing the links between
improvements in environmental performance and expenditures.
Analysis should include consideration of the differences in expenditure in different business units or
in relation to different products or processes. Differences might be caused by differences in the nature
of the specific operations or due to differences in requirements in different locations.
Organisations should have a process for managing their impact on the environment which should
involve collection and analysis of data for this measure and co-ordination of action to reduce any
negative environmental impacts.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Partnerships with Pressure / Community Groups

This measure is designed to reflect co-operation between the organisation and pressure and
community groups.
The measure implies the desire of the organisation to work with pressure and community groups to
find mutually agreeable solutions to issues that arise.
Co-operation in problem resolution prevents confrontation that could result in highly publicised
action which can damage public perceptions of the company and hence sales and profitability.
Co-operation with community groups can help develop positive perceptions of the organisation in the
local community which can facilitate reciprocal contributions by the community. Such contributions
might include willingness of the local labour market to join the organisation, acceptance of planning
applications, provision of infrastructure to support operations, tolerance of less sociable activities
(e.g. activity at unsociable hours, noise pollution, etc.)
Partnership with local community groups might include provision of mutually desirable training or
facilities.
number of pressure / community groups with which the organisation is in partnership
% of the relevant pressure / community groups with which the organisation is in partnership
Pressure groups - are those groups which campaign on particular issues of interest. The implication
of using this measure is that the pressure groups have or might have a particular issue of contention
with the organisation.
Community groups - are groups representing the community in which the organisation operates. The
local community is that in which the organisation considers that it operates. This might be at the level
of town or city. For larger organisations it may be at the national or international level.
Formula 2 reflects the need to consider all relevant pressure / community groups as any one of these
groups might start adversarial action independently. The threat of such action should be considered.
The coverage or representation of the pressure and/or community groups - i.e. whether they are local,
national or international - should be considered when analysing this measure. The size of the
investment required to establish and maintain effective partnerships should also be a focus of
analysis.
The data for calculating this measure should be gathered by those responsible for external relations.
The measure will monitor the effectiveness with which the organisation uses its budget to improve
relationships with communities.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Regulator & Community Feedback / Suggestions

Provision of feedback and suggestions allows regulators and the community to make a contribution to
the effective and efficient running of the organisation. Feedback and suggestions allow identification
of areas for improvement which are in line with the wants and needs of the regulator and community,
therefore enhancing regulator and community satisfaction. The nature of the feedback received will
indicate the level of regulator and community satisfaction.
performance in line with regulator and community requirements. This might be done as part of the
regulator satisfaction survey or might be a procedure to proactively encourage and facilitate
feedback. The success of the process will be assessed by this measure.
The process of encouraging regulator and community feedback and suggestions might include direct
meetings or the organisation of focus groups to discuss performance issues. Suggestions made by
regulators should also provide input to the strategy development process indicating important areas of
performance upon which to focus and the performance factors that determine the 'licence to operate'.
frequently made suggestions. The importance of suggestions and feedback must be considered, as it is
important for organisations not to take their eye off the most important performance factors that are
already being delivered in an attempt to improve other less important performance areas.
Organisations should also ensure that they monitor issues of increasing relevance. It is easy to dismiss
issues that are considered to be of little importance only for them to come back to haunt the
organisation.
number of suggestions / pieces of feedback received per regulator / community group in a given
time period
% of regulators / community groups that make suggestions / provide feedback in a given period
% of regulator / community suggestions that are implemented or acted upon
average lead time to respond to suggestions / feedback.
Suggestions / feedback - are contributions made by regulators or the community with the objective of
improving the operations of the organisation.
Regulators - are bodies which control or regulate the operations of organisations. Regulators often act
on behalf of other stakeholders. A variety of regulators might be applicable to different organisations.
These include industry specific regulators, environmental regulators, regulators of competition, health
and safety regulators, accreditation bodies (e.g. ISO), etc.
Community - the local community is that in which the organisation considers that it operates. This
might be at the level of town or city. For larger organisations it may be national or international level.
Community groups - are groups representing the community in which the organisation operates. They
might include pressure groups which are those groups which campaign on particular issues of
interest.
It is likely that value will be realised through reduced cost of conformance and reduced cost of nonconformance.
before action will be taken. There should be a standard benchmark lead time for acknowledgement. It
is important that regulator or community are notified of the progress of their suggestions and are given
reasons if suggestions are not going to be implemented.
The importance placed on the feedback received will depend on the importance of the stakeholder. If
they can prevent the organisation from operating or impose fines then their feedback will be
considered to be very important.
The % of suggestions that are acted upon will depend on the importance, validity and usefulness of
the suggestions.
Data for the calculation of this measure should be collected through a regulator or community
suggestion scheme which encourages feedback and arranges specific events to facilitate this. This
should be undertaken by the process responsible for managing the relationship with regulators and
communities, including public and external relations.
Prism Facet 1:
Stakeholder Contribution Sub-Facet 1: Regulator & Community Contribution
Prism Facet 2:
Prism Facet 3:
Quality and Availability of Regulator Documentation

The greater the quality and availability of the documentation provided by regulators the easier it will
be for organisations to adhere to regulations and satisfy regulator requirements. The quality of
documentation relates to its accuracy, clarity and accessibility, all of which contribute to the
recipient's understanding of the regulations and regulator requirements.
There are a number of ways in which documentation can be made available to organisations.
Delivery of hard copies of regulations ensures that the organisation receives full copies of all
documents. Making information available on the world wide web is cheaper, but requires the
recipient to have the appropriate hardware and software. Web-based circulation ensures that
documentation is readily available and can be updated frequently to ensure that documents are up to
date.
The quality and availability of regulator documentation will have a significant effect on the clarity of
regulator requirements. It is essential that documentation is clear and accurate if organisations are to
have a clear understanding of regulator requirements, which in turn will affect the ability of the
organisation to satisfy the requirements.
% of documents that are 100 % accurate
% of documents that are considered to be unclear
average time from modification of a regulation to availability of updated documentation
average cost of acquiring documents
Accurate documentation - is material which accurately documents the requirements of the regulators
and represents it in a clear and unambiguous form.
Availability of documentation - is the time at which documentation is available to the regulated
company. When considering availability the mode of document delivery is important. Selection of the
mode of delivery should be based on the frequency with which regulations change and the time from
change of regulation to compliance being necessary. Frequent changes and short compliance periods
necessitate rapid communication of requirements, possibly via electronic means, for example.
Cost of acquiring - the cost of acquiring the documentation required from the regulator.
Unclear documents (metric 2) - can be assessed by the number of complaints or queries received
regarding understanding of documentation. Alternatively proactive feedback can be sought through
surveys of users of the documentation.
The availability and clarity of documentation should be analysed in conjunction with the clarity of
regulations and compliance to regulations, to identify where documentation causes compliance

problems. Where this is the case feedback should be provided to the regulator in an attempt to
improve documentation in the future. The relationship between the organisation and the regulator will
determine how receptive the regulator is to improvement suggestions.
Data for this measure should be collected by those responsible for managing relations with
regulators. These people should record, analyse and feed back any problems with the quality or
availability of documentation.
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Sub-Facet 3:
Press Coverage
Coverage of the activities of the organisation in the press is a significant way in which stakeholders
perceptions of the organisation can be influenced, affecting the satisfaction of all stakeholders,
improving the likelihood of them making a positive contribution in return.
As a result there should be close management of relations with the press to maximise positive press
exposure and minimise negative exposure.
Press coverage can reflect a wide range of organisational activities from normal operations and
product or service information to coverage of contribution to the community or environmental issues.
number of positive press appearances in a given period
number of negative press appearances in a given period
Press articles - items about the organisation that appear in local, national and international press.
Analysis of the number of press articles should include consideration of the subject of the article.
Typical subjects might include:
product or service offered (e.g. product launches)
operational issues (e.g. recruitment)
the impact of the organisation of the environment
activities undertaken in the local community, including charitable activities and donations.
The public relations department should monitor and control all communications with the press and
report the performance against this measure.
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Sub-Facet 3:
Close Working Relationship with Regulators

Increasingly regulators are becoming highly significant stakeholders in organisations, exerting
considerable influence over them and the way in which they operate. Regulators can impose a wide
range of sanctions on organisations that do not satisfy their requirements. As a result satisfaction of
regulatory requirements is a key measure that can have wide ranging implications for the management
of an organisation's operations.
As with other stakeholders, the development of close working relations with regulators will enable
easier identification of their wants and needs, and of the way in which they can be satisfied.
Development of close working relations with regulators can also provide the organisation with the
opportunity to feed back their concerns regarding regulation with the hope of influencing the
development of future regulations and the regulator's approach.
In addition close and open working relationships can enable early notification of changes in
regulations to be provided, allowing greater opportunity to satisfy their requirements in sufficient
time.
The ability to develop close relationships with regulators will be determined by the willingness of
the regulator to listen and consult about potential regulations. This in turn will be affected by the
regulator's satisfaction with the past performance of the organisation. Measures of each of these are
included within the catalogue.
number of points of contact with the regulator
average number of meetings / communications / consultations with regulators in a given period
% of occasions advance warnings of regulation changes are provided
Number of points of contact - are the number of people within the organisation who have contact with
members of the regulator's team. Where relations are poor there is likely to be only one point of
contact at a high level in the organisation, through which all communication must be channelled.
Where there are close working relations members at all levels of the organisation may be able to
contact a member of the regulatory body to discuss specific issues or concerns.
Meetings - are direct face-to-face communications with the regulator.
Communications - are the interactions between regulator and organisation via any medium.
Consultations - are two way negotiations between the regulator and the organisation, where the
organisation is provided with the opportunity to feed back opinions on regulation.
Advance warnings of regulation changes - are instances where advice is provided of future regulation
changes, allowing more notice to take action.
The given period for this measure will be determined by the frequency with which regulations change
and communication between the organisation and the regulator is necessary.
For each of the modes of communication consideration should be given to the instigator. If working
relations are good the organisation will be able to instigate all modes of communication to consult on
a wide range of issues. This will not be the case if relations are poor - all communication is likely to
be from the regulator.
Data for this measure should be collected by the process responsible for managing relations with
regulators.
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Environmental Legislation Compliance Level

An escalating trend in national and international environmental laws and regulations compels
businesses to seek improvement in their environmental performance to avoid financial liabilities.
Regulatory compliance can often result in unexpected expenditures that threaten companies' business
results. The most significant financial liabilities for companies are associated with remediation,
clean-ups and penalties for breaches of legislation.
Compliance with all applicable regulatory and legal requirements is a fundamental corporate
responsibility. Organisational and personal liability for the costs of environmental cleanups and
claims have prompted leading corporations to adopt proactive strategies in dealing with
environmental issues.
Driven by the need to minimise risks, some businesses adopt a precautionary approach which
involves anticipating potential risks and preventing environmental hazards with greater flexibility of
response than is available through regulatory compliance.
A proactive and aggressive approach to environmental protection and regulatory compliance allows
companies to realise potential cost savings by anticipating and avoiding incidental expenditures
caused by environmental damages and by minimising the costs of compliance with environmental
legislation in the future. Furthermore, operation and insurance costs can be reduced through waste
minimisation, pollution prevention and the reduction of health and safety hazards.
% compliance with all applicable regulatory/legislative requirements during previous period
time required to respond to environmental/safety incidents during previous period
number of failures to comply with permits per plant location or facility during previous period
number and type of legal/regulatory actions brought against the company during previous period
number and cost of penalties and judgements levied related to regulatory/legislative noncompliance during previous period
Collected performance data regarding compliance level can be based on information provided to the
authorities, actions being taken to improve performance or environmental impacts of incidents. This
would also provide an opportunity to assess/review how a company's permits relate to production
activity and how the firm meets its legal requirements.
CAUTION:
Recent research has revealed that there can be several obstacles to regulatory/legislative compliance
among companies in particular industries. Fixed costs and perceived small savings are two major
factors that stand in the way of full compliance among certain firms. For example, some companies
may hold the view that pollution reduction activities can increase costs that consumers may be
unwilling to pay. Plus, sometimes the product produced using less-polluting processes may be of an
inferior quality and/or the option of process changes is inefficient in many older plants.
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Sub-Facet 3:
Energy and Raw Material(s) Consumption Rate

In a context of growing corporate social responsibility and ecosystem protection, savings of energy
and raw material(s) consumption represents one of the key criteria of company environmental policy.
For many industries, gas and electricity represent a major portion of total operating costs, so reducing
energy consumption can significantly decrease expenses.
Energy consumption and efficiency is integral to sound corporate environmental management.
Increasingly companies are being asked to disclose the extent to which they use 'environmentally safe
and sustainable' energy sources and material inputs.
Energy consumption is a universal issue giving rise to some of the most pressing global
environmental effects. Being energy efficient means a company can move beyond compliance with
clean air regulations, and get ahead of possible future regulations. Given the links between major
environmental issues on the one hand, and the sources of energy and patterns of demand on the other,
the development of energy consumption and energy efficiency measures is becoming more critical with a high profile in many leading companies.
From a financial standpoint, energy and materials usage can represent a significant cost, thus
becoming the focus of successive targets for improved efficiency. In fact, some of the most specific
targets evident in corporate environmental reports (CERs) of leading companies relate to energy and
material consumption and conservation, often not just for the whole business but also down to
individual operating units.
total quantity of energy consumed from all sources within the manufacturing processes (in joules
per unit of manufactured output).
ratio of the total energy/fuel consumption to the volume of total production and per employee.
% of renewable and non-renewable raw materials turned into product and scrap per quarter or
year.
level of raw materials and energy inputs per unit of production per quarter/year.
Energy consumption - is generally defined as the amount of fossil fuels and electricity used to
generate heat, power and electricity. 'Energy efficiency' or specific energy consumption is usually
assessed as the energy consumption per unit of output.
There are several ways to gather data related to energy consumption rate. Corporate accountants or
purchasing staff can maintain invoices from electric companies and other suppliers which detail how
much of what type of energy an organisation consumed at various times. The information can also be
requested directly from the suppliers themselves.
This compilation process can be more complex for larger companies, particularly multinational
enterprises. Information may be fragmented across various divisions of the company; for instance,
operating departments may collect fuel information, while finance departments collect electricity
information. Indeed, the same type of data may be tracked in different ways by different divisions, or
tracked in some divisions but not in others.
When identifying targets for raw material conservation programmes, it is important to consider each
individual conservation target (such as a goal to recycle 20 tonnes of paper per year) and develop
data on the progress made toward achieving these goals.
A core requirement of several internationally-based corporate reporting initiatives, such as UNEP
and GRI, is the development of an inventory regarding environmentally significant materials used.
Such an inventory should provide an indication of which materials used are hazardous, toxic or
associated with significant potential environmental impacts. The scope and practice of materials
recycling on- and off-site should also be addressed.
There is no standard unit for energy usage. Process industries, such as petrochemicals and
manufacturing, generally prefer to use Joules, whereas others prefer Kilowatt-hours. The latter may
be clearer for a wide audience since it can readily be related to electricity use with which many are
familiar. Further, the use of production-related units can lead to greater transparency and easier
comparisons within a site and between sites. These units often relate to consumption per unit output,
such as Gigajoules per production tonne.
According to recent industry-based surveys, few companies currently reveal their capital investment
in energy savings or the expected pay-back times. However, such information is key to assessing the
priority which the company attaches to energy savings.
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Supplier/Contractor Waste Minimisation and Recycling Rate

Few individual companies can tackle the environmental challenge throughout their product's lifecycle on their own. The environmental performance of suppliers (or contractors) may be significant to
the organisation's own operations and may also result in 'bought in impacts'. If a company wishes to
consider the full range of environmental impacts associated with its products, then it should consider
the waste minimisation and recycling initiatives undertaken by its key suppliers. The need to consider
the performance of suppliers is especially true in operations involving a large percentage of
outsourced production. Moreover, a rigorous means of ensuring the environmental soundness of all
components of a company's production process is essential to understanding the total environmental
impact of a firm's end products.
Although the introduction of environmental criteria into supplier contracts could be seen as an added
burden, some companies are finding that such environmental considerations can stimulate unexpected
improvements and promote stronger business relationships. Also, as environmental liabilities
increase, companies may find that they simply cannot afford to do business with a supplier/contractor
who presents environmental risk.
CURRENT PRACTICE - To help ensure that their products and processes are environmentally
responsible, many companies are seeking to buy 'environmentally-friendly' products and materials
from their suppliers. This includes buying everything from recycled paper for office use to products
or packaging that reduces waste but does not compromise competitiveness, reliability or quality.
Further, companies are increasingly participating in "buyers' groups" in which they leverage their
collective buying clout to push suppliers to consider environmentally-conscious products or
processes.
% of raw materials supplied with recycled content per year
amount and type of wastes generated by suppliers during the previous period
number of waste minimisation initiatives implemented per year during the previous period
Suppliers - should be defined broadly, to include both producers of raw materials the company uses
and providers of intermediate products or services.
The measurement of supplier waste minimisation and recycling initiatives may be influenced in a
number of ways. A first step may involve the exchange of information between firms regarding the
environmental aspects of their products. A second step could be setting supply chain specifications
(such as specifying raw materials used, or setting conditions on the recyclability of a product).
In working with suppliers, waste streams for minimisation should be targeted based on compliance,
disposal cost, potential liability, quantity generated, waste hazard, potential to remove bottleneck(s),
and potential by-product recovery.
Supplier options to minimise waste and maximise recycling opportunities can be best achieved
through source reduction assessment such as equipment changes, procedure changes, or material(s)
changes. Each option should be evaluated in terms of reduction in waste hazard, reduction of disposal
costs, reduction of materials cost, and effect on product quality.
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Product Waste Minimisation and Environmental Release Levels

Greater environmental awareness is challenging organisations in all sectors to re-examine their
operational processes and the products and services they provide. In order to compete effectively in
some markets, companies strive to develop and provide products that have no undue environmental
impact and can be recycled, reused, or disposed of safely. Further, they need to be able to respond to
these challenges quickly and effectively to avoid putting their competitive position at risk.
Banks and other financial institutions are starting to realise they can no longer ignore the
environmental performance of the businesses they rate or invest in. Consequently, bankers and
insurers are making attempts at integrating industry waste and environmental release data in their
lending decisions thereby impacting a company's potential creditworthiness. Their assumption is that
corporations with poor environmental performance pose a high financial risk and decrease in
shareholder value.
To a growing degree, organisations have to be in a position to respond to requests for more
information from various stakeholders regarding their products' environmental impact and
performance. Those organisations that have adopted comprehensive environmental protection
strategies, which go beyond mere compliance, have expanded their view of stewardship to cover
product and non-product waste issues. Such strategies are supported by defined environmental
objectives and targets that provide the benchmarks for measuring performance and progress and for
determining the success of such strategies.
CURRENT PRACTICE - Minimising or eliminating waste involves a wide range of initiatives to
ensure that materials are not used needlessly, and that all processes throughout the organisation are
examined for their potential to reduce waste sent to landfills. Many leading companies have set
ambitious 'zero-waste' goals, meaning that they intend to virtually eliminate waste bins, opting instead
to ensure that all waste is reused or recycled.
% of total waste (in tonnes) reduction per unit of production during previous period
level of waste stream reductions in production processes per quarter/year during previous period
total waste handling/treatment costs per quarter or year during previous period
Waste - is generally defined as any gas, liquid, or solid residual material at a facility, whether
hazardous or non-hazardous, that is not used further in the production of a commercial product or
provision of a service and which itself is not a commercial product.
Environmental releases, or emissions, are usually expressed in total volume over a year or per unit of
production. From the regulatory point of view, the total emissions relative to the legislative period
(where applicable) are the most relevant.

Measurement of waste minimisation efforts and initiatives should cover total waste generation, waste
reduction and recycling. It is recommended that whenever possible, analysis should be undertaken to
classify waste sources.
In assessing environmental release levels, a company should provide base line data against which the
organisation measures itself each year to determine its progress, and quantify, to the extent possible,
the following: emissions to the atmosphere (e.g. ozone depleting substances); hazardous waste; and
waste discharges to land.
Corporate investors concerned with environmental release and emissions are looking ideally for a
trend of reducing emissions against a maintained or increased level of production and improved
profitability. This might be shown as a percentage reduction in emissions related to output volumes.
Several leading companies are now considering the 'environmental burden' when evaluating
emissions and wastes in particular environmental impact categories. Environmental burden is a
quantitative way of weighting the potential environmental impact of different emissions in similar
categories such that companies can: (i) identify the most harmful environmental releases and
prioritise them for reduction; (ii) gain a more meaningful interpretation of the potential impact of its
emissions; and (iii) promote a greater public appreciation of industry's approach to reducing its
product wastes and environmental releases.
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Product Design for Re-Use and Recycling / Product Stewardship

The environmental impact of a company frequently depends on the products it manufactures.
Corporate social responsibility is increasingly involving "cradle to grave" activities as a
consequence of direct consumer and stakeholder pressures. Decisions made during the design phase
determine, for example, a product's use of materials and energy, its longevity, and its recyclability.
Once a product moves from the design phase to the production phase, environmental attributes
become more or less fixed. Bringing environmental concerns into consideration at the beginning of the
design process therefore offers significant opportunity for lessening the environmental impact (or
load) associated with a company's products.
Product stewardship activities generally include "green product design", which can involve a variety
of techniques and strategies, all aimed at increasing a product's recycled content, eliminating
problematic ingredients, or creating a system to take back a product or its packaging for reuse,
refurbishing or recycling at the end of its useful life. Further, this generally includes designing
products that can be easily upgraded, rather than replaced, when they become outmoded, or that can
be easily disassembled for reuse or recycling.
First developed to help manage the production, use and disposal of high-impact products such as
pesticides, product risk management and re-use initiatives are now spreading to other sectors - driven
forward by the growing interest in life-cycle assessment (LCA). Given the structure of industrial
economies, with different stages of a product's life-cycle handled by industries or companies in
different ownership, the 'end of life' phase has been difficult for manufacturers to address. However,
initiatives like Germany's Duales System Deutschland (DSD) material recovery programme are
forcing major rethinking in this area. As such, the design phase offers opportunities for rethinking not
only the physical nature or attributes of a product, but also the ways in which a company offers its
products to its customers.
INDUSTRY EXAMPLE
Design for the environment has been part of the commitment of companies like Xerox for several
years. The company has set its environmental goal to be 'waste free products manufactured in waste
free factories.' Using 1990 as a base year, Xerox embarked on a five-year effort to create waste-free
factories. Operational criteria include 90% minimum reduction in solid waste to landfills, air
emissions, hazardous waste, and process wastewater discharges. Xerox has also introduced a 'take
back' system in which cartridges are taken apart and components recycled. This form of product
stewardship illustrates the importance of life-cycle thinking, assuming that manufacturers will share
responsibility for products from cradle to grave along with suppliers, consumers and others in the
life-cycle chain.
volume of recyclable/re-used packaging as a percentage of total packaging content used per quarter
or year during the previous period

number of product units taken back for recycling or re-manufacture per quarter or year during
previous period
% of total product offering designed for recycling/re-use per year, versus previous period
weight of packaging materials used per volume/weight of product output
Product - is generally defined as the outcome of the organisation's activity and is applicable whether
an organisation manufactures or provides services.
Product stewardship - is generally defined as a company's effort to consider the upstream and
downstream implications of its activities. It involves a level of stewardship assumed by an
organisation for the environmental safety, re-use, and recycling of its products throughout their entire
life-cycle. An emphasis on the entire life-cycle of a product is intended to expand a consideration of
environmental impact beyond what happens within a company's own doors and plants, to include all
the impacts associated with a product's sourcing, manufacture, distribution, use and
disposal/recycling.
Recycle - is generally defined as a practice which regenerates or reformulates a material from a
process to recover a useable product or material for refuse.
Reuse - is generally defined as a practice that reemploys a material either as an ingredient or as an
effective substitute for a commercial product in a particular function or application.
Measures should focus on both the organisation's activities in producing its products or services and
any activities associated with the "end-of-line" of products or service.
It is important to recognise that 'design for environment' is not an isolated activity in product
development - environmental considerations in product development decision-making are also
heavily dependent on action plans taken for implementing, for instance, cleaner production
technologies.
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Repeat Penalties for Non-Conformance to Regulations

Repeat penalties assesses how well the organisation resolves non-conformances to regulator
requirements and successfully implements corrective actions and management processes to ensure
that non conformances are not repeated.
It is likely that fines will increase if an offence is repeated and no corrective action or ineffective
action is taken.
It is essential that organisations analyse the root causes of all penalties to identify and eliminate them.
There is a need to implement processes and procedures to ensure that non-conformances are
eliminated. As such this measure will assess whether the process of identifying and eliminating nonconformances is working effectively.
percentage of fines / penalties for non-conformance which occur more than once in a given period
average value of repeat penalties for non-conformance
Non-conformances - are incidents where the organisations does not satisfy regulations or meet
regulator's requirements. Non-conformance will be defined by the regulator. They will vary in
severity and will often be accompanied by penalties or requirements for corrective actions.
Penalties - reflect a broader category of punishment made by regulators, which includes non-financial
penalties. Non-financial penalties might include restrictions on operations, pricing controls orders to
undertake remedial action, etc.
The time period for this measure should be based on the frequency with which the regulator judges
the organisation's performance and imposes penalties. There should also be analysis by value of the
fine as larger fines imply that the non-conformance has more significant implications and is likely to
have a greater effect on regulator and community satisfaction.
This measure requires analysis of the type of non-conformance to assess whether there have been
repeat offences.
It is essential that analysis seeks to identify and eliminate the root causes of penalties so that they can
be eliminated, ensuring that penalties never re-occur.
If not already in place, organisations should implement a process for managing relations with
regulators which should be responsible for recording penalties and analysing their causes.
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Supplier Satisfaction
Increasing supplier satisfaction is important if long and close relations are to be developed between
the customer and the supplier. Increasing supplier satisfaction increases the suppliers willingness to
supply the particular customer and the likelihood that performance will be improved.
Increased supplier satisfaction will encourage the supplier to enter into long-term contracts or
agreements which allow programmes of mutual benefit, such as capital investment and supplier
development, to be undertaken.
This measure is linked to supplier feedback and suggestions which will provide the organisation with
an understanding of the level of supplier satisfaction and will identify specific issues on which
attention should be focused.
Supplier Satisfaction Survey
Although the catalogue contains numerous examples of surrogate measures of supplier satisfaction,
the only way to understand the actual satisfaction of suppliers is to ask them through a survey.
A supplier satisfaction survey can be used to provide a numerical value for the level of supplier
satisfaction, a percentage, for example. Such index numbers indicate trends in satisfaction and allow
correlations to be identified in order to assess the drivers and consequences of supplier satisfaction.
However the greatest value is gained if the drivers of supplier satisfaction that most need improving
can be identified.
Surveying supplier satisfaction provides an indication of current satisfaction levels. The survey
should be designed to provide the organisation with an understanding of which factors contribute to
supplier satisfaction. For example, for most suppliers on time payment (as per contractual terms and
conditions, industry norms or national codes of practice) is a key driver of satisfaction and should be
measured separately.
When using supplier satisfaction surveys, it is important to focus on those suppliers that are most
important both strategically and by value of purchases.
Analysis of the measure should consider the volume, value and type of goods and services supplied.
This analysis should allow action to be focused so that the satisfaction of those suppliers that are the
most important to the organisation can be improved. This includes those who supply the highest value
and volume of goods and services, and suppliers of specific goods and services that are critical to
operations. Action should also be focused on suppliers with whom the organisation wishes to
develop long-term relationships.
The purchasing function should be responsible for assessment of supplier satisfaction and execution
of the satisfaction survey. They will also be responsible for acting on the results.
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Stability of Customer - Supplier Relationship

The stability of the relationship between customer and supplier reflects the development of long-term
and close relationships. Stable relationships allow both customer and supplier to plan with increased
certainty.
Stability increases supplier satisfaction as it provides confidence that the customer will provide
business in the future.
Stable and long-term relationships allow suppliers to plan future operations, improving the
probability that the customer's requirements will be met - so that their schedules and customer orders
can also be achieved.
Without a stable customer supplier relationship it is unlikely that suppliers will be prepared to make
dedicated capital investments necessary for the efficient and effective satisfaction of specific
customer requirements.
Investing in a supplier's business is an indicator of a company's intent to develop a longer term
relationship with its suppliers. It may also provide the supplier with the finance required to make the
capital investment necessary to meet future demand requirements.
Stable and co-operative relationships reduce the need for bidding contests / tender requests.
Reduction in the frequency of bidding contests indicates increased commitment to current suppliers.
Preparing for bidding contests / tenders is a considerable expense which suppliers would prefer to
avoid if possible.
CAUTION
Whilst longer term stable relationships with suppliers allow an organisation to develop close
working relationships that enable each partner to gain a fuller understanding of the other partner's
requirements, they do prevent customers using competition between suppliers to gain improved terms.
In some circumstances, especially when purchasing commodity products, such competition can be
desirable.
length of contract / relationship / partnership
average size of customer's investment in the suppliers business
% of suppliers in whom a financial stake is held
frequency of bidding contests / requests for tender
Length of contract / relationship / partnership - reflects the length of time a supplier has been in
partnership with a particular customer. Generally this includes formal contracts over an explicit
period of time, although it might relate to less formal agreements of future purchasing intentions clearly formal, contractual arrangements are more desirable for suppliers.
Bidding Contests / Tender Requests - are customer requests for suppliers to compete or bid for
contracts to supply certain goods or services.
Investment - is the provision of financial capital into a business.
Data for this measure should be available from the purchasing department, which is responsible for
measurement and analysis of supplier performance, and sales departments which play a similar role
with customers. These departments are responsible for analysis and development of the relationships
between customers and suppliers.
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Future Visibility Given to Suppliers

Future visibility to suppliers assesses the amount of notice that suppliers are given regarding future
requirements for the goods and services they supply.
The earlier suppliers are notified of future supply requirements, the more likely they are to be able to
meet the requirements (and hence the organisation's schedules can be adhered to).
Future visibility also enhances supplier satisfaction as it makes an organisation easier to deal with as
a customer. This should improve co-operation and willingness to work together, allowing suppliers
to improve the efficiency and effectiveness of planning and their overall performance.
This measure should be used in conjunction with the 'Schedule Stability' measure. There is little value
in providing suppliers with plans in advance, if the content of the plan changes before its execution.
Time Horizon of future demand requirements communicated to suppliers
Percentage of suppliers that are given visibility of demand / schedules beyond the quoted lead time
for the product or service
Future demand - is the amount of the product or service provided by a supplier that the organisation is
going to order to satisfy its requirements.
Suppliers - organisations that provide products and services in return for payment.
Visibility of demand - is the amount of time into the future an organisation informs a supplier of its
requirements for goods and services that the supplier provides. Future visibility should be at least the
supplier's quoted lead time to ensure delivery when required.
Quoted lead time - is the lead time within which the supplier states that a product or service can be
supplied.
Time Horizon - is the period into the future that future requirements are communicated to suppliers.
Common practice includes the provision of tentative schedules for the long term to provide an
indication of future requirements. These schedules can then be confirmed as definite orders within an
agreed lead time of the required delivery date.
There should be analysis of this measure by supplier, so that attention can be focused on improving on
time repayment to the most important suppliers and those with whom the organisation wants to build
close and long-term relationships.
There should also be analysis by goods and services to focus action on improving the future visibility
given to those suppliers who provide the goods and services which are most important to the
operations of the customer organisation.
Assessment of future visibility should be the responsibility of those who manage the relationship with
suppliers and who are responsible for communication.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Customer Account Profitability

The profitability of customer accounts is an important measure of the value that suppliers get from
supplying specific customers. The profit that is generated is the main reason that suppliers provide
goods and services to a customer, although there may be strategic reasons for supplying certain key
customers.
The measure assesses the level of profit raised from a customer account as a proportion of the level
of business.
This is an important measure for the supplier to use when deciding which customers or markets to
target or in which products to invest time and money.
profit from customer account sales turnover of customer account
tax. In this case profit refers to the profit raised from a specific customer account.
from a specific customer account.
Customer Account - is the unit of analysis for this measure. It may refer to a specific contract or more
broadly all of the sales to a particular customer or product or market.
The profitability obtained from customer accounts will be dependent on the business that the supplier
is in, including the value of goods and services supplied.
customers, products or market segments.
The way in which overheads are allocated between products and customers is key to the level of
profit. An appropriate method for allocating overheads, preferably activity based, is essential if
customer account profitability is to be measured accurately.
Data for this measure should be available from accounting information systems.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Customer Liquidity
Customer liquidity measures the availability of funds within customer organisations, indicating their
ability to pay for goods and services provided.
As a result it is an important factor in the relationship between customers and suppliers, as it makes
an important contribution to the development of trust in the relationship. The higher the liquidity of
customers the more confident the supplier will be that future debts and invoices will be paid and that
there will be business in the future. Low liquidity will lead suppliers to seek alternative customers to
spread risk of future operations.
The development of trust within the customer supplier relationship is important to ensure cooperation providing mutual benefit.
This is a particularly important measure to consider when taking on new customers and when setting
credit limits which will determine exposure to risk. As such this is an important measure of credit
control which requires close liaison with sales management.
customer's liquid assets customer's total assets
Liquidity - is the availability of liquid assets.
Liquid Assets - are cash, or other assets that are readily convertible into cash.
Total Assets - all of the assets of the company.
Customer liquidity should be measured and analysed individually for each customer and aggregated
to indicate overall risk.
It is essential that there is close liaison between sales management and credit controllers to ensure
that full consideration is given to the liquidity of customers when agreeing to supply and when setting
credit limits.
The data for this measure should be available from the supplier or potential supplier's financial
accounts and should be used by the sales department when identifying potential customers and
agreeing contracts.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Level of Supplier Development Support

Supplier development is activity undertaken by organisations to improve the processes and
operational performance of its suppliers. This is a way in which an organisation can contribute to a
supplier and encourage improvement in line with its own requirements.
The performance improvement benefits that result from supplier development activities tend to be to
the mutual benefit of the supplier and the customer.
In return for its support of supplier development activity, the organisation is likely to receive
operational performance benefits from the supplier. This might include cost (price) reduction, quality
improvement, improved delivery reliability, increase delivery speed and increased flexibility.
In addition to these operational benefits, less tangible benefits will also result. Undertaking supplier
development, and dedicating resources to it, demonstrates the organisation's commitment to the
supplier. This will improve supplier satisfaction, improving the working relationship between the
two parties and assisting the development of long term relationships. This will facilitate further cooperation which will be mutually beneficial.
number of people / man hours dedicated to supplier development support in a given period
cost of supplier development support in a given period
Supplier development - is the involvement of organisations in improvement of the processes and
performance of its suppliers. Generally benefits that are realised from supplier development tend to
be shared between the supplier and the customer.
Supplier development support - is the provision of financial and human resources to help supplier
organisations improve their operations and performance.
When measuring the level of support offered to supplier development activities consideration should
be given to the benefits that will be realised in return. Benefits should be assessed in terms of the
improvements in operational performance and improving relations with suppliers.
When considering committing resources to supplier development it is important to identify which
suppliers it is most advantageous to support. These will be the suppliers where performance
improvement is most necessary (i.e. where supplier performance is poorest) and where suppliers
provide goods and services which are strategically or operationally important.
Data for this measure should be available from the purchasing department which is responsible for
supplier development activity and supplier performance improvement.
Prism Facet 1:
Prism Facet 2:
Stakeholder Contribution Sub-Facet 2: Supplier Contribution
Prism Facet 3:
Sub-Facet 3:
Level of Business Between Customer and Supplier

The level of business that a customer puts the way of a supplier is a clear indication of the customer's
satisfaction with that supplier. Increasing trends and increasing proportions of spend with particular
suppliers indicates that the customer is happy with the product and/or service being supplied.
Increasing the level and proportion of orders from the customer to the supplier contributes to
increased supplier satisfaction, as it provides an indication that the customer is committed to buy
from the supplier.
High levels of business between customers and suppliers will encourage both parties to invest in the
relationship between them with the aim of improving performance.
CAUTION
Whilst high levels of business between a customer and supplier are positive indicators of customer
and supplier satisfaction, they have serious implications in terms of risk and influence within the
relationship. For instance:
a customer that controls a high proportion of a supplier's turnover has a lot of influence over the
supplier's operations and can make excessive demands of the supplier as its major customer
similarly a supplier with a high proportion of its turnover from one customer carries the risk of
losing that substantial proportion of turnover if that particular customer changes supplier or
ceases production of the end product
A customer whose purchases are a very small proportion of a supplier's turnover will have little
influence over that supplier. The customer may find it difficult to gain the suppliers co-operation with
regard to such things as product specification changes, specific delivery requirements (e.g. batch
sizes or delivery times), or cost reduction efforts. If the product purchased by the customer is a small
proportion of the supplier's business the supplier may choose to cease production of the product
forcing the customer to find an alternative supplier.
average value of transactions between a customer and supplier in a given period
average number of transactions between a customer and supplier in a given period
value of orders to a specific supplier as % of the customer's purchasing spend
value of orders from a specific customer as % of the supplier's turnover
Value - is the expenditure on the supplier's products or services by the customer.
Number of transactions - is the number of transactions between the suppliers and the customers. This
might reflect the number of discrete orders, number of deliveries, etc. The number of transactions
should be defined to appropriately reflect the volume of business between supplier and customer.
Both the number and value of purchases / transactions should be measured in the appropriate time
buckets (e.g. months) with the trend analysed over time.
Purchasing spend - is the customers spend on purchased products or services. It might be divided into
the type of product or service purchased or the end product for which the component is purchased.
Supplier's turnover - is the total income suppliers receive in return for the provision of goods and
services to all of their customers.
Analysis of this measure should include the division of sales into appropriate product groups.
Suppliers and customers should be categorised by the value of business.
Data regarding sales revenue and the level of purchasing should be available from accounting
information system which records all financial transactions. Operating control systems should collect
data regarding the number of transactions. This data should be collected together by sales (with
regard to customers) and purchasing (supplier data) for analysis and action.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Plan / Schedule Stability

Schedule stability measures the degree to which plans or schedules given to suppliers change before
they are converted into orders. The measure reflects the accuracy with which the organisation can
predict its future requirements.
Suppliers will only be able to plan future activities if they are confident that the schedules they have
been provided with are accurate. As a result it is important to provide accurate future schedules, not
least because these enable suppliers to plan more effectively improving the effectiveness and
efficiency of their operations. Directly they will enable improvement of delivery reliability, as there
will be earlier notification of requirements. Less directly they help to improve the relationship
The measure is related to the 'Future Visibility given to Suppliers' measure. Longer term, more
tentative schedules are more likely to be subject to change. Schedule tolerances should be agreed
with suppliers and analysis of the measure should reflect this.
% or plans / schedules given to suppliers that do not change
average number of changes to supplier plans / schedules in a given period
Suppliers - are organisations that provide products and services for another.
Supplier Plans / Schedules - are plans or schedules that are provided to the supplier ahead of an
order being confirmed.
Analysis of this measure should reflect the degree to which schedules are fixed at various time
horizons. It is common to allow tentative long-term plans to vary within agreed tolerances.
There should also be analysis by supplier to enable improvement actions to be focused on those
suppliers who provide the most important goods and services and on those with whom the
organisation wishes to build long-term relationships.
Analysis of the measure should also aim to identify and eliminate the causes of changes in schedules
where this is possible.
Assessment of the stability of schedules should be the responsibility of those who manage the
relationship with suppliers and who are responsible for communication.
Prism Facet 1:

Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
On Time Payment of Suppliers

Most suppliers consider on time payment to be a very important measure for determining satisfaction
of their relationship with their customers. On time payment of suppliers is important in building trust
for longer term relationships.
Payment of invoices on time improves the cash flow of suppliers, enhancing their financial
performance.
It is particularly important to ensure that small suppliers are paid on time, as delays may threaten their
commercial viability.
Measurement and improvement of on time payment of suppliers reflects the effort put into improving
relationships with suppliers. In addition it also measures the effectiveness and efficiency of the
organisation and its ability to pay invoices when required.
Although relationships with suppliers will be improved as payment lead times are reduced, there is a
trade off with cash flow performance which can be improved if payment is delayed. The detrimental
effect on supplier relations should be seriously considered before considering such action to improve
cash flow.
% of suppliers invoices that are paid within the given payment period
Supplier invoices - are bills sent by a supplier requesting payment for goods and services that have
been supplied.
The given period is the period within which the supplier expects payment for the goods and services
supplied. Usually this should be agreed when the order for goods and services is placed or contract
negotiated. In addition there are often industry, regional or national norms for the payment period
which will affect suppliers' expectations of when they will be paid.
Tolerances should be built into this measure to allow for invoices upon which there are queries, such
as product quality problems or invoice errors.
There should be analysis of this measure by supplier so that attention can be focused on improving on
time repayment to the most important suppliers and those with whom the organisation wants to build
close and long-term relationships.
Data should be available from accounting information systems which records when invoices are
received and paid. Those responsible for managing supplier relationships should use this data to
identify what needs to be improved.

Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Level of Supplier Involvement in Customer's Process

This measure assesses the level of co-operation between customers and suppliers. It measures how
well they work together for their mutual benefit.
Supplier involvement in customer's processes refers to customers and suppliers working together to
improve business processes to their mutual benefit. This often includes customers and suppliers
working together on product development, process improvement or outsourcing activities.
The level of supplier involvement in customer's processes will vary depending on the trading
relationship that exists. Involvement will be more important the higher the value of the 'Level of
Business between Customer and Supplier' measure and where there are long-term relationships
This measure reflects the nature of the working relationship between customers and suppliers. Neither
will invest time and money on working together if the relationship is likely to be short term.
% of the customer's product development process in which the supplier is involved
number of inter-company improvement initiatives undertaken in a given time period
% of a suppliers improvement initiatives in which customers are involved
% of non-core activities that are outsourced
Product Development Process - is the process of developing new or enhanced products or services
by the customer. The measure assesses the level of involvement of supplier in that process to ensure
that design is convenient for the supply of component goods and services.
Inter-company improvement initiatives - are joint actions between customers and suppliers to
improve products or business and production processes to their mutual benefit.
Non-core activities - are activities which must be undertaken in order for the organisation to operate
effectively, but which are not core competencies and do not provide the organisation with
competitive advantage.
In metric 1, the unit of analysis might be the elapsed time of the process, man hours involved in the
process or some other significant unit that indicates the most significant effort involved in the product
development process. Where complex products, with large numbers of components are being
developed, suppliers are more likely to be involved in the design and development process. If there
are close relationships a supplier might be trusted to design an entire module of a product. A process
known in the automotive industry as corner or black box engineering.
The measure should be analysed by supplier and supplier type. Types of supplier include the amount
of business between the customer and supplier, as well as the type of product or service delivered.
Data for calculation of this measure is likely to be a subjective evaluation of involvement by those
responsible for developing the relationship between customer and supplier. It is important to quantify
this relationship to gain an understanding of the level of involvement and track how this changes over
time. Consideration should be given to the way in which consistency of this measurement can be
maintained.
Prism Facet 1:
Prism Facet 2:
Processes Sub-Facet 2: Plan & Manage the Enterprise - Stakeholders
Prism Facet 3:
Sub-Facet 3:
Organic Sales / Profit Growth

Measurement of the organic growth of sales and profits assesses the success of strategies to grow the
business.
This measure provides an indication of the organisation's corporate strategic intent. Organic growth
indicates the intention to grow the current areas of the business rather than investing large amounts in
buying other organisations which could provide increased sales and profits in complementary or
diverse markets and industries.
Organic growth implies that investment will be focused on increased marketing of existing products
and services, development of new products and services internally (including identification and
accessing new markets) and improvement of the efficiency and effectiveness of operations.
% of increase in sales turnover generated from organic growth
% of increase in profit generated from organic growth
Sales turnover - is the value of sales and should be split into product or market categories to make
appropriate comparison.
tax.
Organic growth - is growth in the business, measured by sales and/or profit, generated by developing
the organisation's current business activities, rather than investing in the acquisition of new
enterprises.
Analysis of this measure should identify markets, market sectors or business units in which growth
takes place. This will identify growth areas of the business.
The areas in which growth takes place should be compared with that in which investment has been
made or where strategic improvement initiatives have been focused. This will identify the
effectiveness of improvement effort and return on investment.
Use of this measure should also include comparison of organic sales and profit growth with that
expected and planned during the strategy development process.
Financial accounting systems will provide data on sales and profit growth. The finance department
and strategy development process will be able to identify the proportion of that growth which is
organic. Analysis of organic growth performance should be undertaken as part of the corporate
strategic review process.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Acquired Sales / Profit Growth

Measurement of acquired growth of sales and profits assesses the success of strategies to grow the
business.
This measure provides an indication of the organisation's corporate strategic intent. Acquired growth
indicates the intention to grow the business by investing in the acquisition of other organisations
which could provide increased sales and profits in complementary or diverse markets and industries
rather than growing current areas of the business.
Acquired growth implies that investment will be focused on purchasing new enterprises in order to
grow the organisation rapidly.
Synergy can be obtained by acquiring businesses that are complementary to the current activities of
the organisation. Meanwhile organisations that undertake more diverse activities can provide access
to new areas of expertise and to new markets.
% of increase in sales turnover generated from acquired growth
% of increase in profit generated from acquired growth
Sales turnover - is the value of sales and should be split into product or market categories to make
appropriate comparison.
tax.
Acquired growth - is growth in the business, measured by sales and/or profit, generated by investing
in the acquisition of new enterprises rather than developing the organisation's current business
activities.
Analysis of this measure should identify in which markets, market sectors or business units growth
takes place. This will identify growth areas of the business and indicate the portfolio of activities the
organisation is developing.
Analysis should consider the focus of the businesses in which investment is made. The nature of
business and markets in which acquired organisations compete will indicate the intended strategic
focus of the organisation. It is important to consider how well newly acquired businesses match the
current portfolio of products, businesses and activities.
The areas in which growth takes place should be compared with that in which investment has been
made or where strategic improvement initiatives have been focused. This will identify the
effectiveness of improvement effort and return on investment.
Use of this measure should also include comparison of sales and profit growth with that expected and
planned during the strategy development process and during the purchase of new enterprises.
Financial accounting systems will provide data on sales and profit growth. The finance department
and strategy development process will be able to identify the proportion of that growth which has
been acquired. Analysis of organic growth performance should be undertaken as part of the corporate
strategic review process.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Technology Deployment / Redeployment Speed

The redeployment of technologies is an important factor in ensuring that technologies are available
when required to complete operations and satisfy customers' demand for the organisation's products
and services.
The relocation speed measures how quickly technologies can be transferred from one location to
another when required. Measures of such redeployment will affect whether redeployment will take
place and hence whether the technologies will be available when required. As such it is a measure of
the flexibility of the organisation to respond to changes in demand for their products and services and
changes in availability of technologies, caused by such things as breakdowns, for example.
The ability to re-deploy equipment quickly and cheaply will allow an organisation to maintain a
small pool of technology as the technology can be moved to the required location when required,
rather than having to maintain a large pool of technology as a back up.
The speed of relocation will be dependant on the size and physical distribution of the organisation.
For organisations with a large number of geographically diverse locations will find it more difficult
relocate equipment quickly. As a result the measure of geographical diversity should be considered
when using this measure.
The relocation of equipment will be affected by relocation of operations and will also be determined
by the scheduling of operations to fulfil demand and the associated capacity planning.
This measure will contribute to the availability of technology when required, the measure of which
should be considered in conjunction with this measure.
average lead time required to re-deploy equipment / technologies when required
New technology - a piece of new technology is the application of a new scientific or technological
development that has practical value to the organisation. New technologies can relate to products or
processes and will include information and communication technologies, manufacturing process
technologies or product technological development.
Time required to re-deploy - is the time from identification of the need for a new piece of technology
to the time that it is available for use. This will include the time required to uninstall and reinstall the
equipment, to transport the equipment and the time to find skilled personnel to operate the equipment
in the new location. This might include the recruitment of new personnel.
The data for this measure should be available from the processes that use the measure, i.e. strategy
development and scheduling / capacity planning. These processes should review the availability of
technology and compare it to requirements to identify required movements. At this point estimations
of the time required to move equipment should be considered and compared with that of purchasing
new equipment. Estimations should be based on previous experiences and expert opinion. When
deciding on redeployment options consideration should be given to the need for rapid relocation
versus the cost of relocation.
Speed of transfer will vary greatly depending on the nature of the technology being re-deployed. As a
result this measure must be analysed by the type of technology redeployment being undertaken.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Cost of Technology Deployment / Redeployment

The redeployment of technology can be an important factor in ensuring that technologies are available
when required to complete operations and satisfy customers' demand for the organisation's products
and services.
The cost of redeployment measures how cheaply technologies can be transferred from one location to
another when required. Measures of such relocation will affect whether redeployment will take place
and hence whether the technologies will be available when required. As such it is a measure of the
flexibility of the organisation to respond to changes in demand for their products and services and
changes in availability of technology caused by such things as breakdowns, for example.
The ability to re-deploy equipment quickly and cheaply will allow an organisation to maintain a
small pool of technology as the technology can be moved to the required location when required,
rather than having to maintain a large pool of technology as a back up.
The cost relocation will be dependant on the size and physical distribution of the organisation.
Organisations with a large number of geographically diverse locations will find it more difficult to
relocate technological equipment cheaply. As a result the measure of geographical diversity should
be considered when using this measure.
average cost of moving technologies to a new location
Technology - a piece of technology is the application of a new scientific or technological
development that has practical value to the organisation. Technologies can relate to products or
technologies and/or product development technologies.
Cost of moving technological equipment - will include cost of uninstalling and reinstalling the
equipment, cost of transportation and the cost of skilled personnel to move the equipment and operate
it in the new location. This might include costs of recruiting new personnel.
The costs of transfer will vary greatly depending on the nature of the technologies being re-deployed.
As a result this measure must be analysed by the type of technology that is being re-deployed.
technology and compare it to requirements to identify required movements. At this point estimations
of the cost of moving equipment should be considered and compared with the cost of purchasing new
equipment. Cost estimations should be based on previous experiences and expert opinion. The
finance department should maintain data regarding previous costs incurred in moving location and
equipment. When deciding on redeployment options consideration should be given to the need for
rapid redeployment versus its cost.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Mission / Vision Awareness / Congruence

Awareness of and congruence with the organisation's mission or vision is an important measure of
communication within the organisation. Part of the managing human resources process is concerned
with promoting and facilitating communication throughout the organisation.
Use of this measure is important for the alignment of strategies within the organisation and ensuring
that all employees have the same understanding of the organisation's objectives and act accordingly.
This is important if the organisation's strategy is to be effectively executed.
% of employees who fully understand the organisation's mission / vision
% of employees whose actions are consistent with the organisation's mission / vision
Mission / Vision - the mission or vision of the organisation is a general statement which identifies the
basic purpose and overall objectives of the organisation. Generally speaking strategies and
objectives throughout the organisation should be aligned to this statement - as such this measure can
be used to check on whether employees understand the organisation's mission, strategies and
objectives and whether the actions they take are consistent with the organisation's mission, strategies
and objectives.
Congruence - is agreement with the mission and vision - i.e. a measure of the extent to which all
employees understand and accept the organisation's mission, strategies and objectives.
Data for this measure can be collected through the employee satisfaction survey. This can be achieved
by assessing the level of agreement with a series of statements which relate to the organisation's
mission, strategies and objectives.
To assess the alignment of actions there is a need to make a subjective assessment during the personal
appraisal process. As part of the process the assessment should be quantified and collated to give an
indication of congruence to goals across the organisation. There is a need to provide those
undertaking appraisal with guidance to improve consistency of this subjective assessment.
The measure should be analysed on a departmental level to assess how communication differs in
different areas of the organisation.
Prism Facet 1:
Prism Facet 2:

Prism Facet 3:
Mission / Vision Achievement

The mission or vision identifies the basic function of an organisation, defining its purpose and
providing a concise summary of overall objectives. As the mission defines the overall purpose of the
organisation, strategies and objectives at all levels should be aligned to it. As a result measurement of
achievement of the mission or vision is one of the overriding measures of the effectiveness of the
organisation and the achievement of its overall objectives.
Actions at all levels should be aligned to the mission or vision, hence measurement of mission /
vision achievement is appropriate at all strategic and organisational levels. As such this measure
assesses the alignment and execution of strategies within the organisation.
The measure also assesses the consistency of actions throughout the organisation indicating whether
all employees have the same understanding of the organisation's objectives and whether they act
accordingly. As a result this measure is linked to that of 'Mission or Vision Awareness / Congruence'.
This is important if the organisation's strategy is to be effectively executed.
% achievement of organisational mission / vision
Mission / Vision - the mission or vision of the organisation is a general statement which identifies the
basic purpose and overall objective of an organisation. Generally speaking strategies and objectives
throughout the organisation should be aligned to this statement - as such this measure can be used to
check on the understanding and alignment of employees actions to the mission, strategies and
objectives.
Achievement - should be defined in the context of the specific mission or vision statement. In most
cases it will be necessary to make a subjective assessment of the degree to which the mission or
vision has been achieved. This assessment should be made as part of the strategy development and
review process where performance against organisational objectives is reviewed. Assignment of a
value to mission achievement will force a debate regarding progress made and actions necessary to
take the organisation forward in the appropriate direction.
Analysis of mission / vision achievement should include comparison of the level of achievement at
different strategic and organisational levels as well as in different functions of the organisation. This
will identify how well the mission is communicated to different areas and levels of the organisation.
It will also assess the alignment and execution of appropriate strategies in all areas of the
organisation.
Prism Facet 1:

Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Strategic Objective Achievement

Strategic objectives represent the ends to which the activities of the organisation are aimed. They are
the results to be achieved. As such measurement of the achievement of strategic objectives is one of
the most important measures of the success of the organisation with regard to strategy and objectives.
Strategic objectives should be defined for each level of strategy (i.e. Corporate; Business Unit;
Brand, Product and Service; Operating). As a result measurement of achievement of strategic
objectives should also be undertaken at each of these levels.
Although measurement of strategic objectives at each level should be defined separately to reflect
each set of specific objectives, there should be alignment of objectives and actions at each level. This
alignment should be demonstrated through the consistent achievement of the mission or vision at each
level as assessed by the measure of mission achievement.
In addition to assessing the deployment and execution of strategy, the achievement of strategic
objectives also measures the consistency of actions throughout the organisation reflecting the
effectiveness of communication.
% of strategic objectives that are achieved
Strategic objectives - represent the ends to which the activities of the organisation are aimed. They
provide more specific objectives that relate to each of the level of strategy within organisation to the
mission or vision.
Achievement - should be defined in the context of the strategic objectives in question. Strategic
objectives should be more specific and tightly defined than the mission or vision, as a result it may be
possible to collect data regarding objective achievement. For example increasing market share is a
strategic objective of Brand, Product and Service Strategy for which objective measurement can be
collected.
It may be necessary to assign values to the level of achievement of strategic objectives subjectively.
Where this is necessary it should be undertaken as part of the strategy review process where
performance against organisational objectives is reviewed. Assignment of a value to the level of
strategic objective achievement will force a debate regarding progress made and actions necessary to
take the organisation forward in the appropriate direction.
There should be separate measurement of strategic objective achievement at each of the levels of
strategy (i.e. Corporate; Business Unit; Brand, Product and Service; Operating). Analysis should
include comparison of the level of achievement at different organisational levels as well as in
different functions or divisions of the organisation. This will identify how well the strategic
objectives are communicated to different areas and levels of the organisation. It will also assess
execution of the appropriate strategies in all areas of the organisation.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Hierarchical Complexity
The way in which an organisation operates will have a significant effect on its effectiveness and
efficiency and hence its financial performance. The way in which management of people and
operations is organised will affect this performance.
Measurement of the hierarchical complexity of an organisation assesses the number of levels within
the organisation between the senior management and 'shop floor' workers. The more organisation
levels there are, the more difficult communication between the top and bottom of the organisation will
be.
Excessive hierarchical or management levels in the organisation mean that objectives and strategies
get confused in their deployment. It is also possible to ensure that inefficiencies within the
organisation can be hidden.
number of levels in organisational hierarchy
Organisational hierarchy - is the way in which the management of the organisation from top level
management to 'shop floor' level operations is arranged or organised. In the case of this measure the
organisational hierarchy refers to the number of levels or direct line managers between the top level
management of the organisation and workers at 'shop floor' level.
Where possible action should be taken to identify and eliminate unnecessary hierarchical levels in
order to improve vertical communication within the organisation. This should help to improve
alignment and achievement of strategies and the consistency of action throughout the organisation.
Assessment of the hierarchical complexity of the organisation is likely to be part of a process for
reviewing the structure of the organisation or part of the strategic review of operations. As such this
is unlikely to be an operational measure, rather a measure to review progress against a specific
objective of reducing complexity.
Prism Facet 1:
Prism Facet 2:
Capabilities Sub-Facet 2: Practices
Prism Facet 3:
Level of Capital Investment

The level of capital investment in a specific business unit provides an indication of the organisation's
strategic intent and identifies the focus of the organisation's development and improvement action.
The business units or products and services in which the organisation invests indicates where it
considers its future prosperity and profitability will be generated. These decisions are based on the
Business Unit Strategy and Brand, Product and Service Strategy which should be consistent with the
organisation's mission or vision and corporate strategies.
Measurement of the success or return on this investment should be based on the objectives and
assumptions underpinning strategy development.
Measurement of return on investment, market sector profitability and other measures of strategy
achievement should be used to assess whether the investment has an appropriate return.
average value of capital investment per employee
capital Investment as a % of sales turnover
Capital investment - is the input of financial resource to the business in order to develop new
opportunities.
from a specific market or market sector.
Analysis of the measure should identify specific objectives for which investment is being made. This
might include intended operational improvement or target markets or products. This will provide an
indication of the focus of strategic intent and will allow analysis of the return on the investment made
in terms of its original objectives.
The finance department should monitor the level of investment.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Strategies Sub-Facet 3: Brand, Product and Service Strategy
Cost of Infrastructure Relocation

The relocation of infrastructure is an important factor in ensuring that infrastructure is available when
required to complete operations and satisfy customers' demand for the organisation's products and
services. Relocation of infrastructure can take two forms:
relocation of operations from one building or piece of land to another
movement of a piece of equipment from one location to another
Cost of infrastructure relocation measures how cheaply infrastructure or operations can be transferred
from one location to another. Measures of such relocation will have a significant bearing on whether
relocation will take place and hence on availability of infrastructure when required. As such the
measure assesses the ability of the organisation to respond to changes in demand for products and
services and to changes in availability of infrastructure caused by such things as machine
breakdowns, for example.
The ability to relocate equipment and operations quickly and cheaply will allow an organisation to
maintain a small pool of infrastructure which can be moved to the required location when required,
rather than having to maintain a large pool of infrastructure as a back up.
The cost relocation will be dependant on the size and physical distribution of the organisation.
Organisations with a large number of geographically diverse locations will find it more difficult to
relocate operations and equipment cheaply. As a result the measure of geographic diversity should be
considered when using this measure.
The relocation of operations from one location to another will usually be part of the strategy
development process, as business units identify where they need to operate in order to most
effectively fulfil demand for their products and services and satisfy their customers.
by the scheduling of operations to fulfil demand, and the associated capacity planning.
average cost of moving operations to new land / buildings
average cost of moving equipment to a new location
Land / buildings - are items of infrastructure that are physically fixed and define where operations
take place.
Equipment - are items of infrastructure that are not fixed to a specific location and can be moved to,
and used in, another location.
Cost of moving operations to new land / buildings - includes cost of selling land and buildings or
'decommissioning' facilities, cost of disposing of equipment that is no longer required and the cost of
making redundant employees that are no longer required. These costs will also include taking on new
employees in the new location and the set up costs of newly introduced equipment and operations.
Cost of moving equipment - will include the cost of uninstalling and reinstalling the equipment, the
cost of transportation and the cost of skilled personnel to move the equipment and operate it in the
new location. This might include costs of recruiting new personnel.
infrastructure and compare it to requirements to identify required movements. At this point
estimations of the cost of moving operations and equipment should be considered and compared with
the cost of purchasing new facilities and equipment or not moving. Cost estimations should be based
on previous experience and expert opinions. The finance department should maintain data regarding
previous costs incurred in moving location and equipment.
When deciding on relocation options consideration should be given to the need for rapid relocation
versus the cost of relocation.
The costs of transfer will vary greatly depending on the nature of the infrastructure being considered.
Organisations should select comparable items of infrastructure when analysing performance. As a
result this measure must be analysed by the type of infrastructure relocation being undertaken.
Categories include:
- Relocation of operations from one location to another. This will vary depending on size, distance
moved, whether the new location is a new or existing site, the amount and nature of equipment that is
being moved or bought
- Relocation of equipment. This will vary depending on the value and size of equipment, distance
moved, complexity of installation and uninstallation, level of technical expertise required to move
and operate the equipment, etc.
Prism Facet 1:
Capabilities Sub-Facet 1: Infrastructure
Prism Facet 2:
Prism Facet 3:
Geographical Coverage of Infrastructure

Geographical coverage measures how an organisation's infrastructure is spread across the
geographical areas which constitute its target markets.
The measure assesses how close the organisation's facilities are to its target markets. The closer
facilities are to target markets the easier it will be to generate and fulfil demand and to satisfy
The importance of having diverse geographical locations will vary depending on the product and
market being satisfied. For service industries it may be necessary to locate close to the market in
order to offer as good a service as possible and have employees on hand to offer the service to
customers.
For manufacturing organisations location will be dependent on:
the cost of transporting products to market - the higher distribution costs the greater the necessity
to locate close to the market;
the cost and availability of labour and materials - operations will locate where appropriate
labour and materials are cheap and readily available.
In all cases it will be necessary to have sales representation in all target markets. Such representation
might be via a sales office or agents employed to generate sales.
The measure should be used when deciding on new locations required to satisfy organisational
strategies. In reviewing such strategies, this measure should be used in conjunction with measures of
potential and actual sales, and market trends for the region to review performance against
expectations and potential areas for expansion or relocation.
Decisions regarding the location of operations will usually be part of the strategy development
process as business units identify where they need to operate in order to most effectively fulfil
demand for their products and services and satisfy their customers.
% of target countries / regions containing plants
% of target countries / regions containing sales offices
% of target countries / regions covered by agents
% of target countries / regions covered by distribution centres
average number of locations per head of population in a defined country / region
Target countries / regions - are those countries or regions of the world which represent the target
markets for the organisation's products and services.

Regions - should be defined by the organisation depending on its target market. A region might refer
to a district or area of one country, regions in a number of countries or continents. Regions need not
necessarily be based on existing national or international boundaries.
Locations - include any operational sites such as plants, distribution centres or sales offices as well
as agents, merchants and dealers acting on the organisation's behalf.
Plants - are buildings used to carry out business activities. Usually they refer to production facilities.
Sales offices - are bases where representatives responsible for sales of the organisation's products
and services are based. They tend to be in locations which are a significant distance from main
offices or production facilities but close to existing and potential customers.
Agents - are independent organisations or individuals who represent the organisation in order to
market and sell its products and services in locations where the organisation has no presence.
Distribution centres - are centres from which products can be distributed to customers. They are often
warehouses containing buffer stock of finished products. Personnel at distribution centres take
customers orders, possibly received via a central sales office, and despatch products to them.
Calculation of measure should be undertaken during the strategy development and review processes.
Locations of plants, sales offices and agents, and their geographical coverage responsibilities, should
be provided by the relevant departmental representatives. Demographic data regarding each region is
readily available providing population data where appropriate.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Infrastructure Relocation Speed

The relocation of infrastructure is an important factor in ensuring that infrastructure is available when
required to complete operations and satisfy customers' demand for the organisation's products and
services. Relocation of infrastructure can take two forms:
relocation of operations from one building or piece of land to another
movement of a piece of equipment from one location to another
The relocation speed measures how quickly infrastructure or operations can be transferred from one
location to another when required. Measures of such relocation will have a significant bearing on
whether relocation will take place and hence on availability of infrastructure when required. As such
the measure provides an indication of the organisation's ability to respond to changes in demand for
their products and services and changes in availability of infrastructure caused by such things as
breakdowns, for example.
The ability to relocate equipment and operations quickly and cheaply will allow an organisation to
maintain a small pool of infrastructure which can be moved to the required location when required,
rather than having to maintain a large pool of infrastructure as a back up.
The speed of relocation will be dependant on the size and physical distribution of the organisation.
For organisations with a large number of geographically diverse locations will find it more difficult
to relocate operations and equipment quickly. As a result the measure of geographical diversity
should be considered when using this measure.
The relocation of operations from one location to another will usually be part of the strategy
development process as business units identify where they need to operate in order to most
effectively fulfil demand for their products and services and satisfy their customers.
This measure will contribute to the availability of infrastructure when required, the measure of which
should be considered in conjunction with this measure.
average time required to move operations to new land / buildings
average time required to move equipment to a new location
take place.
Time required to move - is the time from identification of the need for a new piece of infrastructure
(land and buildings or equipment) to the time that the infrastructure is available for use.
Time required to move operations to new land / buildings - includes the time taken to acquire or
construct new land and buildings. It might also be necessary to consider the time required to take on
new employees in the new location.
Time required to move equipment to a new location - will include the time required to uninstall and
reinstall the equipment, to transport the equipment and the time to find skilled personnel operate the
equipment in the new location. This might include the recruitment of new personnel.
infrastructure and compare it to requirements to identify required movements. At this point
estimations of the time required to move operations and equipment should be considered and
compared with that of purchasing new facilities and equipment or not moving. Estimations should be
based on previous experience and expert opinions. When deciding on relocation options
consideration should be given to the need for rapid relocation versus the cost of relocation.
Analysis of the measure over time is difficult, as in most industries there is unlikely to be relocation
of similar items of infrastructure, making comparison problematic. Organisations should select
comparable items of infrastructure when analysing performance. Analysis should allow comparison
of the speed of individual parts of the process of relocation which are more comparable than the
entire process.
Speed of transfer will vary greatly depending on the nature of the infrastructure. As a result this
measure must be analysed by the type of infrastructure relocation being undertaken. Categories
include: (i) relocation of operations from one location to another - this will vary depending on size,
distance moved, whether the new location is new or existing site, the amount and nature of equipment
that is being moved or bought; and (ii) relocation of equipment - this will vary depending on the value
and size of equipment, distance moved, complexity on installation and un-installation, level of
technical expertise required to move and operate the equipment, etc.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Frequency of Technology Audits

It is important that the organisation monitors the technology available in relation to that required to
satisfy demand and execute strategies. A full and accurate understanding of technology availability
enables the maximum advantage to be taken of the resources that are available. As a result, increasing
the frequency of audits will help improve the understanding of technology availability. However this
has to be weighed against the cost of undertaking an audit. This is a particular consideration in large
organisations where audits will be more costly, but keeping an accurate understanding of the
availability of technology is more difficult.
The frequency with which audits are undertaken will be determined by the speed of change of the
technologies available and required within the organisation, including changes of technology and
changes in the products and processes.
Maintaining a centralised understanding of the technologies that are available throughout the
organisation allows the transfer of technology between locations to be planned in order to maximise
utilisation. This should include input to the strategy review process which will include redeployment
of activities and decisions regarding where activities will be undertaken.
Technology audits are an important part of undertaking a technology inventory and identifying the
gaps in technology availability, that must be closed in order to improve the effectiveness and
competitiveness of the organisation.
number of technology audits undertaken in a given period
technologies or product development.
Technology audit - is a review of all of the technology available within the organisation or part of it.
The time period for this measure should reflect the frequency of audits. This is determined by the
frequency with which the technology requirements within the organisation change.
Larger organisations might consider undertaking audits more frequently as it will be more difficult for
them to maintain an accurate understanding of the condition of its technologies.
The frequency of technology audits will affect technology availability as frequent and effective audits
will improve understanding of requirements, allowing appropriate action to be taken in a timely
manner.
The process responsible for the management of technologies should undertake audits of technologies
and hence calculate and report this measure.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Value of Licensing Agreements

Licensing agreements are agreements between organisations which allow one organisation to use
technologies or processes developed by others. Licensing agreements can also be signed to allow
other organisations to manufacture products in order to increase capacity to meet demand. Licensing
agreements allow organisations that develop technological capabilities to generate income and take
advantage of reciprocal agreements with other organisations. This is particularly applicable to
technologies, processes and products that are patented.
Measurement of the value of licensing agreements provides an indication of how successful the
organisation is at innovating and developing technologies. The measure indicates whether other
organisations see value in the use of these technologies and how much they are prepared to pay. As
such it measures the organisation's technology development capabilities and their ability to develop
products and services that other organisations want to produce. Maximising the usage of licensing
agreements will enable increased income generation. However this should be balanced against an
organisation's desire to obtain greater competitive advantage from exploiting technological
developments exclusively.
average value of licensing agreements
% of income of income (turnover) generated from licensing agreements
% of licence agreement income generated from top five licences
net income from licensing agreements
Licensing agreements - are agreements between organisations which allow one organisation to use
technologies or processes developed by the other, or produce another company's products for them.
Net income from licensing agreements - is the amount of income generated from other organisations
using technologies developed in your organisation minus expenditure to other organisations for use of
their technologies. This is an important measure of whether an organisation is a developer of new
technologies or user of established technologies.
Use of the measure in comparison to overall income provides an indication of the focus of the
organisation. If the proportion of income from licence agreements is high this indicates that the
organisation has greater focus on innovation than its exploitation.
Metrics 1 and 3 provide an indication of the magnitude and frequency of innovation. They indicate
whether licence agreement income is generated from a small number of high value agreements or from
a larger number of lower value agreements.
Use of the measure should include analysis of type of technology being licensed, such as product or
process technologies, and split by product groups or process types. This will indicate the area of the
business which is providing the greatest innovation of interest to the outside world and resultant
income generation.
Analysis should also consider the organisations that are using the licences, for example which
industries they are from, whether they are competitors, etc. Organisations and types of technology
used should be analysed together to identify trends.
The financial accounting systems should record income from licence agreements. Such systems should
link this income to specific development projects or areas of the business.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Market Sector Profitability

Market Sector Profitability assesses how profitable the markets in which the organisation competes
are.
This measure assesses the effectiveness of the organisation's Brand, Product and Service strategy in
identifying and targeting the most profitable markets. It is an important measure as it us used to assess
the value that the organisation gets from competing in specific markets.
The profit that is generated is the main reason that organisations provide goods and services to a
market, although there may be strategic reasons for wishing to maintain a presence in a particular
market. Even if this is the case it is important to monitor the impact of this on profitability.
The measure assesses the level of profit raised from a particular market as a proportion of the level
of business done (i.e. sales).
This is an important measure for the organisation to use when deciding which markets to target or in
which products to invest time and money.
average profit per market sector in which the organisation competes
profit from market sector sales turnover of market sector
tax. In this case profit refers to the profit raised from a specific market or market sector.
from a specific market or market sector.
Market sector - is a specific market or part of a market at which the organisation targets its products.
In some cases it might be difficult to define the boundaries of a market sector.
The profitability obtained from a market sector will be dependent on the type of business that the
organisation is in, including the value of goods and services supplied.
customers, products or market segments.
Where possible, when using this measure consideration should be given to estimations of the
profitability of other related markets into which the organisation could expand or transfer. This will
provide an indication of whether appropriate market and product choices have been made.
Data for this measure should be available from accounting information systems with market
intelligence data providing information regarding alternative markets and sectors.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Profit from New Products / Services

Profit from new products and services assesses the contribution that they make to the profitability of
the organisation. This is an important measure as it assesses the success of the new product or service
in terms of market response (customer orders), as well as considering the efficiency and effectiveness
with which the products and services are developed and subsequently brought to market.
It is an effective measure of how well the 'develop products & services' process generates ideas and
converts them into products that satisfy customer demand. This not only assesses whether there is a
market for the products and services that are developed, but also the costs incurred in developing the
products and services. It assesses how well the 'generate demand' process generates demand for
products that have been developed and the efficiency with which products and services are produced
and distributed.
Monitoring the Profit from New Products and Services gives a company an idea of the contribution of
new products or services to its overall profitability. It is most relevant for companies that frequently
introduce new products, the more frequently new products are introduced the more important it is that
the whole process, from idea generation to end product or service delivery, is profitable.
The data from this measure provides an important input to decisions on new product or service
development, as it allows a full understanding of where revenues can most effectively be generated
and where costs are incurred during the process. Thus providing an informed view of the potential
profitability of future options.
profit generated from new products / services in a given period
% of profit that is generated from new products / services in a given time period
Profit - is the excess of sales turnover over expenditure. In the case of profit from new products and
services it relates the revenue generated from the sale of new products or service in comparison to
the cost of developing, producing, marketing and distributing the product or service.
New Products / Services - are those which have recently been introduced. The definition of 'recently
introduced' is completely dependent on the nature of the market and product or service being
introduced. In highly dynamic markets products and services will be defined as new for a shorter
period than in more stable, established markets. Defining 'new' products and services should also
consider to what extent modifications result in a 'new' product or service.
The given period for over which this measure should be used and analysed will also vary depending
on the nature of the market in which the new products compete. When defining the time period
consideration should be given to the product life cycle because new products launched in one year
may not have generated adequate sales within the year for them to reflect their impact on new revenue
generation. So, measuring new product or service sales per year may not take account of the time lag
involved in new sales revenue generated. Analysis should investigate the demand for individual
products, product groups as well as for all products, assessing the 'develop new products & services'
process as a whole.
Analysis of the measure by product or product group will provide an understanding of which are the
most profitable products or product groups and hence which are the markets on which the
organisation should focus. This is an important feedback mechanism to review the assumptions that
were made when deciding which products to introduce and which markets to aim for.
Data for this measure will be available from the organisation's financial accounting information
systems which record revenues and costs incurred. It is important that the accounting systems include
an appropriate basis for the allocation of costs to ensure that they represent as accurately as possible
the costs incurred in developing, producing and selling each new product and/or service. These are
similar issues to those considered when measuring New Product / Service Break Even Time.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
R&D Spend
Research and Development (R&D) spend reflects the amount of resource directed towards the
systematic search for innovations and indicates the commitment of the organisation to developing new
products and processes in order to maintain competitiveness.
The amount spent has a direct impact on the innovative outputs (products, processes or patents) of the
business unit. It can be regarded as one of the key inputs to the innovation process.
The level of spend on R&D will vary considerably between industries, depending on the rate at
which new products and processes need to be introduced in order to maintain competitiveness and the
cost of developing these products and processes.
This measure is an input to the R&D process, as the level of resources available will have a
significant effect on its output. As a result it will assess the Develop Products and Services process
and the strategic importance of developing new processes, products and services.
R&D expenditure as a percentage of sales turnover
R&D expenditure as a percentage of operating costs
R&D expenditure - is expenditure which relates to research and development activities. R&D will
relate to the development both of new products and processes.
Turnover - is income from the sale of goods and services.
One should be aware that R&D is only one of the key elements within the innovation process. Other
non-R&D inputs include new product marketing, patent-related work, financial and organisational
change, design engineering, industrial engineering and manufacturing start-up.
It is important to note that the amount of R&D spend does not always translate into innovative
products or processes. Specifically there are eight factors that are critical for new product success:
a product with a high performance-to-cost ratio
development, manufacturing and marketing functions that are well co-ordinated and integrated
the product provides a high contribution margin to the firm
the new product benefits significantly from the existing technological and marketing strengths of
the business units
significant resources committed to selling and promoting the product
the R&D process is well planned and co-ordinated
a high level of management support for the product from the product conception stage through to
its launch in the market

the product is an early market entrant.
Where possible, the amount an organisation spends on R&D (including ratios) should be compared to
that of competitors. As spend does not guarantee results, comparison of the level of spend should
include consideration of the value that is created with that expenditure. For recent UK R&D
benchmarks in across key economic sectors see "The R&D Scoreboard". This is published by
Company Reporting Ltd and the DTI, but covers only those UK companies who report R&D
expenditure in their Annual Accounts (around 500 firms).
The amount of R&D expenses is typically reported in the consolidated statement of income. Some
conglomerates specify a fixed R&D budget (1-5 % of sales for instance) based on the profit line for
each business unit.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
New Product / Service Breakeven Time

Breakeven Time (BET) measures the time it takes for sales turnover from a new product or service to
equal the cost of bringing that new product or service to market, as measured from the beginning of
the project.
This is an important measure as it assesses the speed with which a new product or service makes a
positive contribution to the profitability of the organisation. The measure not only considers the costs
of bringing the product to market, including promotion, but also considers the success of the product
in the market in terms of the turnover it generates. As a result it is an important measure of the
'Develop Products & Services' process as it assesses the efficiency and the effectiveness of that
process. The measure underlines an important principle of not just developing new products or
services, but also producing them with competitive costs, compelling quality and ever more quickly.
The measure is appealing as it accounts for the entire new product development process - the
assessment of customer needs, the effectiveness of R&D, the speed of ramp up to volume production,
the efficiency of distribution efforts, the adequacy of training programmes and related issues.
The measure is useful to serve as a "reality check" against the portfolio of development projects.
Using the measure will inform development managers of the likelihood of proposed projects reaching
BET. Those not making BET may then be redefined to make more business sense. BET also helps
managers see the importance for their proposed product to hit the market before the "window of
opportunity" closes.
time elapsed when cumulative sales turnover from the new product or service equals the cost of
bringing it to market
Turnover - is the total income from the sale of goods and services.
New Products / Services - those which have recently been introduced. The definition of 'recently
introduced. In highly dynamic markets, products and services will be defined as new for a shorter
period than in more stable, mature markets. Defining 'new' products and services should also
Cost of bringing product to market - includes all the related costs from concept to launch (R&D,
product design costs, prototyping costs, production costs, distribution costs, training costs and
advertising costs and so forth).
Analysis should include comparison by product or product group which will indicate which are the
most profitable and on which products or product groups effort should be placed to improve the
effectiveness and efficiency of product introduction and marketing.
The actual breakeven time will vary considerably between industries and products and services
within industries. Key factors affecting breakeven time include the complexity of the product, the cost
of the R&D involved and the profit margin included in the final selling price.
The actual point of breakeven will be affected by the 'Target Cost vs. Actual Cost' measure.
The Develop Products & Services process should include a process to monitor the progress of new
products and services that are developed. This should enable evaluation of the output of the process
including the success of the products that are introduced into the market. The process will require
data from accounting information systems regarding the costs incurred and sales revenue generated.
This monitoring process should provide important and valuable feedback regarding the performance
of the process.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Sales / Market Penetration of New Product / Service

This measure assesses the success of the new product or service in terms of market response
(customer orders). It is an effective measure of how well the 'develop products & services' process
generates ideas and converts them into products that satisfy customer demand.
The measure also assesses how well the 'generate demand' process generates demand for products
that have been developed.
Monitoring the New Product / Service Sales gives a company an idea of the contribution of new
products or services to its total sales revenue. It is most relevant for companies that pursue product
leadership strategy. With a product leadership strategy, the key dimensions of the customer value
proposition are product differentiation and innovation. Hence, the contribution of new products or
services is an important proxy of how the company is aligned with its strategic orientation.
Measurement of market penetration measures how successful the organisation has been in obtaining
market share with new products in its chosen markets. This reflects how competitive the company's
products and services are in the market.
Innovative companies typically use this measure. For instance, more than 30% of 3M's sales are
composed of products less than four years old (see www.mmm.com). For the fiscal year 1990, half of
Hewlett Packard's orders were for products brought to the market within the past two years.
New Product / Service Penetration data will be useful during the next round of new product and/or
service launches, as they will provide an informed view of the diffusion rate of a firm's new
offerings.
turnover generated from new products / services in a given period
% of sales turnover that is generated from new products / services in a given time period
% of orders that is generated from new products / services in a given time period
Market Share - Sales turnover generated from new products / services as a percentage of total
market sales value
Sales Turnover - is the total income from the sale of goods and services, and should be split into
product or market categories to make appropriate comparison with market data.

Total Market Sales Value - is the total sales turnover of all products sold by all companies in the
market. The market is that which the company defines as its target or that in which a specific product
competes. This measure should be employed for each of the target markets in which the company
competes.
Total market sales data can be obtained from market research either conducted internally or by market
research companies. Care must be taken when using external data to ensure that it is accurate and
relates to the appropriate market segment.
The sales data is readily available from the sales department. The measure will have to be
implemented if not currently monitored. The sales force could be effectively mobilised for the data
collection. Data collected can be used to illustrate the impact of the new product or service on:
expanding existing market share; and
creating new business opportunities with new customers.
The data is best captured as sales over a period, determined by the product life cycle, because new
products launched in one year may not have generated adequate sales within the year for them to
reflect on their impact on new revenue generation. So, measuring new product or service sales per
year may not take account of time lag involved in new sales revenue generated. Analysis should
investigate the demand for individual products, product groups, as well as assessing the 'develop new
products & services' process as a whole.
Analysis should compare sales and market share for different products and product groups. This will
indicate in which areas the organisation is most competitive and in which areas greater effort is
required to improve penetration. This data will also provide input to decisions regarding which
products and services the organisation should focus on.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
New Product / Service Introduction Rate

The objective of the measure of New Product / Service Introduction rate is to capture information on
the rate at which a company is introducing new products or services.
While New Product / Service Introduction Time measures the length of time taken to proceed from
initial concept of product or service through to actual launch; the New Product / Service Rate
measures the rate of change (refresh rate) of the existing portfolio of products and/or services.
In new and dynamic markets the rate at which new products or services can be introduced will be a
key determinant of competitiveness. In markets where new products and time to market are order
winning criteria, ensuring that the introduction rate is better than competitors is essential.
the total number of new products or services launched over a given period
new product / service introduction rate vs. competition
new product / service introduction rate vs. industry standard
Competition - are providers that produce products or services that are in direct competition with
those of the organisation. This measure is concerned with the rate at which competitors introduce new
products or services, as well as the rate at which the organisation introduces them. In markets in
which time to market is an order winning criteria, it is essential that performance is better than the
competition.
Industry standard - is the introduction time that is demonstrated throughout the industry in which the
organisation competes. This should be considered to be the minimum acceptable introduction rate in
order to compete in the market.
The given period should be defined based on the characteristics of the market in which the products
and services compete. In a dynamic market where new products and services are frequently
introduced the measure should be reviewed more frequently to pick up performance trends quickly.
The Develop Products and Services process should maintain a monitoring system to collect data
regarding the rate at which new products and services are developed and introduced.
Analysis of new product or service introduction rates should compare performance for different
products and product groups to identify which are the most competitive and for which performance
improvement is important. There should also be analysis of each stage of the introduction process to
identify where improvement can be made. Each stage of the process could be benchmarked with other
organisations to see how they can be improved. Analysis must also include comparison of
introduction rate versus that of competitors and standard rates within the industry.
Prism Facet 1:
Prism Facet 2:
Strategies Sub-Facet 2: Brand, Product and Service Strategy
Prism Facet 3:
Sub-Facet 3:
Infrastructure Availability
This measure assesses whether infrastructure is available when required.
As with other capabilities, it is essential that infrastructure is available when required in order to
satisfy demand. The measure assesses how well infrastructure is planned in order to ensure that the
organisation has the right items of infrastructure and that the infrastructure is in the right place at the
right time so that demand for the organisation's products and services can be satisfied. Such planning
is a key part of the capacity planning process when scheduling activities, as a result this is an
important measure of the effectiveness of these planning processes.
It is most important to use this measure in relation to key pieces of infrastructure, where their absence
can constrain activity of the organisation, or items which provide competitive advantage, the absence
of which could affect the competitiveness of the firm.
The availability of infrastructure can be maintained by making large investments to ensure that
infrastructure is always available. This might include maintaining excess infrastructure to cover all
eventualities. Although this will ensure availability it might well be an inefficient use of resources as
there will be increased investment costs and increased cost of maintaining infrastructure which might
not be highly utilised. As a result it is important to use this measure in conjunction with the measure
of 'Infrastructure Utilisation' which assesses the amount of infrastructure that is under-utilised. The
balance between utilisation and availability of infrastructure should be assessed by the organisation
based on its competitive priorities. Expenditure on excess infrastructure in key strategic areas or on
key strategic items can be justified if availability and flexibility are key competitive priorities.
The availability of capital to invest in infrastructure can be a key consideration in its availability
when required as will the speed and cost of infrastructure relocation.
The availability of infrastructure is related to its age and condition and the level of maintenance to
ensure availability. As a result this measure should be used in conjunction with measures of those
areas of performance.
Lack of availability will cause additional costs to be incurred. These costs are included in the 'Cost
of Equipment Breakdown' measure.
% of occasions that items of infrastructure are / are not available when required
mean time between equipment breakdowns
Infrastructure - is the underlying capital of the organisation. Infrastructure includes land, buildings,
plant, machinery, vehicles, furniture and other equipment.
and used in, another location. These are working items of infrastructure that can break down i.e. other
than land and buildings.
Breakdown - is to become in-operational due in unexpected circumstances.
The availability of infrastructure will provide an input to the strategy development process when
decisions regarding investment are made. In such instances the frequency with which the measure is
used should reflect the frequency of the strategy development and review. In the case of smaller items
such as equipment, machinery, etc. the measure will be more regularly used to assess whether the
infrastructure required to fulfil customer demand is available. This will be part of a quicker feedback
mechanism to ensure that machines and equipment are available when required and that plans and
schedules consider current availability and trends that will indicate potential future availability.
It is most important that the measure is focused on key items of infrastructure where their absence can
constrain activities of the organisation, or infrastructure which provides competitive advantage, the
absence of which could affect the competitiveness of the firm.
It is important that causal analysis of this measure is undertaken. Such analysis will allow the
identification of the reasons for infrastructure being unavailable and hence action can be taken to
prevent recurrence. Lack of infrastructure might be caused by a lack of investment in the appropriate
infrastructure, failure to effectively deploy available infrastructure in a timely manner or poor
planning / scheduling of activities.
Analysis should also include split by business unit or department to analyse where the planning is
most effective and where improvement is required.
There is a need for a feedback mechanism to determine when infrastructure is not available and to
analyse the causes so that they can be reduced.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Cost of Infrastructure Acquisition

The cost of acquiring infrastructure is an important measure and a key determinant of whether or not
infrastructure investments are made. Cost is a key input into the investment decision, along with
consideration of the benefits that will accrue.
Measurement of whole life costs is important when making investment decisions, as it encourages
consideration of the cost of infrastructure over its entire life. This includes acquisition, maintenance
and disposal costs.
The lower the cost of infrastructure, the more that can be purchased, hence the more likely it is that
the infrastructure will be available when required. As a result this measure is linked to 'Infrastructure
Availability' and 'Capacity Availability'.
Lower cost of infrastructure might encourage organisations to invest in excess infrastructure to act as
a buffer to ensure availability. This will reduce utilisation levels and result in higher than necessary
cost of capital. However excess infrastructure should reduce the need to transfer infrastructure or
operations, thereby eliminating the associated costs. Excess infrastructure also ensures that the
organisation does not have to turn away business when unexpected demand arises. Hence it can result
in reduced opportunity costs.
When using this measure it is essential to consider the availability of capital to invest in
infrastructure. When making an investment decision, the cost of infrastructure will only be relevant if
related to the ability of the organisation to pay for it.
average cost of / expenditure on acquiring land / buildings
average cost of / expenditure on constructing new buildings
average start up costs at new locations
average cost of / expenditure on new equipment
whole life cost of infrastructure investment
take place.
Cost of acquiring / constructing new land / buildings - includes the purchase price of the land and
buildings, all construction or modification costs plus start up costs.
Start up costs of new locations - include taking on new employees in the new location and the set up
costs of newly introduced equipment and operations.
Cost of new equipment - will include cost of installing the equipment, cost of transportation and the
cost of skilled personnel to operate it. This might include costs of recruiting and training new
personnel.
Whole life costs of infrastructure - are the costs that will be required to acquire and maintain items of
infrastructure throughout their entire useful life. These costs include the costs of acquisition,
installation or construction and the cost of maintenance.
The measure is used in strategy development and scheduling / capacity planning and the data to
calculate it should be available from these processes. These processes should review the availability
of infrastructure and compare it to requirements to identify necessary acquisition. At this point
estimations of the cost to acquire new infrastructure should be considered and compared with the cost
of utilising existing facilities, the benefits of acquiring new infrastructure and the costs of not doing
so. Cost estimations should be based on previous experience and expert opinion. The finance
department should maintain data regarding previous costs of acquiring infrastructure, which is
especially relevant if similar types of infrastructure have previously been acquired. Analysis of the
measure over time is difficult, as in many industries there will not always be regular investments in
similar items of infrastructure, making comparison between types of expenditure problematic. Trends
will allow understanding of changes in infrastructure requirements.
The costs of infrastructure will vary greatly depending on their nature. As a result this measure must
be analysed by the type of infrastructure relocation being undertaken. Categories should include:
cost of land - which will vary depending on size, location, availability of local facilities, etc
cost of buildings - which will vary depending on size, location, features (including equipment,
fixtures and fittings etc.), availability of local facilities, etc. The cost of any work required to
modify existing buildings to new uses should be included
cost of construction - will include all design and construction costs, cost of purchasing land, cost
of fitting out the building, start up costs, etc. The amount of specific requirements required will
have a significant effect on the cost of constructing new buildings
cost of new equipment - will include variation depending on the complexity and technical
specification of equipment, complexity on installation, level of technical expertise required to
operate the equipment, etc
Prism Facet 1:
Prism Facet 2:

Prism Facet 3:
Infrastructure Age / Condition Profiles

The age and condition of its infrastructure, and in particular its equipment, is an important determinant
of an organisation's ability to execute its strategies and satisfy the demand for its products.
New infrastructure and assets perform more efficiently and effectively than those that are ageing or in
poor condition. As a result it is important to monitor and control the age and condition profile.
The age and condition profile is linked to the fixed asset inventory which assesses its value, including
depreciation and the effect of condition on value.
The age and condition profile will provide input to strategy development and infrastructure
management decisions regarding the need and timing of replacement and redeployment.
This measure is linked to the measure of infrastructure availability which considers the frequency
with which machines breakdown.
average age of plant / infrastructure
% of useful life of infrastructure completed
% of infrastructure that is in need of replacement
average amount of useful life remaining
Useful life - is the time from the purchase of an item until its need to be replaced. An estimation of the
useful life of an item of infrastructure will be made when justifying investment in it. This estimation
should be updated as the item ages and its condition deteriorates and as the organisation's
requirements change.
The overall age of infrastructure throughout the organisation will provide an indication of the control
maintained over infrastructure and the frequency of investment.
The benchmark age of infrastructure and actual performance of this measure will depend on the nature
of the organisation and industry in which it operates. Where technologies are frequently changing and
where the performance of infrastructure is very important, infrastructure is likely to be younger and in
better condition.
The age and condition of an item of infrastructure will affect its value and depreciation. This should
be reflected in the fixed asset inventory which assesses value.
When using the measure of remaining useful life, consideration should be given to the lead time
required to replace the item.
Assessment of the age and condition of assets and infrastructure should be undertaken in conjunction
with the fixed asset inventory which monitors fixed assets. There should also be a feedback
mechanism to report changes in condition of infrastructure. In many cases this will be provided by the
maintenance department who will monitor the condition of all infrastructure. Operators using
infrastructure should also be encouraged to provide feedback of condition and the need for
replacement.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Initiative Achievement On Time

Measurement of Initiative Achievement On Time indicates the realisation of strategic performance
improvement initiatives. It is important that initiatives are realised on time to ensure that
improvements are realised as quickly as possible and that the benefits affect overall business
performance as quickly as possible. It is also important to ensure that improvements are achieved to
coincide with other projects as planned, such as new product introduction.
When using this measure consideration should be given to the achievement of the intended results of
the initiative. As a result the measure of strategic objective achievement should also be considered
when using this measure.
The achievement of operating strategy improvement initiatives should be defined in terms of the
operational performance improvements that are realised. Such operational improvements should be
defined in terms of the operational strategic objectives of cost reduction, quality improvement,
improved delivery reliability, increase delivery speed and increased flexibility.
Failure to achieve operational improvement initiative on time can have a detrimental effect on the
achievement of its intended objectives. For example project over run will result in additional costs
being incurred reducing the benefit of any cost reduction achieved.
% of strategy programmes / projects that are completed on time
% deviation from strategy programme / project time scales
Strategy programmes / projects - are programmes or projects intended to improve operational
performance.
Analysis of the failure to achieve strategic improvements when planned should be undertaken to
identify why planned dates were not achieved. This will allow the causes to be considered when
planning future initiatives, so that these plans can be made more realistic and achievable.
When using the measure consideration should also be given to the achievement of the objectives of
the improvement initiative undertaken. These will be defined in terms of the operational strategic
objectives of cost reduction, quality improvement, improved delivery reliability, increase delivery
speed and increased flexibility.
Operational improvement initiatives should include a project management process which monitors the
achievement of milestones to ensure that intermediate and ultimate milestones are achieved.
Prism Facet 1:

Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Initiative Cost Achievement

Measurement of Operational Initiative Cost Achievement indicates the realisation of strategic
performance improvement initiatives to budget. It is important that budgets for initiatives are adhered
to, to ensure that the impact of improvements on business performance is maximised. Failure to
achieve operational improvement initiatives to budget can have a detrimental effect on the
achievement of its intended objectives.
When using this measure consideration should be given to whether the intended results of the
initiative were achieved. As a result the measure of 'strategic objective achievement' should also be
considered when using this measure.
The achievement of operating strategy improvement initiatives should be defined in terms of the
operational performance improvements that are realised. Such operational improvements should be
defined in terms of the operational strategic objectives of cost reduction, quality improvement,
improved delivery reliability, increase delivery speed and increased flexibility.
% of strategy programmes / projects that are completed within budget
% deviation from strategy programme / project budget
Strategy programmes / projects - are programmes or projects intended to improve operational
performance.
Analysis of the failure to achieve strategic improvements within budget should be undertaken to
identify why the planned cost targets have been exceeded. This will allow the causes to be
considered when planning future initiatives, so that these plans can be made more realistic and
achievable.
When using the measure consideration should also be given to the achievement of the objectives of
the improvement initiative undertaken. These will be defined in terms of the operational strategic
objectives of cost reduction, quality improvement, improved delivery reliability, increase delivery
speed and increased flexibility.
Operational improvement initiatives should include a project management process which monitors the
achievement of milestones to ensure that intermediate and ultimate milestones are achieved.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
New Product/ Service Introduction Time

The 'New Product / Service Development Time' measures the total time taken for ideas about a new
product or service to be translated into a tangible product or service.
Time to market is critical where product and service introduction rates are high and competition is
highly dependent on new products. In such cases getting new ideas developed, incorporated into
products and into the market place will provide competitive advantage.
This is a critical measure for establishing competitiveness based on time to market. It assesses how
quickly the product development process can convert ideas into prototypes and new processes and
how quickly the new products can be put into full production and distributed to market.
total elapsed time from initial idea generation to availability of new product to the customer
In general the new product development process involves six major activities: (i) concept generation
- involves the translation of customer needs or problems into a written statement of the product
concept; (ii) product planning - involves the establishment of detailed targets for performance, cost
and styling derived from the product concept; (iii) prototyping or product engineering - involves the
translation of product targets into a set of detailed engineering drawings backed by engineering
prototypes and CAD data files; (iv) production engineering - relates to the translation of engineering
drawings into a process design (process flow charts, plant layout, tool and equipment design, work
design, and parts programming). Process design information is then fed into actual production process
(tools, equipment, operator skills) using learning from pilot runs and start-up activities in the plant;
(v) production ramp up - is upping production to full rate following introduction of new production
processes; and (vi) launch / distribution to market - involves taking the full production product to the
appropriate markets for the consumer and introducing the appropriate promotional activities.
Each of these activities should be measured separately to stimulate improvement at each stage.
Combining stages, such as prototype to launch, might be more appropriate for some organisations.
Analysis of the measure should include comparison with competitors and relevant performance in the
industry. Each of the activities should also be benchmarked to understand how they can be improved.
Such benchmarking would benefit from use of comparisons in different industries.
The elapsed time varies depending on the nature and the problem-solving capabilities of the
company. Some of the tasks may be carried out simultaneously, while some are strictly executed in a
sequential fashion. Actual performance is also dependent on the characteristics of the product or
service being developed, such as complexity, regulatory requirements, technological specification,
etc.
Unless marked by a specific event, such as input from a customer or marketing department, it might
sometimes be difficult to determine the point at which ideas are generated and so identifying the start
of conceptual design can be difficult.
The 'develop products & services' process should monitor and record all stages of the product
introduction process, including identification of the beginning and end of each stage of the process.
This should include measurement and analysis of this measure.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Idea Generation Rate

The front end of any innovation process lies in ideas. For a company that supports innovation, the
ability to introduce new products, services and processes depends on the pool of ideas available.
This measure accounts for this ability to generate new ideas.
New ideas might relate to new products and services, improvement of current products and services
or improvement of processes. As a result it assesses improvement ideas related to the Develop
Products & Services and Fulfil Demand processes which might include continuous improvement
initiatives. Although employees tend to be the main source of new ideas, they can also come from the
other stakeholders. As a result this is also a measure of stakeholder contribution. As such it is
strongly linked to the measures of Feedback and Suggestions from each of the stakeholders.
The measure should be used to encourage the generation of ideas where there is considered to be
insufficient input into product development and improvement of the performance of the business. In
such circumstances the measure could be used in conjunction with incentive schemes that might
include recognition or rewards. It is important that organisations proactively encourage ideas and
suggestions.
To be most effective this measure should be part of evolving measurement of idea generation and
implementation. Measurement of the number of ideas or suggestions should encourage increased
volume of ideas and suggestions. Once the volume of ideas and suggestions has increased it is
desirable that the sophistication of the measure is increased to encourage implementation of ideas and
suggestions and their positive impact.
number of ideas / suggestions for improvement received monthly
Ideas / suggestions - are contributions made with the objective of improving the operations of the
organisation. New ideas might relate to new products and services, improvement of current products
or services or improvement of processes.
For companies with suggestion schemes and structured new ideas assessment system, data for this
measure can be readily obtained from such a system, typically monitored by the HR department or
processes responsible for managing relations with stakeholders. This measure is to be distinguished
from Idea Conversion Rate which measures the effectiveness of new ideas that can be implemented.
Idea Generation Rate only measures the number of new ideas generated monthly, it does not say
anything about the ease of implementation, for this, the new ideas assessment system would act as a
filtering gate. All new ideas generated have to be weighed within the context of a company's
resources and capabilities.

It is not always easy to collect data regarding the generation of new ideas. It is often difficult to
define what constitutes a discrete idea. For this measure to be effective there is a need for a
mechanism (i.e. new ideas assessment system) to identify and record the generation. Such a system is
important to ensure that ideas are monitored and their effect is maximised.
Use of this measure should include analysis of the source of the ideas being generated. This will
include employees from the Develop Products & Services process, employees from other processes
or functions of the organisation and other stakeholders in the organisation.
The results of this measure must be used with caution if there are incentive schemes in place to
encourage the generation of ideas. These may bias the results to give a false impression of idea
generation. For example certain employees might have one big idea but only submit it as a number of
smaller sub ideas in order to take advantage of rewards that are made available. Similarly there
should be consideration of the usefulness of the idea before offering rewards.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: All Stakeholders
Idea Conversion Rate

The idea conversion rate measures the rate at which new ideas are assessed and implemented
successfully through improvement initiatives or directly on at the point of operations.
performance. The Develop Products and Services process and the Fulfil Demand process should both
include mechanisms to encourage and facilitate the provision of ideas and feedback from all possible
sources.
New ideas might relate to new products and services, improvement of current products or services,
or improvement of processes.
The measure assesses the quality of ideas that are generated, measuring whether idea generation
within the Develop Products & Services and Fulfil Demand processes is effective. The measure also
assesses the quality of the ideas generated by the organisation's stakeholders and hence their
contribution. As such it is strongly linked to the measures of 'Feedback and Suggestions' from each of
the stakeholders.
To be most effective this measure should be part of evolving measurement which is linked to the
measure of idea generation and implementation. Measurement of the number of ideas / suggestions
should encourage increased volume of ideas and suggestions. Once the volume of ideas and
suggestions has increased the sophistication of the measure should be increased to encourage
implementation of ideas and suggestions and their positive impact.
number of ideas / suggestions implemented in a given period
% of ideas / suggestions that are implemented / acted upon
average value of ideas / suggestions implemented
average lead time to respond to ideas / suggestions
Suggestions / feedback - are contributions made with the objective of improving the operations of the
organisation.
the value.
before action will be taken. There should be a standard benchmark lead time for acknowledgement.
It is important that those contributing ideas and suggestions are notified of the progress of their
suggestions and are given reasons if suggestions are not going to be implemented.
The Develop Products and Services and Fulfil Demand processes should monitor idea generation
including their conversion into actions. This should include the collection of data for this measure.
The process should therefore include a process or mechanism which records ideas and their progress
including the results of their implementation.
Improvements should be assessed in terms of savings or enhancement in cost, cycle-time and quality.
In essence the idea conversion rate measure provides an indication of how effective the process of
converting and implementing the upstream pool of ideas is. A Pareto analysis of implemented
suggestions is often useful as this will display patterns of improvement initiatives within the
company.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Stakeholder Contribution Sub-Facet 3: All stakeholders
Uniqueness of Products / Services

This measure assesses the extent to which a new product or service launched differentiates both from
competitor's products and the organisation's existing portfolio of products and services. Higher
uniqueness is in line with product differentiation strategy. The objective of developing unique
products and services is to generate sales in new markets or to increase market share in existing
markets. Adding a unique product is a way of stimulating mature markets.
Therefore the measure assesses how well the Develop Products and Services process generates
innovative and unique ideas and converts them into innovative and unique products. Introduction of
unique products will also affect the level of customer satisfaction, especially where there is strong
competition in the market based on product or service features.
CAUTION - when developing unique products it is important to ensure that new and innovative
features are required by the customer. It will be counter productive to incur the cost of including
additional features if the customer doesn't require or value them. As a result this measure should be
used in conjunction with a measure of new product and service sales to assess whether uniqueness
creates value.
% of new products and services introduced in a given period that are considered to be unique
% of product or service features and attributes that are considered to be unique
Unique - refers to products or services, or features and attributes of products or services that cannot
be found elsewhere in the market.
New Products / Services - are those which have recently been introduced. The definition of 'recently
Uniqueness can be captured as a basket of measures that is spread across product function, features
and aesthetics. This should ideally be benchmarked against a product in the same category.
Measurement of uniqueness can only be made by subjective assessment of features and attributes.
This can be done as assessment of the effectiveness of the Develop Products and Services process but
should have considerable input from the marketing function, who have knowledge of the market, and
from consumers. As measurement will be subjective, care must be taken when using the data. The
integrity of the data collection will be critical.
This measure is related to the measure of patents which will also indicate the uniqueness of products.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
New Product / Service Cost of Quality

The New Product / Service Cost of Quality measures the total cost (cost of conformance and cost of
non-conformance) of ensuring that products and services in the market are of appropriate quality. This
includes the cost of ensuring that products of the correct quality are delivered and the costs that are
incurred if non-conformances occur.
It is critical to measure the cost of quality for the following reasons:
to display critical quality-related activities to management in meaningful terms
to illustrate the impact of quality-related activities on key business performance criteria
(profitability, operational costs, inventory levels, customer satisfaction, etc.)
to enable benchmarking against other divisions or companies
to establish bases for budgetary control over the whole quality operation
to provide cost information to motivate employees across all levels of the company.
"Quality-related costs commonly range from 5 to 25 per cent of a company's annual sales turnover,
depending on the industry and the way in which the company manages quality. Ninety-five per cent of
this cost is expended on appraisal and failure. Reducing failure costs by eliminating causes of failure
can also lead to substantial reductions in appraisal costs. Quality costs may be reduced to one-third
of their current level by the use of a cost-effective quality management system" (Dale and Plunkett,
1990).
The measure of New Product / Service Cost of Quality provides an indication of how well products
and processes are designed in order to produce high quality products, and does so in the common unit
of cost to allow comparability of data. This measure also assesses (i) the fulfil demand process, as
most of the failure costs will come from operations, and (ii) the plan and manage operations process,
which manages the costs of prevention.
Cost categories are defined in BS (British Standard) 6143 to include cost of conformance (COC) and
the cost of non-conformance (CONC).
total cost of quality conformance (COC) in a given period
total cost of non-conformance to quality requirements (CONC) in a given period
Cost of conformance - (or cost of control) is the cost of providing new products and services to
specified standards. For example, prevention costs (preventing defects and non-conformities - quality
planning, process control, quality training, etc.) and appraisal costs (maintaining quality levels
through formal evaluation - inspection, testing, quality audits etc.).
Cost of non-conformance - (or cost of failure to control) is the cost of wastage in time, materials and
capacity in the process of receiving, producing, despatching and reworking unsatisfactory goods and
services. Cost of non conformance includes internal failure costs (e.g. scrap and rework costs,
wasted effort first time) and external failure costs (which includes warranty claims, field repairs,
returns, product recall, lost custom, etc.).
Quality costs are "those costs associated with the definition, creation, and control of quality as well
as the evaluation and feedback of conformance with quality, reliability, and safety requirements, and
those costs associated with the consequences of failure to meet the requirements both within the
factory and in the hands of the customers" (See Armand Feigenbaum "Total Quality Control" and
British Standard on Quality Costing: BS6143 Part 1, Guide to the Economics of Quality, Process Cost
Model).
Performing process modelling to identify sub-processes in the production of new product or service
is an effective first step in building a big-picture view of the cost of quality. Having identified
opportunity areas for reduction in cost of conformance and non-conformance measures should be
introduced to monitor the cost of quality. Operations reviews should also be established to look into
root causes of non-conformance.
Organisations should have a quality control or assurance department which is responsible for
ensuring the products and services that are delivered are of appropriate quality. This process should
include recording and analysing data regarding the costs of quality. The department should also
receive feedback from other departments or processes such as the sales department regarding missed
sales.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Processes Sub-Facet 3: Plan & Mange Enterprise - Operations
Cost of Late Launch

The cost of late launch measures the additional costs incurred as a result of failure to get products to
the market when planned.
This includes measurement of the extra cost incurred due to late launch of a product, resulting in
development projects going over budget. Additional costs have a direct implication on the breakeven
point and target cost compliance of projects and overall profitability.
As well as additional actual costs incurred (i.e. exceeding budgets for labour costs, overheads etc.)
there are also additional costs which in many cases have greater implications for profitability. These
costs include lost revenue or customer penalties as a result of failure to deliver new products when
expected as well as the need for increased promotion to compensate for the late launch.
In many organisations the most significant cost is in terms of lost sales. This includes the sales that
are lost during the period when the new product is not available, lost opportunities for getting the
product or service to the market first and lost reputation of the product and organisation. In the
pharmaceuticals industry, for example, a drug patent has a finite length and a late launch means that
sales and profit are effectively lost for ever.
total costs incurred as a result of late launch of new products / services in a given period
number of man-hours per month consumed after planned date of launch
total value of customer penalties as a result of late launch in a given period
total value of customer lost sales as a result of late launch in a given period
Customer penalties - are penalties imposed by customers as a result of the failure to deliver the new
product or service when promised.
Lost sales - are expected sales which are not realised because of late launch of the product.
Use of the measure should include analysis of each stage of the Develop Products and Services
process to identify which parts of the processes are causing the late launch. This will provide
important feedback to the process so that the improvement of planning can be targeted on the most
appropriate areas.
Analysis of costs should consider the differences in costs incurred between different products,
product groups and customers. This will identify where the greatest penalties for late introduction
will be incurred, which will be important information when deciding on prioritisation and resourcing
of product introduction projects.
Data for this measure is readily available from the list of tasks to be completed within the Gantt Chart
of projects. After the date of intended launch, all outstanding activities are translated into "manhours" and costed. The sales department should make an assessment of the expected sales that are lost
as a result of failure to get the project to market and should record penalties that customers impose.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Licence Agreement Usage

Licensing agreements are agreements between organisations which allow one organisation to use
technologies or processes developed by others. Licensing agreements can also be signed to allow
other organisations to manufacture products in order to increase capacity to meet demand. Licensing
agreements allow organisations that develop technological capabilities to generate income and take
advantage of reciprocal agreements with other organisations. This is particularly applicable to
technologies, processes and products that are patented.
Measurement of the usage provides an indication of how successful the organisation is at innovating
and developing technologies. The measure indicates the success of the innovations as it measures
whether other organisations see value in their use. As such it measures the organisation's technology
development capabilities and its ability to develop products and services that other organisations
want to produce.
While maximising the usage of licensing agreements will enable increased income generation,
organisations may prefer to protect their innovations and obtain greater competitive advantage from
exploiting them exclusively.
Although the focus of this measure is on the use of licence agreements by other organisations, it can
also be used to assess the use by the organisation of technologies developed by others. Using
technologies developed by others indicates that the organisation is a follower rather than a setter of
technology trends.
number of organisations using licensing agreements
% of competitors using licence agreements
Licensing agreements - are agreements between organisations which allow one organisation to use
technologies or processes developed by the other, or produce another company's products for them.
Use of the measure should include analysis of type of technology being licensed, such as product or
process technologies, by product groups or process types. This will indicate the area of the business
which is providing the greatest innovation of interest to the outside world and resultant income
generation.
Analysis should also consider the organisations that are using the licences, for example which
industries they are from, whether they are competitors, etc. Analysis of organisations and types of
technology used should be analysed together to identify trends.
The technology and product development processes should maintain a record of the number of
organisations that are using licences for technologies developed internally as well as the number of
licences being used.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Sub-Facet 3:
Number of Patents
Use of this measure provides an independently quantifiable indication of how innovative an
organisation is, as it measures the number of patent applications that are granted. The number of
patents or commonly known as 'patent counts' have the effect of revealing the scientific and
technological base of a company.
Patents counts are measured for a number of reasons:
patents provide information about the rate, volume and direction of technological developments
the data can be benchmarked against competitors so that in-house research and development
performance can be tracked
the data can also be used as a proxy measure to assess the effectiveness of R&D Spend
Use of this measure is particularly important where competition based on innovation is high and
considerable advantage can be gained from being the first to introduce a new product or service.
Registration of patents ensures that the organisation that has developed innovative products or
services can exploit them exclusively.
CAUTION - registration of patents also tells the competition what technologies the organisation has
developed. Therefore it is worth not registering patents, or not registering them immediately, in some
situations.
the number of patents successfully registered in patents office of respective countries
% of patent applications that are successfully registered
average R&D expenditure per successful patent application
value of patents vs. R&D spend
% of target markets in which patents are successfully registered
Patents - a formal document securing the inventor the exclusive right to make, sell or use their
invention.
Patents might relate to products or processes, either of which might provide an organisation with a
Value of patents - is the commercial value gained from the sale of products or use of processes that
are protected by patents. Value from patented processes might be generated from increased
efficiencies or increased sales of products that can only be produced by the patented process or
technology.
The valuation of patents may have to be subjective, but will give an indication of the benefit gained
from R&D expenditure, and might be a more relevant measure than the number of patents.
Patents protect ideas. As such they are considered an intermediate output of the whole process of
innovation. Patent counts reflect the propensity to patent, not the actual innovations (exploitation of
ideas in the form of actual products or processes that get launched in the market). The propensity to
patent may vary across firms, industry sectors and countries. Hence, patent counts are highly
correlated with research inputs, but not necessarily innovative outputs.
Analysis of the number of patents should include comparison of patent application success rates in
different countries. It should also include comparison with competitors to assess the relative
effectiveness of the R&D process and the competitive advantage that it provides.
Data regarding patent applications lodged and their success should be tracked by the R&D process.
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Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Target Cost vs. Actual Cost

This measure captures information about the actual costs when the new product is launched versus the
target costs in the planning stage. It assesses the accuracy of cost estimation when planning product or
service development projects. It also measures how well product and service introduction projects
comply to target costs. This indicates how tightly the organisation controls costs.
It is important that product and service introduction costs are monitored to ensure that they don't
spiral out of control. The feedback that the measure will provide also ensures that the process of
setting target costs improves. In turn this will make target costs more accurate and appropriate.
Accurate estimates of costs are important when making decisions regarding which projects to
continue with and take to market and which to discontinue. If cost estimates are inaccurate then these
decisions may well be wrong.
The achievement of cost targets will have a significant effect on the profitability of new products and
services and should be considered in conjunction with measures of profitability and additional costs
of late product launch.
ratio between target cost for project over actual cost of project at launch
average percentage deviation of actual costs from target costs per product
average percentage deviation of actual costs from target costs in a given period
Target Cost - is the expected cost of bringing a product or service to market. Estimation of target
costs should be made at the beginning of the Develop Products and Services process. Decisions on
whether to proceed with development and introduction of the product or service will be based on this
cost estimation.
Actual Cost - is the actual cost of bringing a new product or service to market.
If the ratio of target to actual costs is greater than one, say 1.5, then new product project has delivered
one and a half times savings from planned target cost. A ratio of less than one means the new product
project has exceeded target cost. Given that capital should be utilised efficiently, it is critical to keep
the actual cost of new product projects under control. This measure provides a useful way for cost
control and can be extended to evaluate a portfolio of new product projects, along with break even
time measures.
Analysis of this measure should include comparison of products and product types as well as
monitoring in total over time. Measurement of individual projects will assess compliance to target
costs. Measurement of all projects over a given period will give an indication of the accuracy of cost
estimation and the effectiveness of cost control. The period over which the measure should be used
will depend on the frequency with which products are introduced. A number of projects need to be
considered in order to understand the performance of the whole process rather than simply the
introduction of individual products.
Analysis should also include comparison of compliance in different parts of the project or different
business units. This will improve understanding of where estimation and compliance can be
improved and action is required.
The Develop Products and Services process should include monitoring of costs incurred, collecting
data for this measure.
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Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Cost of Quality
Cost of quality aims to financially quantify the activities in the prevention and rectification of defects.
It measures the total cost (cost of conformance and cost of non-conformance) of ensuring that products
of the correct quality are delivered.
It is critical to measure the cost of quality for the following reasons:
to display critical quality-related activities to management in meaningful terms
to illustrate the impact of quality-related activities on key business performance criteria
(profitability, operational costs, inventory levels, customer satisfaction etc.)
to enable benchmarking against other divisions or companies
to establish bases for budgetary control over the whole quality operation
to provide cost information to motivate employees across all levels of the company
The measure of Cost of Quality provides an indication of how well products and processes are
designed in order to produce high quality products, and does so in the common unit of cost to allow
comparability of data. It also measures how well all activities are executed (Fulfil Demand) to ensure
that products and services are delivered to specification as most of the failure costs will come from
operations. In addition costs of prevention are managed in the plan and manage operations process.
Cost categories are defined in BS (British Standard) 6143 to include cost of conformance (COC) and
the cost of non-conformance (CONC).
total cost of quality conformance (COC)
total cost of non-conformance to quality requirements (CONC)
Cost of conformance - (or cost of control) is the cost of providing new products and services to
specified standards. For example, prevention costs (preventing defects and non-conformities - quality
planning, process control, quality training, etc.) and appraisal costs (maintaining quality levels
through formal evaluation - inspection, testing, quality audits etc.).
Cost of non-conformance - (or cost of failure to control) is the cost of wastage in time, materials and
capacity in the process of receiving, producing, despatching and reworking unsatisfactory goods and
services. Cost of non-conformance includes internal failure costs (e.g. scrap and rework costs,
wasted effort first time) and external failure costs (which includes warranty claims, field repairs,
returns, product recall, lost custom, etc.).
Quality costs are "those costs associated with the definition, creation, and control of quality as well
as the evaluation and feedback of conformance with quality, reliability, and safety requirements, and
those costs associated with the consequences of failure to meet the requirements both within the
factory and in the hands of the customers" (See Armand Feigenbaum "Total Quality Control" and
British Standard on Quality Costing: BS6143 Part 1, Guide to the Economics of Quality, Process Cost
Model).
Performing process modelling to identify sub-processes in the production of new product or service
is an effective first step in building a big-picture view of the cost of quality. Having identified
opportunity areas for reduction in cost of conformance and non-conformance measures should be
introduced to monitor the cost of quality. Operations reviews should also be established to look into
root causes of non-conformance.
Organisations should have a quality control or assurance department which is responsible for
ensuring the products and services that are delivered are of appropriate quality. This process should
include recording and analysing data regarding the costs of quality. The department should also
receive feedback from other departments or processes such as the sales department regarding missed
sales.
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Advertising Response Rate / Return on Investment

The response rate to a company's advertising is clearly a key measure of the effectiveness of their
marketing activities. Advertising is the most effective way of building awareness of a company and
its products and services. However it is essential that the investment on promoting this awareness
results in sales revenue.
Advertising can be via a wide variety of channels. The effectiveness of each channel should be
assessed, the approach to such evaluation will vary depending on the channel. Traditional channels
include print and broadcast adverts, brochures and catalogues, billboards and direct marketing.
In addition this measure is closely related to those of Web Site Hit Rates and Web Site Customer
Behaviour as web sites are a major advertising resource. Banners on other web pages are an
additional advertising medium in the digital economy.
number of orders generated per advert
number of orders per viewing of an advert
revenue generated per advert
revenue generated as % of advertising expenditure
Advert - is a device or notice designed to promote awareness of a company and its products and
services. Advertising can take many forms including print and broadcast adverts, brochures and
catalogues, billboards, direct marketing, web pages and banners. The type of advertising will
determine the data collection methods required.
Viewing - is the number of people that view a particular advert. For print media this will be the
circulation of the publication, audience figures of broadcast adverts, circulation or print run of
brochures and catalogues, number of people to which direct marketing is sent, web hit rates and hit
rates on pages containing banner adverts.
The difficulty in measuring response rates and return on investment lies in separating orders from
those generated by other marketing campaigns or actions.
To increase the reliability of the data required to calculate this measure the company must collect the
advertising source to which the customer is responding.
Analysis of advertising response rates should be segmented by advertising channel as performance
will vary considerably. Analysis can be further segmented - for example response rates for focused
special interest publications are likely to be higher than in general publications such as national
newspapers.
Response rates and return on investment are relatively easy to calculate when doing direct marketing
as it is easy to identify the specific individuals targeted and whether they respond.
Advertising via the world wide web enables even more data to be collected about response rates and
effectiveness. Refer to the measures of Web Site Hit Rate and Web Site Customer Behaviour.
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Sub-Facet 3:
Time to Quote / On Time Quotation Rate

Time to Quote / On Time Quotation Rate measures how quickly the organisation prepares quotations
in response to customer requests. This is an important measure of the generate demand process as
quotes must be prepared in sufficient time to be considered by the customer.
The ability to offer quotations, within tight time targets can give an organisation a competitive
advantage. If the necessary information and resources required for submitting a quotation are readily
available, the likelihood of meeting the bid deadline is high. Further, where time is at hand, the
accuracy of the quotation will be improved, perhaps increasing the possibility of winning a job.
average lead time to prepare a quotation / bid
% of quotations delivered to the customer on the date / time required
% of rejected bids due to late submission (as a % of total bids over a given period)
% of unsatisfactory bids offered due to time limitations (as a % of total bids over a given period)
Time to quote / bid - is the lead time between when a customer requests a quotation (or when a
potential customer need is identified), to the time when the quotation or bid is received by the
customer.
Rejected bids - are those submitted late and therefore not accepted, or were incomplete and therefore
rejected at a later stage.
Unsatisfactory bids - are those which have not been prepared to the appropriate quality due to lack of
time. An example may be an instance where the bid is deliberately inflated to cover the risks of
pricing errors that may have occurred as a result of submitting an under-prepared bid.
When measuring the time to quote it is important to consider and define when a quote is considered to
have been delivered. Although it is possible to confirm delivery by faxing a quotation or obtaining
confirmation of delivery through the mail, that is no guarantee that it has reached the appropriate
person in the organisation. A follow up telephone call enables conformation that the correct person is
in possession of the quotation. It also provides the opportunity to clarify any initial queries that there
might be.
When using this measure it is essential that comparison is made with the performance of competitors
or that expected by customers to ensure that quotes are being submitted in sufficient time to ensure
consideration. The expected time a quotation is required should always be considered. This might not
always be a formally stated time or date, in which case an estimate of the maximum acceptable
elapsed time should be made.
As the preparation of quotes is likely to include interaction between different functions or
departments, analysis should identify the performance of each contributing function so that those
causing delays in finalising quotes can be identified and improvement action can be taken.
The generate demand process should include a process or mechanism for recording and monitoring
the progress of quotations from original request for a quote to its delivery and the ultimate decision of
the customer whether to purchase.
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Sub-Facet 3:
Cost to Quote
The cost to quote measure assesses how much it costs an organisation to prepare a quotation in
response to a customer request. This is an important measure of the efficiency of demand generation
process.
If the costs involved in preparing a quote are too high it might eliminate any hope of making a return
on the deal. As a result it is important to compare the cost of preparing quotes with the margin that
would be made if the bid were successful. If the cost of bidding is greater than the margin, the bid
should only be prepared if the strategic decision is made that the bid is a 'loss leader'.
Using this measure in conjunction with the measure of quotation conversion provides an important
indication of the amount of resources that are wasted preparing quotations that are unsuccessful.
average cost of producing a quotation
cost of quote preparation as % of the margin on the quotation
Cost of producing a quotation - includes the costs of collecting together all of the necessary data,
producing prototypes, etc.
Margin on the quotation - is the amount by which the selling price exceeds the costs included in the
quotation.
When using this measure consideration should be given to the volume and detail of material provided
with the quotation. This should be compared to that provided by competitors or that expected by the
potential customers. Provision of excessive material will increase costs unnecessarily.
Analysis of the cost of quotes should include identification of where in the process costs are incurred
so that they can be reduced if appropriate.
The generate demand process should include a process or mechanism for recording and monitoring
the cost of preparing quotations.
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Sub-Facet 3:
Sales Force Productivity

The measure of sales force productivity assesses the efficiency and effectiveness of the sales force. It
is a key measure of the generate demand process, as it assesses the return that is received for
marketing effort.
Sales productivity should not only indicate the sales managers' forecasting skills, territory
configurations, advertising strategies, training priorities or compensation practices, but also, things
that contribute to the sales organisation's ability to meet customer needs profitably.
It is important to understand sales force productivity when planning sales activities including defining
the level of resources required to achieve the desired level of sales to satisfy the organisations
business plan targets.
CAUTION - Research has found that sales management executives should balance the need for cost
effective selling - generating maximum revenue at least cost - with the need to be responsive to
customers wants and needs such as offering additional support during the purchase decision and after
the purchase has been made.
Fulfilling customer needs will require the mobilisation and support of different areas of the
organisation. For example, the expectations created in the minds of customers in terms of product
quality through advertising will have to be met, with the support of the manufacturing unit, to ensure
that those expectations are met. The sales force can be directly responsible only for the duties that are
part of the sales function and therefore it is important that the sales force have an understanding of
what promises they can realistically make and expect to be kept.
average number of orders generated per sales employee in a given period
average value of orders generated per sales employee in a given period
sales and marketing costs as % of sales turnover orders generated in a given period
Number of orders generated - is the total number of customer orders that are generated by sales staff
in a given period.
Value of orders generated - is the sales turnover generated by order received in a given period.
Sales employees - are employees who are responsible for generating sales from customers.
Sales and marketing costs are all of the costs incurred selling products. These costs include salaries
of sales and marketing employees, their expenses visiting and entertaining customers, advertising
expenditure. etc.
Analysis of sales force productivity should include comparison of the performance of individuals or
sales teams as part of the processes of setting their sales targets.
Analysis might also consider the differences in costs incurred in selling different products or services
to different customers as this will have implications for the focus of the resources in sales and
marketing.
Data regarding sales and costs should be available from the accounting information system. Personnel
data should be available within the 'generate demand' process which should collect the data together,
analyse it and report it.
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Sub-Facet 3:
Advertising Spend vs. Sales Turnover

The level of advertising spend in relation to sales turnover assesses the efficiency and effectiveness
of the advertising campaigns. It is important to assess the efficiency and effectiveness of advertising,
as it indicates the level of advertising that is required to generate a certain level of sales.
This is an important measure to consider when planning future advertising activities especially when
associated with new products and markets.
CAUTION
It is difficult to isolate the impact that advertising has on sales as opposed to other factors. Increases
in sales revenue can be due to reasons other than advertising, such as new customers attracted through
'word of mouth' from existing customers. Therefore, if possible the real effectiveness of advertising
campaigns should be established through eliminating increases in revenue due to other reasons.
Advertising, which creates unreasonable expectations in the minds of customers can lead to long term
dissatisfaction, even though such advertising may be associated with initial rises in revenue.
Therefore, the long-term effects of advertising and its effect on overall satisfaction, should also be
considered.
expenditure on promotion and advertising as % of sales turnover in a given period
Expenditure on advertising - is all expenditure on advertising in an attempt to generate sales. Such
expenditure includes direct correspondence with potential customers, advertising in the media, etc.
The 'period' mentioned in the equation should be so selected as to adequately reflect changes in
revenue and expenditure patterns. This will depend on the nature of the product. The time for the
advertising campaign to take effect may also vary.
Attempts should be made to correlate advertising spend or promotional campaigns to sales turnover.
This will provide an understanding of the effectiveness of advertising (i.e. how much advertising
directly effects sales) and the time lag between advertising and increased sales. These are important
factors to understand when considering past and future advertising spend.
The customer satisfaction survey should also be used as a source of feedback regarding the
effectiveness of advertising. This data can be used to gain more qualitative understanding of the cause
and effect relationship between advertising and the purchasing decision. Where possible questions
should be designed to understand the difference between the expectations generated by advertising.
Analysis of advertising effectiveness should compare differences in effectiveness between different
target markets or customers. It should also consider the most effective mode of advertising for each
market sector. This analysis will allow advertising to be focused on the markets where it will be
most effective and in the mode which will be most effective.
Expenditure on advertising should be monitored by the generate demand process, as it will often form
a large proportion of the budget for that process. The same process should also monitor revenue
generated in order to monitor trends and identify patterns and correlation. Expenditure and revenue
data should be available from the accounting information system, but is likely to require further
analysis to provide the precise data required.
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Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Demand : Production (D:P) Ratio

The measure of Demand : Production Ratio assesses how easily the lead times demanded by
customers can be satisfied. The ratio compares the lead time that the customers' demand to that in
which the product or service can be made and delivered.
This is a critical measure which fundamentally affects the organisation's ability to meet demanded
delivery lead times. If the organisation can easily meet the required delivery lead times then there is
little need to hold stock. If, however, manufacturing lead times exceed acceptable delivery lead times
then the organisation will have to hold stock and will be forced to forecast future demand.
Although the measure refers to production lead time and is usually applied in the production
organisations, it is also possible to define the measure in a way that makes it appropriate to service
organisations.
demand lead time production lead time
Demanded Lead Time - is the lead time from customer order to delivery of the product as demanded
by the customer. Demanded lead time might be explicitly demanded by the customer, agreed between
customer and supplier, or related to an expectation in the market based on that offered by competitors.
Production Lead Time - is the total time from ordering the longest lead time material from suppliers
to delivery of the finished product. Although this is referred to as the production lead time, and the
measure is most often applied in production environments, it is possible to define production in a way
that is appropriate to the lead time required to deliver services from the acquisition of the longest
lead time materials or services.
If D/P > 1 then the production lead time is shorter than lead time demanded by customers. This
provides the organisation with some flexibility over the way it schedules its activities so that
efficiency can be improved. For instance, the production lead time for fabricating motherboard PCB
for PCs is typically five days. If the customers specify a lead time of six days, then the supplier plant
has the capacity to produce at D/P = 1.2, i.e. the plant is fulfilling the customer's demand on time and
there is the flexibility to alter the schedule by one day.
For D/P < 1 the production lead time is longer than lead time demanded by customers. Where this is
the case it is necessary to hold safety stocks to enable customer demanded lead times to be met. As a
result it is also necessary to forecast future demand. Ideally action should be taken to reduce
production lead times so that safety stocks can be eliminated and flexibility increased.
In some instances it may be possible to negotiate with the customer to extend the demanded lead time
in order to improve this ratio.
Analysis of the D:P ratio should compare products and services to identify where performance needs
to improve. It should also promote analysis of processes such as cycle times, scheduling and
procurement to identify where lead time reductions can be achieved.
The production or operations planning and control system should monitor all activities, identifying
when activities are planned and executed including when materials are required. The lead time for
purchased goods and services should be available from purchasing. Sales should provide details of
demanded lead time and details of actual orders and deliveries. It is important that all of these
processes are involved in review of this measure and agreement of the actions required to improve.
Prism Facet 1:
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Sub-Facet 3:
Skills / Labour Utilisation

It is important that optimum use is made of key skills that exist within the organisation. This is
particularly the case if there are key skills which provide competitive advantage or undertake
bottleneck operations, as failure to fully utilise these skills is likely to reduce the efficiency and
effectiveness of the business.
The measure assesses how well human resources are planned in order to maximise the utilisation of
skills and labour in general in order to satisfy demand for the organisation's products and services.
Such planning of human resources should be included in the capacity planning process when
scheduling activities.
% of time that labour / key skills are utilised
labour hours worked as % of total possible labour hours
Key skills - can be defined as those that are critical to the performance of the organisation. Such
skills might be shortage skills where their absence can stop activity of the organisation, or skills
which provide competitive advantage, the absence of which could affect the competitiveness of the
firm.
Utilised - skills that are utilised are those of which productive use is made. Consideration should be
given to the quality of work produced. Time should only be considered to be utilised if the output is
of sufficient quality.
Labour hours worked - total productive hours worked by all employees.
Total possible labour hours - total hours employees are available for work.
When assessing the utilisation of skills it must be considered that one employee might hold more than
one skill (multi-skilled), hence it is not possible to fully utilise all of the skills as one employee
cannot use more than one skill at a time.
Analysis of the measure should enable the causes of sub-optimal utilisation (e.g. time spent on
rework, waiting time for materials / equipment / tools, etc.) to be identified so that corrective action
can be taken.
CAUTION - When using the measure it is important to consider the demand for the organisation's
products and services. Whilst it is important to maximise utilisation of relevant skills when there is
sufficient demand, skills and labour should not be used if there is insufficient demand. Utilising
labour in order to maintain high utilisation will cause wasted effort and over production, resulting in
excess inventories, for example.

Provided there is sufficient demand for the output generated, the organisation should aim to increase
utilisation of skills and labour. Low levels of utilisation might indicate that headcount is too high or
too many employees are employed holding specific skills. This is an important consideration where
skills are expensive to employ.
Analysis of the measure should include analysis of the whole workforce, a part of the workforce such
as a department or section and a specific skill or skill set. This will allow identification of
differences in utilisation across different areas of the business.
It might be possible to collect the data for this measure from time sheets, if they are used.
Alternatively it might be necessary to use a separate data collection mechanism to record the
utilisation of specific skills.
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Prism Facet 3:
Skill Deployment
The measure of skills deployment assesses how quickly and easily skills can be made available at a
location or job when required.
The speed with which skills can be deployed to the location or job at which they are required will
have a considerable impact on the availability of labour and skills when required and significant
impact on the flexibility of the organisation. If a central pool of skills exists within an organisation it
is important to maximise their use by reducing the time required to redeploy them, increasing the
measure of skill / labour utilisation.
Similarly reducing the cost of deployment will have a significant impact on the efficiency with which
the labour force is used.
Quicker and cheaper redeployment of skills will allow an organisation to maintain a small pool of
labour and skills as they can be moved to the required location when required, rather than having to
maintain skills or labour in many locations or maintaining surplus skills and labour as backup.
The cost and time of deployment will be dependent on the size and physical distribution of the
organisation. Organisations with a large number of geographically diverse locations will find it more
difficult to re-deploy skills and labour quickly and cheaply.
Skill deployment is an important measure of the creation of a workforce that is mobile and flexible so
that they can be re-deployed to the location required to fulfil demand for the organisation's products
and services, responding to changes in the market. This assesses the capabilities of the workforce and
the way in which human resources are managed to encourage and facilitate mobility and flexibility.
This is an important measure for an organisation that has poor skills coverage, meaning that there are
few people holding specific key skills within the organisation, so it is more important to move those
skills to the places where they are required.
lead time required to re-deploy skills / labour when required
cost of re-deploying skills / labour
Skills - are specific competencies appropriate for a particular job. Skills are both manual and
cognitive in nature.
Labour - the workforce of the organisation. In the case of this measure labour refers to the whole
workforce not just those with specific skills.
Re-deploy - transfer from one place to another.

Lead time to re-deploy - is the time from the identification of a need for labour / skills to the time that
the labour / skills are available.
Cost of redeployment - is the cost of transferring labour from one location to another. Such costs will
include the cost of physically transferring employees and additional salary or bonus payments paid as
compensation for changes in location, including movement at short notice.
Analysis of this measure by skill or job type will allow understanding of the mobility of types of
worker. In addition measurement by department or section within a department will enable
understanding of variations in flexibility around an organisation. Analysis should also consider the
notice required to re-deploy employees. Redeployment at short notice implies poor planning as
labour and skills requirements have not been identified in advance.
The redeployment of labour is undertaken as part of the planning and management of human resources.
This process should collect data regarding the availability of labour and the time required for
redeployment. This data will enable calculation of this measure but will also help in the planning of
human resources to satisfy demand.
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Prism Facet 3:
Skills / Labour Availability

This measure assesses whether key skills and labour are available when they are required. It is a
measure of the organisation's ability to anticipate demand for specific skills and to fulfil that demand.
Clearly it is essential that labour and key skills are available when required in order to satisfy
demand. The measure assesses how well human resources are planned in order to ensure that the
organisation has the right skills and that the skills and labour are in the right place at the right time to
satisfy demand for the organisation's products and services. Such planning of human resources should
be included in the capacity planning process when scheduling activities. Hence this is an important
measure of the effectiveness of the planning processes.
It is most important to use this measure in relation to key skills, such as 'shortage' skills, where their
absence can constrain the activities of the organisation, or skills which provide competitive
advantage, the absence of which could affect the competitiveness of the firm.
Skills availability will be affected by the size of the workforce / skills base and the speed with which
the labour / skills can be deployed to the point at which they are required. In order to maximise
availability of labour and skills it is possible to maintain a large workforce, however this can lead to
inefficiency and under-utilised skills. Therefore it is important to consider headcount, labour cost and
utilisation measures in conjunction with this measure.
availability of skills / labour when and where required
mean time between occasions that labour / skills are unavailable
Skills - are specific competencies appropriate for a particular job. Skills can be either manual or
Labour - the workforce of the organisation. In the case of this measure labour refers to the whole
workforce not just those with specific skills.
It is most important to use this measure in relation to key skills, such as 'shortage' skills, where the
absence of the skill can constrain activities of the organisation, or skills which provide competitive
advantage, the absence of which could affect the competitiveness of the firm.
identification of the reasons for skills / labour being unavailable and hence action can be taken to
prevent it recurring. This might include recruitment, training or improved planning and scheduling of
activities.
Analysis should also include split by job type and department to analyse where the planning is most
effective and where improvement is required.
There is a need for a feedback mechanism to determine when skills and labour are not available and
to analyse the causes so that they can be reduced. This mechanism should include feedback from
operational areas to the planning human resource process.
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Prism Facet 2:
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Cost of Equipment Breakdowns

The cost of equipment breakdowns assesses the cost to the organisation of equipment being
unavailable when required.
The direct cost of equipment breakdowns includes the cost of repairing or replacing the equipment in
question. However there are also less direct costs which have significant implications. These costs
include lost sales or penalties incurred as a result of failure to satisfy demand and the loss of future
revenue from dissatisfied customers who choose alternative suppliers as a result.
In the case of bottleneck equipment there will also be knock on implications for downstream
activities. Breakdowns in bottleneck equipment will stop downstream activities reducing utilisation
and efficiency.
The cost of breakdowns are most significant in situations where rapid response to satisfy the
customer requirements is an important competitive priority and in high volume flow production
environments where any halt in production causes considerable reduction in output, repercussions in
the organisation and negative impact on customer satisfaction.
This measure should be linked to the measure of 'Infrastructure Availability'. The measure assesses
how well an organisation's equipment is maintained including the planning of maintenance activities
and the ability to identify and predict potential problems. The measure also provides an indication of
the age and condition of the equipment.
The reliability of equipment and cost of breakdown should be a consideration during the decision to
purchase and piece of equipment.
cost of equipment breakdown incurred in a given period
value of lost sales / penalties / lost customers due to breakdowns in a given period
Cost of equipment breakdown - is the cost incurred in repairing or replacing a piece of equipment that
has broken down. Consideration should also be given to the expenditure on labour and equipment
which is left idle as a result of downtime of upstream equipment.
Lost sales due to breakdowns - are the sales that are lost because of the failure to complete the
product on time as a result of equipment breakdown.
Penalties - are penalties imposed by customers because products have been delivered late as a result
of equipment breakdown.
Lost customers due to breakdowns - are customers who are lost because delivery failures have lead
them to choose alternative suppliers. This is related to the reputation of the organisation for reliability
and will be dependant on the availability of alternative suppliers.
The time taken to repair equipment that has broken down will have a considerable impact on
penalties, lost sales / customers and the impact on downstream activities.
This measure can be used to measure the cost of individual breakdowns, however it is most effective
when considered over a period of time as this will address the reliability of equipment which will
determine the frequency of breakdowns.
The data required to calculate this measure needs to be collected from a variety of sources. Data
regarding the cost of repairing equipment should be available from the maintenance department
responsible for repairing equipment. The finance department will be responsible for monitoring
investment in replacement equipment. The sales department should provide information on penalties
and lost sales which should be allocated to breakdowns. The sales department should also estimate
the value of lost sales. This should be undertaken as part of the causal analysis of lost accounts /
customers.
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Accuracy of Forward Provisioning

Forward provisioning is the identification and acquisition of materials, parts or other resources
required to satisfy demand for finished products or services, even though the actual orders have not
been made or specifications finalised at the point they need to be ordered.
The measurement of the accuracy of forward provisioning is most appropriate where organisations
have to commit to production before specific customer orders have been received or before the point
at which the product specification has been finalised. As such this measure is most appropriate where
demand lead time is longer than the total production lead time (i.e. D:P ratio of greater than 1). This
will occur where there is a requirement for materials, parts or other resources which take a long lead
time to acquire or produce.
The measure assesses how well the organisation predicts requirements for finished products and
hence the requirements for materials and parts to satisfy demand. As a result the measure should be
used with that of demand forecast accuracy which will determine the confidence with which the
organisation predicts future demand for its products and services. Accuracy of forward provisioning
measures whether the correct materials or parts have been ordered, whether they have been ordered
in sufficient time to ensure that they are available when required and whether they have been designed
to the appropriate specification (given the fact that the specification for the finished product may not
have been finalised when the order is placed).
The measure is also related to that of product standardisation. Increased standardisation will reduce
the risk of ordering parts or materials as it is likely that those materials and parts could be used on
other finished products.
Although the focus of this measure is on the forward provisioning of materials, parts or other
resources for production, it is possible to define the measure in a way that makes it appropriate to the
forward provisioning of materials and resources required to deliver services.
% of forward provisioned materials / parts / resources that are available when required
% of forward provisioned materials / parts / resources that are not required
% of forward provisioned materials / parts / resources that require rework
Forward provisioned materials / parts / resources - is the identification and acquisition of materials,
parts or other resources required to satisfy demand for finished products or services even though the
actual orders have not been made or specifications finalised. The unit of measure is any resource that
needs to be acquired to produce the product or service such as materials, parts, specific skills or
labour, etc. It is possible to define these units in a way which makes definition of the measure
appropriate to the measurement of services, as well as delivery of products.

Available when required - is the availability of materials, parts or other resources when required to
complete production of the finished product or delivery of the service to satisfy customer
requirements.
Forward provisioned materials / parts / resources that are not required - are those materials / parts /
resources that are ordered based on expected orders that are not realised, or for which the
specification is different to that expected.
Forward provisioned materials / parts / resources that require rework - are those materials / parts /
resources that need to be altered or reworked in order to match the requirements for the product once
the actual order is received and specification finalised.
Analysis of forward provisioning should identify the areas where most forward provisioning is
necessary and where accuracy is poorest. This will allow identification of causes of inaccurate
provisioning, so that provisioning accuracy can be improved. Where possible this should include
reduction of the need to forward provision. This might include changing the way in which products or
production systems are designed, lead time reduction or negotiation with customers to increase
customer lead times. This analysis will be similar to that of demand forecast accuracy.
The data for calculation of this measure will require feedback of availability of materials, parts and
resources at the point they are required. This feedback should be to the point at which forward
provisioning decisions are made to allow analysis of causes of poor performance and possible
improvement actions.
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Inventory Level / Stock Turns

The measurement of the level of inventory held within the organisation is an important measure which
directly relates to the financial performance and operations of organisations. Although financial
accounting statements report inventory as an asset, it is commonly understood that inventory levels
should be reduced in order to reduce costs incurred. These costs include the cost of investing in
inventory, opportunity costs of not being able to invest elsewhere, cost of holding inventory and cost
impact on operations.
Inventories are held throughout the organisation. Categories of inventory include finished goods, raw
materials, components and work in progress. Measurement of inventory levels assesses the quality of
the planning and control processes which establish the requirements for each category of inventory in
terms of: inventory value, supplier or production batch sizes, the most economic order quantities and
sensible quantities for control purposes when deciding on volumes to order or produce. These are
considered in the context of an overall objective of reducing inventory levels. The planning and
control processes measured include demand planning, scheduling, inventory control, materials
planning, shop floor control, etc.
When measuring and reducing inventory it is important to consider the availability of materials and
parts when required. Reduction of inventory can eliminate the safety net of buffer or safety stocks
which can prevent materials being available if planning is poor. As such the measure of safety stocks
should be considered with this measure.
Measurement of inventory includes measurement of the value of inventory held and of stock turns. The
value of inventory assesses the impact of inventory held on financial accounts and measures the
amount of investment tied up in inventory. Stock turns is a more appropriate measure to assess the
planning and control of inventories as it compares the inventory level to usage.
Measurement of inventory is appropriate to all manufacturing environments to ensure that excess or
unexpected stock is not accumulated. It will also be appropriate to service companies although it will
often be less important as many service firms hold less inventory.
The measure of finished goods inventory will be less significant in make to order environments as all
production should be allocated to customers and stay in stock for a short period, though it should still
be monitored to ensure that this is the case. Stocks may well build up if customers change their minds
at short notice. The measure is essential in build to stock organisations and should be used when
responding to customer requests / orders and master scheduling.
average value of inventory held over a given period
average value annual of inventory usage : average value of inventory

Stock turns (metric 2) - is the number of times inventory is used per year. This puts the level of
inventory into the context of the level of usage of the items in question.
Value of inventory - the traditional view of the cost or value of inventory includes the capital cost
(cost of capital and opportunity cost of other investments) and the handling cost (including
warehousing costs, space occupied wages of stock controllers, material handling costs, etc.) More
contemporary 'lean' views of inventory suggest the costs of inventory are greater including increased
defects and costs of defect detection (defects are harder to detect in large batches of inventory),
increased costs of control and material handling (including costs of ensuring inventory records are
accurate), space on the shop floor (not only costs of space but prevention of layout changes affecting
material handling and operations).
Value of inventory usage - is the value of the finished goods, raw materials, components and work in
progress that are used annually. This is used to compare the actual level of inventory of each of these
categories of inventory.
Analysis of inventory, and specifically stock turns, should include comparison of turns of different
parts, types of part, parts for specific products or parts in different areas of the business. This allows
identification of inventory that is being used slowly and should be reduced.
Pareto analysis of inventories allows prioritisation of which inventories should be eliminated. The
most valuable (A class) items should be the focus of inventory reduction activity. Little effort should
be placed on reduction and control of the lowest value (C class) items as there is little value is to be
gained. Techniques such as kanban systems should be implemented to ensure that these items are
available when required but consume as little control effort as possible.
Use of inventory measurement should include comparison of performance with other organisations in
order to identify where there are performance gaps which should be reduced. The stock turns metric
should be used for this comparison. Benchmarking of inventory control processes enables
organisations to improve performance by learning from other organisations.
All organisations should maintain inventory records in order to plan and manage the availability of
finished goods, raw materials, components and work in progress. The value of inventory should be
maintained within the accounting information system. Organisations should undertake stock taking or
cycle counting activities to ensure that inventory records are accurate. Accuracy of inventory records
should be measured in order to maintain and improve levels.
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Material and Parts Availability / Stock Outs / Inventory

The availability of materials and parts when required to make products and deliver services is a
crucial measure which will significantly affect the organisation's ability to deliver products and
services to the customer as and when required. As such it significantly affects delivery reliability,
delivery lead time and responsiveness. It also affects costs as, if materials are not available when
required, action is required to expedite them, penalties for late delivery might be incurred and
productivity will be lost.
Material availability can be maintained by holding excess inventory or safety stocks. Holding safety
stocks enables increased responsiveness so that customer requirements can be satisfied more
reliably. As a result, when using this measure consideration should also be given to the measure of
the 'level of inventory'. The measures should be used together to balance the need to ensure that
materials are available when required and the need to reduce inventory levels to improve efficiency
and reduce costs.
Measurement of material availability is often referred to as stock outs, which refers to the number of
occasions that materials are not available when required. Similarly the term inventory service level
specifically refers to material availability that is supplied from stock.
This measure focuses on the availability of materials, parts and components that are used to produce
finished products. This equates to the measure of delivery reliability for finished products which
measures whether they are delivered to the customer when required or demanded.
Material and parts availability measures how effective the planning of material requirements is in
ensuring the availability of parts when they are required. Over time the process of planning material
requirements should take account of poor performance by purchasing, suppliers and manufacturing
and build an understanding of actual rather than quoted performance.
Where relevant, the focus of the measure should be on the availability of key parts that are essential to
ensure that schedules and plans are met. This might include long lead time items on which the plan of
all other activities is based.
Measurement of materials and parts availability is most important in manufacturing organisations as
their availability when required is a precondition of being able to make a product. Although this
measure is usually focused on the availability of materials and parts for manufacturing operations
measurement is also appropriate to service organisations in ensuring that materials for delivery of
services are available when required.
% of occasions that purchased materials / parts are available when required
% of occasions that manufactured materials / parts are available when required
average number of stock outs in a given period

average elapsed time between stock outs
Inventory Service Level (% of occasions demand for materials, parts, finished products etc. can be
supplied from the inventory available)
Materials and parts - are all materials, parts, components and other items that are required to make a
product or required to deliver a service.
Purchased materials and parts - are materials and parts that are purchased from external suppliers.
Manufactured materials and parts - are those manufactured in one part of the organisation and used in
another part.
Stock outs - are occasions that stock of materials and parts is not available when required.
Inventory Service Level - is the recognised term for measurement of the frequency with which
requirements for materials, parts and finished products can be supplied from inventory that is held.
This measure is usually used in make to stock environments, or for parts for which safety stock is
held.
It is important that analysis of material and part availability identifies the causes of incidents where
materials and parts are not available when required. Causes include changes in customer demand,
changes in schedules (due to reasons such as shifting priorities), poor supplier performance, poor
manufacturing performance and inaccurate planning parameters (e.g. inaccurate inventory records,
bills of materials, etc.). Analysis should attempt to identify trends in these causes so that material
requirements can be determined based on actual circumstance (e.g. actual supplier performance)
rather than the intended or quoted situation. Causal analysis should also prompt action to identify and
eliminate the root causes of stock outs / non availability of materials and parts.
When analysing the availability of materials and parts, consideration should be given to changes in
requirements, such as those caused by changes in customer demand. If customer demand changes it is
likely that materials and parts will only be available if safety stock is maintained. Although the
planning of material requirements process should attempt to predict where safety stocks are required,
it will not always be possible to predict changes in customer demand that are made at short notice.
Data collection - the availability of materials and parts will be identified when they are required for
use. There should be a mechanism to collect data regarding overall availability at the shop floor or in
the stores, as appropriate. There should be feedback to the planning of material requirements process
which should analyse and act on the data collected.
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Capacity Plan Accuracy

The accuracy with which capacity requirements are predicted will have a significant effect on the
availability of capacity when required. This is an important measure if plans and schedules are to be
executed as and when required in order to satisfy customer requirements.
The capacity plan accuracy measure assesses whether the capacity that is actually required is that
which is predicted in the capacity plan associated with the scheduled work.
Capacity plan accuracy is a key determinant of 'Capacity Availability', as a result the two measures
should be used closely together. Where capacity plans are accurate, but capacity is not available
when required, the short fall is attributable to the failure to execute capacity actions in sufficient time.
% of capacity plans that are 100 % accurate
average planned resources required : Average actual resources required
Capacity plans - are plans of the requirements of capacity to satisfy production schedules or the need
for resources to deliver services to the customer when required.
Actual resources - are the actual resources that are required to satisfy production schedules or the
need of resources to deliver services to the customer when required.
When using this measure it is important that an appropriate unit of analysis is used. The unit should be
that used to plan capacity and might include the number of finished products or units, consumption of
a specific material, or man hours of a specific skill.
Analysis of capacity plan accuracy should include causal analysis of inaccuracies. Causes of
inaccuracies might include inaccurate demand forecasts, changes in customer requirements or a lack
of understanding of capacity requirements for products or services. In each case the capacity planning
process should analyse the frequency with which they occur in an attempt to identify trends, so that if
possible future occurrences can be predicted.
Data collection for this measure should include feedback from the shop floor of actual capacity
requirements and comparison to these requirements to those planned.
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Capacity Availability
The capacity availability measure assesses whether there is sufficient capacity available to fulfil
orders. This is a measure of how well the business predicts future requirements and plans its
operations and capacity actions to satisfy them. It is important that capacity be made available when
required to ensure that plans and schedules can be executed as and when required in order to satisfy
Assessment of capacity availability can be applied at two levels:
1. In the long term capacity availability assesses how well the organisation predicts long-term
market trends and future demand, and plans the resources that will be required to satisfy them. At
this level capacity planning is concerned with investment in infrastructure to satisfy long-term
requirements and strategic plans.
2. In the short term capacity planning is concerned with planning and scheduling of activities.
Capacity planning at this level is more concerned with identifying the capacity and resource
requirements of the products and services that the customer demands and scheduling existing
activities so that existing capacity and resources are used effectively and schedules can be
achieved.
Capacity availability can be maintained by investing in excess or spare capacity. This ensures that
capacity will always be available when required, but ties up capital in excess capacity and can result
in inefficient capacity utilisation. As a result this measure should be used in conjunction with that of
'key resource utilisation'. The measure should be balanced to ensure that capacity and resources are
available when required, but that this is achieved with the efficient use of resources.
% of occasions that capacity / resources are available when required
% of occasions that critical capacity / resources are available when required
Capacity / resources - are items that are required to execute operations. They refer to items of
equipment required to manufacture products or enable the delivery of products and services.
Critical capacity / resources - are items of capacity or resources that are critical to the achievement
of plans and schedules or to the competitiveness of the organisation. Most notably they refer to
bottleneck machines, where lack of availability will stop operations, thereby reducing the reliability
with which the product or service can be delivered to the customer and the productivity of the entire
organisation.
When using this measure it is important that an appropriate unit of analysis is used. The unit should be
that used to plan capacity and might include the output of finished products, man hours of a specific
skill or consumption of a specific materials or parts.
Focus on the measure should be on the availability of key resources or pieces of equipment. These
are the resources or capacity that are the key constraints on operations (e.g. bottleneck machines). If
key resources are not available when required the impact on the organisation will be significant. The
organisation will not be able to meet customer requirements for products and services and activities
elsewhere in the organisation will be stopped, which in turn will adversely affect productivity.
Analysis of capacity / resource availability should include causal analysis of instances where
capacity is not available. Causes might include inaccurate capacity plans, inaccurate demand
forecasts, changes in customer requirements, a lack of understanding of capacity requirements for
products or services, or equipment breakdowns. In each case the capacity planning process should
analyse the frequency with which each root cause occurs in an attempt to identify trends, so that if
possible future occurrences can be predicted.
Use of this measure should include feedback about availability of capacity and resources to the
capacity / resource planning process. This should enable the planning process to be improved.
Data collection for this measure should include feedback from the shop floor detailing actual capacity
requirements and a comparison of these requirements with those that were planned or predicted.
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Plan / Schedule Adherence

Plan or schedule adherence measures whether organisations deliver products or services as
originally planned.
Schedule adherence measures the effectiveness with which the business plans its operations in order
to ensure that products and services are completed and delivered when required.
The level of schedule adherence will be determined by the availability of the resources required to
make and deliver the products and services concerned. The resources required include equipment
(capacity), materials, parts and labour. As a result the adherence of individual schedules will be
affected by the performance of numerous processes within the organisation, as well as the
performance of other stakeholders, such as employees and suppliers.
Using the measure over a long period of time assesses how well the planning process monitors and
plans for fluctuations in the performance of the processes and stakeholders involved and the
availability of the necessary resources.
The measure of plan or schedule adherence is often used in organisations as a surrogate measure of
delivery reliability or on time delivery. Care must be taken when using the measure in this way as
schedules do not always reflect customer requirements, hence schedules can be adhered to without
customer requirements being satisfied. Similarly, where the schedule does not include delivery of the
product to the customer, a product could be completed to schedule but remain in finished good
inventory without being delivered to the customer. It is important that schedules and customer
requirements are closely aligned.
This measure is most appropriate in build to stock environments where customer orders are not
received until production is complete.
% of orders that are completed on the date / time stated on the plan / schedule
Completed - refers to when the finished product is complete and available for delivery to, or
collection by, the customer. When using the measure care must be taken to ensure that the lead time to
deliver the finished product does not result in late delivery.
Plan / schedule - is the plan by which operations of the organisation are planned, detailing when all
activities are undertaken and products completed.
Analysis of the measure should identify the root causes of failure to adhere to schedules and plans.
Action should be undertaken to ensure that these root causes are eliminated so that plans and
schedules are not missed for the same reasons again. Equally importantly the reasons should be fed
back to the planning process so that the root causes can be considered when making future plans.
The size of the 'time bucket' in which the schedule is planned will have a significant impact on the
schedule adherence performance. Time buckets are the time period in which plans and schedules are
planned. For example monthly time buckets mean that schedule defines the number of products that
are to be produced in a month. Large time buckets (e.g. one month) do not provide precise delivery
dates and allow considerable flexibility as to when specific products are completed. Although this
enables good schedule adherence, it does not necessarily facilitate the completion of products on the
date required by the customer.
Data for this measure should be collected as part of the operational planning and control system
which monitors activities within operational areas of the organisation. This should record when
products are completed and compare that to the date specified in the original plan or schedule.
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Demand Forecast Accuracy

Demand forecasts are predictions of future demands on which the planning of future operations is
often based. The accuracy of demand forecasts is a crucial measure as it will determine whether or
not the plans on which forecasts are based are accurate. The level of accuracy should be considered
when making plans based on demand forecasts to ensure that their reliability is considered. Analysis
of this measure over time will provide an understanding of normal accuracy tolerances that should be
built into future plans.
Demand forecasts are most important where commitment to production of service delivery is
necessary before actual orders are received. This occurs when demanded lead time is greater than the
lead time required to deliver the product or service (see 'Demand : Production (D:P) ratio').
Demand forecast accuracy is most valuable as a measure when the actual internal production lead
time is greater than lead time demanded by customer. It is, however, also important when planning the
purchase of long lead time materials and parts. As a result the accuracy of demand forecasts has
significant implications for the level of inventory at all levels of the organisation. When organisations
commit to production or the purchase of long lead time parts based on forecasts, additional inventory
will be built up if the forecasts are inaccurate and parts are not required. In addition, safety stocks
will often have to be maintained in order to allow for inaccuracies and variations.
Even when the total 'production' lead time is within the customer demanded lead time, demand
forecasts are used to plan longer term strategies, such as infrastructure investment decisions. Hence
the accuracy of forecasts should still be considered.
Although demand forecast accuracy is measured in order to improve accuracy, it must be accepted
that forecasts will never be 100% accurate. As a result, organisations should always attempt to
eliminate the need to forecast by reducing procurement and production lead times and by attempting to
increase the lead time demanded by customers.
% of demand forecasts that are 100 % accurate
actual units demanded as % of units forecast
Demand forecasts - are predictions of future demands on which the planning of future operations is
often based.
Actual units demanded - is the number of units of a given product that are sold. This will be easily
identified where demand is less than output. If demand is greater than output an estimate must be made
of the number of sales that are lost should be used to determine actual demand.
Causal analysis of changes in demand that result in inaccurate forecasts should allow the organisation
to test the assumptions on which forecasts are based. This will enable future forecasts to be
improved. The documentation of the assumptions where possible will aid this review process.
Analysis of the measure should include comparison of accuracy for individual items, product groups,
customers and different markets. The characteristics of the markets and the demand for different
products will mean that fluctuations in demand will differ.
Consideration should be given to the differences in accuracy over different time periods. The longer
the time period over which demand is forecast, the less likely it is going to be accurate.
Actual demand will be the orders that are received by sales order processing in the given period.
This should be fed back to the demand forecasting process for comparison with the original forecast.
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Schedule Stability
The stability of plans and schedules is important to consider as the more stable plans are the more
controlled operations will be. Stable plans allow all activities to be executed as planned eliminating
the need for fire fighting and expediting to achieve changing requirements. Instability in the short term
will prevent schedules from being achieved and will therefore affect delivery reliability.
This measure is particularly relevant in volatile environments where there are frequent to changes
plans and schedules. Measurement and analysis enable understanding of changes so that they can be
accommodated and where possible root causes can be identified and eliminated.
The importance of stable plans is exacerbated in the short term by the impact on suppliers and
internal processes that supply the planned or scheduled operations. If plans fluctuate, orders for
materials and parts become inappropriate or obsolete. This will result in rush orders for new
materials and parts and cancellation of existing orders or the build of inventory that is not required.
The stability of internal plans and schedules will determine the stability of plans and schedules that
are forwarded to suppliers. The measure is related to the measure of 'Future Visibility given to
Suppliers'.
In the longer term stable schedules allow accurate planning of future requirements and planning of
operations to make most efficient and effective use of resources and facilities.
average number of changes to schedule within 'frozen zone'
Plan / schedule - is the plan by which operations of the organisation are planned, detailing when all
activities are undertaken and products completed.
Frozen zones - are time periods over which plans should not be changed as changes will prevent
schedules being achieved on time.
Changes - include changes to scheduled due dates or changes to the mix of products scheduled.
There should be causal analysis of changes in schedules. In particular consideration should be given
to those caused by changes in demand and those caused by incorrect scheduling. Reasons for
incorrect scheduling should be identified and eliminated where possible. Similarly the causes of
changes in demand should be analysed to see if they can be pre-empted in future. Reduction of lead
times and hence frozen zones will also reduce the number of changes to schedules.
Analysis of this measure should reflect the degree to which schedules are fixed at various time
horizons. It is common to allow tentative long-term plans to vary within agreed tolerances.
Assessment of the stability of schedules should be the responsibility of business or production
planners in liaison with sales in the case of changes caused by demand changes. The planners should
be responsible for conducting the measurement, analysing the data and following up with those who
are most affected by the changes - e.g. suppliers.
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Safety Stock Reduction

Safety stocks are stocks of finished goods, raw materials, work in progress and components in excess
of planned usage that are deliberately held to allow for unexpected requirements.
Although financial accounting statements report inventory as an asset, it is commonly understood that
inventory levels should be reduced in order to reduce costs incurred. These costs include the cost of
investing in inventory, opportunity costs of not being able to invest elsewhere, cost of holding
inventory and cost impact on operations. As a result organisations should seek to reduce safety stock
levels.
However safety stock should be maintained in strategically important places in order to protect the
organisation against changes in circumstances or receipt of customer orders which are to be satisfied
at short notice. Holding safety stock is appropriate if it will enable responsiveness to changing
circumstances. If safety stock is to be held to enable responsiveness then it is important that processes
are analysed to ensure that they are held in the appropriate place and at the appropriate level. It is
often appropriate to hold inventory in front of bottleneck machines or operations to ensure that they
remain operational. The holding of safety stock will be necessary where production lead time
exceeds the lead time demanded by the customer (see the measure of D:P ratio).
There are many uncertainties that result in the need to hold safety stocks, of which changes in
customer demand at short notice is one of the least avoidable. Others include unreliable supply from
suppliers or internal processes, unreliable inventory control, unreliable materials planning, etc. In
each of these cases the root causes should be identified and action should be taken to eliminate them
if possible.
% reduction in the value of safety stock in a given period
% reduction of safety stock of materials or parts which are not strategically critical
Safety stocks - are stocks of finished goods, raw materials, work in progress and components in
excess of planned usage that are deliberately held to allow for unexpected requirements.
Safety stock which is not strategically critical - is safety stock that is held 'just in case' something
unexpected happens.
It is important that there is analysis of the reasons that safety stock is held. Analysis of these reasons
should identify where safety stock has to be held as a result of poor planning or poor inventory
control. These root causes should then be eliminated if possible.
Analysis should also monitor the level of safety stock held in each location and the usage of it. This
will identify whether the right level of safety stock is being held, or whether reductions can be made.
The measure of stock outs should be used when considering safety stocks. If the same item is subject
to stock outs on repeated occasions, safety stocks might be necessary if no specific root cause for the
stock outs can be identified.
The inventory control process should record inventory levels and usage to identify the data for
calculation of this measure.
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Number of Suppliers
In many organisations reduction in the supplier base is a key measure of supplier development
activity. Reduction in the supplier base increases control that can be maintained over the supply of
goods and services to the organisation as more attention can be focused on controlling each supplier
and developing closer working relations with them.
Reducing the number of suppliers eases inbound logistics and increases the value of business with the
remaining suppliers, which in turn increases their commitment to the organisation. As a result
measurement of the number of suppliers is linked to supplier satisfaction measures such as 'Level of
Business between Customer and Supplier'.
This measure should be used where a reduction in the supplier base is required in order to increase
business with good suppliers at the expense of poor suppliers. However there is a need to assess the
trade-off between increasing commitment and increasing risk, by reducing the number of alternative
suppliers.
% reduction in suppliers in a given period
number of suppliers per work cell
Suppliers - organisations that supply goods and / or services to the organisation.
The given period for the measure should be defined based on the level of supplier development
activity which will determine the importance of this measure and rate at which the number of
suppliers is reduced.
The manufacturing of a product or service can be thought of as consisting of flow of materials across
work cells. In measuring the number of suppliers, one might treat a work cell as a process consisting
of inputs and outputs. For illustration, consider the case of printed circuits board manufacturing. In the
drilling section (work cell), the inputs would be laminates for drilling and the process is performed
by drilling machines which use drill bits. So, to take account of the number of suppliers for this
section of the manufacturing plant, one would measure the number of suppliers for laminates (raw
material) and the number of suppliers for drill bits (process).
The number of suppliers for bought-in parts can be readily obtained from the buyer in most cases.
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Asset Utilisation / Critical Resource Utilisation

Measurement of asset or critical resource utilisation is important in order to maximise the
contribution of machinery to the achievement of schedules and plans.
Asset Utilisation is a concept that was developed by the Japanese to give a unitless measure so that
operations could be ranked or compared. The measure can be easily understood and drilled down to
determine areas for improvement or the causes of problems. It aggregates some of the most common
operational measures into an index that allows executives to review performance more efficiently.
By multiplying together the performance of operational measures, challenging targets for utilisation
are set. (i.e. World Class performance of 85% = .95 x .95 x .95 x .99). If tracked properly it is easy
to see improvement trends and determine where corrective action is required.
Asset utilisation (or Overall Machine Effectiveness) should only be applied to bottleneck machines,
i.e. those which are a constraint on output. Maximising utilisation of other machines will result in
production of output for which there is no demand, wasting resources and building up inventory. It is
essential, however, that utilisation of bottleneck machines is maximised.
Measurement of asset utilisation should be considered when planning capacity and scheduling
operations to provide an understanding of expected machine output.
Although most applicable to machines in a manufacturing environment, it is possible to define this
measure in a way that makes it appropriate to other resources and in other scenarios.
Asset utilisation = Availability x Duty Cycle x Efficiency x Quality (of bottleneck / critical
resources)
The dimensions of assets utilisation are calculated as follows:
Availability = (Total time - Downtime) Total time
Total time = 7 days x 24 hours = 168 hours
Downtime includes scheduled maintenance (PMS), breakdowns - unscheduled maintenance/line
stops, lunch breaks, etc.
Duty Cycle = Actual Run Time (Actual Run Time + Set Up Time).
Efficiency = Units Produced Total Units that could have been produced (Run Speed / Design
speed).
Quality = % Production Units that are Defect Free.
Analysis of asset utilisation should look at each of the contributing performance criteria (Availability,
Duty Cycle, Efficiency and Quality) in turn to identify variations in performance over time. This
analysis should identify the root causes of poor performance and highlight where improvement effort
is required.
Although asset utilisation provides a comparable performance measure, comparing operations
between organisation is not possible because of the large number of variables that cause performance
differentials (location, age of assets, customer requirements, supplier quality, etc.).
The operational control system should collect data regarding the outputs of machines especially
critical or bottleneck machines.
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Reduction of Operating Costs

This is an important measure as it helps to monitor one of the key performance objectives of the
operations function. Reduction of operating costs is one of the five performance objectives that an
operations function should be concerned with (together with quality, speed, dependability and
flexibility of operations).
Cost reduction is most important where a cost leadership strategy is being followed, however
reducing costs will always be important to improve organisations efficiency and profitability.
Whenever reducing costs, consideration should be given to its impact on the other dimensions of
performance (quality, speed, dependability and flexibility of operations).
Organisations can gain a competitive advantage through cost reduction as it enables price reductions
to be passed on to the customer.
Significance of cost reduction to an organisation may be determined by where the product lies in the
product cycle. It is generally accepted that a product passes through four stages during its life cycle:
introduction, growth, maturity and decline. Cost is most important during the maturity and decline
stages. During the introduction stage, where a product is new, many changes to product design may be
necessary requiring flexibility of operations. During growth stage, it is crucial to be better than the
competition so that market can be gained. At this stage quality and dependability are crucial. When
product is mature, staying in business is the most important issue. At this stage, products will be
standardised. Competition will most probably be on price. Therefore, efficiency of operations is
crucial. In the decline stage, many competitors may leave the market as it shrinks and price
competition increases. The need to maintain margins makes cost the crucial issue at this stage.
Operating costs will also be affected by quality, speed, dependability and flexibility of operations
since they are all cost related.
% reduction in operating costs in a given period
Operating costs - are all of the cost incurred during the organisation's normal operations.
Cost monitoring and review is normally undertaken monthly. However this should be altered if
appropriate in given circumstances. For instance it should be shortened to ensure that rapidly
changing trends are identified.
Analysis of costs and cost reductions should identify where and how costs have been reduced. Where
possible cost reduction that can be attributed to specific initiatives should also be identified.
Accounting information systems will provide the data for this measure
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Securities Required
This measure assess the level of security the organisation must place in order to obtain capital from
investors. The measure indicates how easily the organisation can obtain capital from potential
investors.
Investors can contribute to the organisation by reducing the amount of securities they demand in order
to invest. This makes it easier for the organisation to obtain capital.
The amount of securities required will be determined by the investors' confidence in the operations
and future profitability of the organisation and hence their confidence of receiving repayment of loans.
Investors' confidence in the organisation and its future performance (i.e. investor satisfaction) will be
determined by recent performance of the organisation, the perceived reliability of predictions of
future performance and investors' confidence in the management of the organisation. As a result there
are close and important links between this measure and those of 'Investors' Perceptions of
Management' and 'Performance Against Promises'. These measures should be considered together.
Feedback from investors should be used to identify shortcomings in performance of the other two
measures and identify ways in which they can be improved.
The drivers of the cost and availability of capital will be the same as those of the level of securities
required. As a result these three measures should be considered together.
The level of securities that an investor will demand will be based on their confidence that loans will
be repaid. Therefore, the measure provides an indication of the investors' confidence that loans will
be repaid based on their perception of the future profitability of the business.
average value of securities required to obtain a loan
security as % of loan value
Securities - are assets of the business that are used to secure a loan. This means that the investor will
take possession of the asset should the organisation default on repayment of the loan.
Loan value - is the full value of the debt loaned by the investor.
Analysis of securities required should include comparison of the securities required from different
institutions or types of institution. This will give an indication of the most appealing sources of
investment capital.
Analysis should also consider loans of different sizes separately as smaller loans are less likely to
require security.
The data required by this measure should be available from the financial accounting systems and the
terms and conditions of loans taken out.
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Cost of Insurance
Insurance against unexpected eventualities is important to safeguard organisations against heavy
financial penalties or costs. The financial burden of insurance premiums can be substantial so it is
important that costs are measured to ensure that they can be controlled. Organisations must monitor
the cost of insurance against the benefits that are received. A measure of the costs will give an
indication of the pros and cons of risk minimisation (or elimination) efforts, against the cost of paying
for insurance.
Organisations must take decisions regarding the policies they take out based on the level of risk and
the cost of liability that will be incurred if the policies are not taken out. To make such decisions
effectively it is important to measure both the costs of insurance and the liabilities incurred. This is
appropriate both where losses are insured and where there is no insurance and the entire liability
falls on the organisation. Comparison of losses and premiums allows the organisation to test the
assumptions underpinning their decisions regarding insurance.
Although risk minimisation is both possible and desirable, total elimination of risk will be
impossible. Therefore, it will not be possible to totally eliminate the necessity for taking insurance.
However, risk minimisation will bring not only direct financial benefits, due to reduced insurance
premiums, but also indirect benefits in the form of improved public image of the company and
increased employee satisfaction.
total cost of insurance as % of operating costs
total cost of insurance premiums as a % of value of loss or damage
difference between the cost of minimising risks and the saving on reduced insurance charge
% reduction in insurance premium in a given period
Insurance - is payment of a premium in return for which the insurer pays compensation for certain
eventualities.
Premium - is the regular payment made in return for an insurance policy. Insurers calculate the
premium based on their perception of the risk. As such the organisation must consider whether the
insurer's perception matches their own and hence whether the premium is a realistic estimation of the
likely value of claims against the policy.
Value of loss or damage - is the cost of losses incurred by the organisation as a result of unexpected
circumstances, whether covered by an insurance policy or not. There are many risks against which
insurance can be obtained. Common types include coverage for: (i) damage to property; (ii) injury or
death to employees and (iii) claims from third parties, including customers, the general public and the
environment.
Insurance policies will usually be for a duration of a year for which the premium will be fixed. As
such consideration should be given to trends in premiums over a number of years in comparison to
changes in risk.
Each of the metrics indicate trends in expenditure on insurance which should be considered over time
to identify changes in the level of risk and continue to verify decisions regarding insurance policies
taken out. They will also indicate whether risk minimisation strategies, such as safety programmes,
are bringing financial returns in comparison to the costs associated with them.
Use of the measure should include analysis by the different types of policy taken out, including those
identified above. This allows analysis of expenditure on insurance and whether the right policies are
being taken out and the right risks insured against. Analysis should also include consideration of the
amount of losses which were uninsured, for which total liability falls upon the organisation.
Analysis should also consider premiums and claims incurred by specific areas of the business to
identify where the greatest risks are.
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Accuracy of Planning Parameters

The accuracy of the planning parameters is a fundamental factor affecting the accuracy and
effectiveness of planning throughout the organisation.
Planning parameters represent the assumptions that underpin planning decisions. As such, if plans are
made on the basis of inaccurate data or planning parameters the plans themselves will inevitably be
inaccurate.
As a result it is essential that there is review of the accuracy of planning parameters to ensure that
future planning is improved in the future.
The review of the accuracy of planning parameters is undertaken by analysing the reasons for
variations between planned and actual performance.
% of planning parameters that are 100% accurate
Planning parameters - are the assumptions that underpin planning decisions. All planning parameters
or assumptions should be documented so that they can be reviewed.
General assumptions that underpin business and operational plans should be reviewed by analysing
the causes of differences between actual and planned performance. This analysis should identify
where assumptions were incorrect and how future plans can be improved.
In addition to general planning assumptions, more precisely defined parameters are contained within
computerised planning systems, such as MRP and ERP systems. It is also important that these
planning parameters are reviewed to measure and improve their accuracy.
In order to measure the accuracy of planning parameters it is necessary to implement a feedback
process that identifies errors in planning parameters. This process should identify where problems
are caused by having inaccurate planning parameters. These problems are only likely to be identified
when they are manifest at the point at which actions are executed. For example if inaccuracies exist in
the material planning process errors will be highlighted when materials are not available for use
when required. Analyses of the causes should then identify whether data such as inventory records,
the bill of materials, supplier delivery lead times is accurate. It is this analysis and feedback to the
planning process which will allow measurement of planning parameter accuracy.
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Skills Coverage
Skills coverage measures the average number of people within the organisation that have each skill.
This measures whether the organisation has sufficient flexibility to cope with changes in demand or
absence of employees with key skills. It is important that an organisation has sufficient coverage of
important skills, such as those of bottleneck operations or those which provide competitive
advantage. It is important that these skills are always available when required.
The planning of human resources should identify the appropriate skills and ensure that there is
sufficient coverage of these skills. As a result this measure should be used in conjunction with the
skills inventory / gap analysis to determine future training and recruitment activities.
CAUTION
It is possible to increase skills coverage by increasing headcount so that there is surplus labour to
cover unexpected eventualities. Although it might be necessary to maintain surplus key strategically
important skills, this will usually result in inefficient use of the workforce. As a result, when using
this measure, it is important to also consider the measures of headcount and labour / skills utilisation.
This measure is closely related to that of multi-skilling. Skills coverage focuses on the organisational
level, measuring whether there are sufficient skills within the organisation. Multi-skilling focuses on
the individual, assessing how many different skills individuals within the organisation have.
average number of employees per identified skill
average number of employees holding each key skill
% of jobs for which insufficient skills cover is available
Skills - are specific competencies appropriate for a particular job or set of jobs. Skills are both
manual and cognitive in nature.
skills might be shortage skills where the absence of the skill can stop an activity of the organisation,
or skills which provide competitive advantage, the absence of which could affect the competitiveness
of the firm.
Use of this measure should be focused on specific, key skills that are important to the organisation.
Using the measure as a global indicator across the organisation can also provide an indication of the
overall flexibility of the organisation.
Data for such a measure should be kept as part of the training plan for the management of the human
resources. In addition such information is often maintained at the point at which skills are used, such
as the shop floor. Boards are often maintained in the work area which list the skills required and the
employees that have those skills. This should be linked to the skills inventory which monitors
employees' competence at specific skills.
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Headcount / Staff Costs

Head count and staff costs give an indication of the efficiency of the organisation and measure the
number of employees required to generate a certain level of sales and profit. Comparison of
headcount with sales and profit provides an appropriate benchmark to compare efficiency with other
organisations. Similarly staff costs reflect the efficiency of the organisation, but also provides an
indication of how expensive the labour employed within the organisation is.
Maintaining control of the employment costs and the size of the workforce is always important. In
large organisations it is important that appropriate analysis of the measure is undertaken so that
control can be maintained at the appropriate organisational level.
The measure indicates how well the human resources within the organisation are planned in order to
make the most efficient and effective use of employees.
Consideration should also be given to the measure of 'Training Spend' which can be considered as an
employment cost and an employment investment.
Organisations should consider their employment costs per employee in relation to the make up of the
workforce. An organisation with a highly skilled workforce, or many employees with long service
histories, is likely to have higher staff costs.
number of employees employed by the organisation
employment costs as % of sales turnover / profit
sales turnover / profit per employee
employment costs per employee
employment costs as % of operating costs
Employment costs - the costs of employing employees. Employment costs include salaries and
additional costs such as social security costs, taxes, pensions and bonuses.
Profit - is sales turnover less expenditure.
There are numerous ways in which this measure can be analysed. It is important that the appropriate
level of analysis is undertaken to maintain control of headcount and costs. As such it is important that
this measure is reported to the appropriate people within the organisation who control recruitment in
certain areas of the organisation.
Analysis of the measure should be by: job type; organisational level; employment / contract type;
department or section.
When benchmarking performance of this measure against other organisations it is important to
consider whether the activities of the two business units are similar. For example, are the levels of
outsourcing the same. Similarly it is important to consider whether levels of accountability or
responsibility between jobs is similar.
The analysis should include use of each of the defined metrics at each level in the organisation to
indicate the efficiency of each unit of analysis and the return they generate. Analysis of the measure
should also consider changes over time in order to identify trends and causes. This should include
consideration of seasonal variations in headcount and costs reflecting variations in product or service
demand.
The employment costs will be dependent on the market circumstances. If there is a lot of surplus
labour in the market or in a specific region, employment costs per employee are likely to be lower.
Similarly highly skilled employees are likely to be in higher demand and shorter supply and hence the
cost of labour is likely to be higher.
The data required for this measure should be collected during preparation of financial reports and
statutory accounts, although collection and analysis of data should be undertaken at departmental or
lower organisational level.
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Frequency of Skills Audits

The frequency with which skills audits are undertaken is a measure of the effectiveness of the manage
human resources process and reflects changes in the capabilities of the organisation's employees.
It is important that the organisation monitors the skills that are available and are being developed by
the workforce. A full and accurate understanding of skills availability enables the maximum
advantage to be taken of the resources that are available. As a result, increasing the frequency of
audits will help improve the accuracy and understanding of skills availability, however this has to be
weighed against the cost of undertaking an audit. This is a particular consideration in large
organisations where audits will be more costly, however audits may be more necessary as it is more
difficult for large organisations to maintain an accurate centralised understanding of the availability
of skills in diverse locations.
skills available within the organisation. The skills available will be affected by the level of
recruitment, the level of training that is provided and the amount of on the job learning that takes
place.
Maintaining a centralised understanding of the skills that are available throughout the organisation
allows the transfer of labour between jobs and locations to be planned to maximise utilisation of
labour across the organisation.
Skills audits are an important part of undertaking a skills inventory and identifying the skills gaps that
must be closed in order to improve the effectiveness and competitiveness of the organisation.
However ultimately skills audits should become an obsolete process that is replaced by a continuous
update of the organisation's skills inventory (e.g. through individual performance reviews).
number of skills audits undertaken in a given period
Skills audit - is a review of all of the skills available within the organisation or part of it.
The time period for this measure should reflect the frequency of audits. This is determined by the
frequency with which the skills within the organisation change. This frequency will be affected by the
level of recruitment, the level of training that is provided and the amount of on the job learning that
takes place.
them to maintain an accurate understanding of the current skill level. Larger organisations also have
considerable benefits to gain from synergy by transferring labour and skills between jobs or
locations.
The skills audit will be undertaken by the personnel department in conjunction with all members of
the organisation. Therefore personnel should collect the data for this measure.
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Speed of Skill Development

This measure assesses the speed with which skills can be developed once a gap or need for a skill
has been identified. This is an important determinant of the availability of skills when required. This
is a measure of the efficiency and effectiveness of the training process and the training capability of
the organisation.
This will be an important measure to consider when planning human resource requirements as it will
determine when new skills will be available and hence when specific activities can be undertaken.
This is an important measure for organisations where skills requirements change frequently requiring
new and updated skills to be developed frequently and quickly. Where the organisation does not have
the ability to develop skills quickly it may be necessary to recruit employees with the appropriate
skills instead.
The speed of skills development will also vary between in-house and outsourced training. If the
speed of skill development is very important to the organisation, the difference between in-house and
outsourced development speed will be an important factor in the decision of how training will be
delivered. Cost of training will also be a consideration when using this measure - it may be possible
to increase the speed of skill development by increasing payment for it.
This measure should be linked to that of 'Skills Inventory' as skill development is key to closing skills
gaps.
average lead time to develop skills that are required
average lead time to close skills gaps
Lead time to develop skills - is the time from the identification of a need for skills to the time that the
skills are available.
Develop skills - is the process of providing existing employees with the skills required to undertake
necessary tasks in order to satisfy demand for the organisations products or services. Skill
development will usually involve training which might be off site or on the job training. An
alternative to developing the appropriate skills is to recruit new personnel with the required skills.
Skills Gaps - are required skills which are not available within the organisation.
Analysis of this measure over time can be difficult as it is not always possible to directly compare
different types of training or skill development or modes of skill development. Types of skill
development should be considered together to enhance comparability.
This measure will vary considerably depending on the type of skill that is being developed and
analysis of the measure should reflect that. Complex and intricate skills are likely to take longer to
develop. As a result, analysis of this measure should include consideration of the type of skill being
developed.
Analysis should also include consideration of the mode of skill development. This will include the
difference between in-house and outsourced speed, whether skills are developed on the job and
comparison of school versus computer-based learning.
When using the measure it is important to give consideration to the quality of the output of the training
and skills development. This might include post training assessment and grading of an individual's
competence at a specific skill. This might also include consideration of an individual's propensity to
acquire skills.
Data for this measure should be available via the training process which should use the information to
plan training programmes and the availability of skills.
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Skills Inventory / Gap

This is a key measure of the availability of the appropriate skills required to achieve organisational
objectives and execute business processes effectively. Having the appropriate mix of skills can be a
significant source of competitive advantage.
This measure compares the skills available within the organisation in comparison to the skills
required. As a result it measures how well the human resource management process or function
identifies and fills gaps in the skills currently available within the organisation. This includes the coordination and planning of recruitment and training to satisfy organisational requirements.
This measure also evaluates the contribution employees make in terms of the skills they have to offer.
Use of this measure, and skills matrices discussed below, should be related to the measures of skills
coverage and 'multi-skilling' which assesses the number of people who have each required skill.
CAUTION
An effective inventory of the skills should be based on the strategic requirements of the organisation.
As a result an appropriate strategy, and qualitative assessment of skills requirements to execute it, are
essential if this measure is to be effective.
% of required skills available within the organisation
% of skills gaps that are closed in a given time period
Skills - are specific competencies appropriate for a particular job. Skills are both manual and
Required skills - are those skills that are required in each part of the organisation to achieve shortand long-term objectives and to execute processes.
Skills gaps - are required skills which are not available within the organisation.
In addition to specific job related skills, examples of skills that should also be considered when
taking an inventory of skills include:
management competencies
communication skills
ability and willingness to learn and be trained
ability to work in a team (refer to the Belbin self-perception inventory).
Use of this measure should include analysis by skill or job type to identify gaps that have to be
closed. There should also be analysis between departments and locations to investigate differences
and gaps.
Skills requirements should be identified as part of the strategy formulation and implementation
process. Skills requirements for specific processes or functions can be recorded on a 'Skills Matrix'
that identifies which people have which skills and what level of competence they have reached at that
skill. Such matrices, which are often displayed clearly at the place of work, illustrate where skills
gaps need to be closed.
A skills audit can be used to identify the skills that are available throughout the organisation.
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Best Practice Transfer

Best practice transfer measures the transfer of practices between different parts of the organisation.
The identification of best practices, especially via benchmarking of external partners, is an expensive
process. Therefore it is important that maximum benefit is drawn from practices that have been
identified and implemented. This can be achieved by different business units or departments learning
from each other. This measure assesses how well knowledge of best practices is communicated
around the organisation and how well this knowledge is used to improve the performance of the
whole organisation.
The transfer of practices is a form of internal benchmarking. Internal benchmarking allows the
determination of best practice within the organisation before benchmarking with external partners.
Although the benefits are unlikely to be as great, this can achieve performance improvements
throughout the organisation without the expense of undertaking an external benchmarking project. This
can be enhanced by undertaking further internal benchmarking when best practices have been
introduced from external partners.
Transfer of practices between business units or departments is most appropriate where they undertake
similar processes or activities. Transfer of practices can allow implementation to be enhanced as it is
repeated, speeding up the process and its positive effect, as well as reducing the cost of
implementation.
Considerable benefit can be gained from maintaining comparable performance measures between
different parts of the organisation. Comparison of performance against these measures will allow
identification of which areas are performing best, so that the practices being used in these areas can
be spread throughout the entire organisation.
Following a merger or acquisition it is important for an organisation to identify quickly the practices
that are transferable, so that synergy benefits can be rapidly realised.
% of best practices that are transferred between business units / departments
average number of business units in which each best practice is implemented
% of best practice gaps closed by internal benchmarking
% of expected performance achieved through internal benchmarking
Best practices - are the best way of undertaking an activity or process. Best practices are identified
by comparing the organisation's current activities with those who are considered to undertake that
process better than any other.
Benchmarking is 'the search for industry best practices that lead to superior performance' (Camp,
1989).
Internal benchmarking - is the transfer of practices from one part of the organisation to another. This
enables an organisation to establish its own internal best practice before seeking industry best
practice.
Best practice gaps - are gaps in the performance of key activities or processes between actual and
required performance. These gaps might be identified by comparing performance levels with those
achieved by other organisations or by estimating by how much performance would improve if best
practice was introduced.
Expected performance with best practices - is the level of performance that the organisation expects
can be achieved if best practices were implemented.
Not all practices will be appropriate in all circumstances. Practices should always be modified to
make them appropriate to the organisation. Lessons learnt from other organisations might encourage
the organisation to redesign its processes to make them more appropriate. Best practice for a process
might be a hybrid practice of a number of organisations. It is important for each part of the
organisation to consider its own requirements and decide how practices need to differ to applications
elsewhere. This might be due to different cultural backgrounds or legal requirements in different
locations.
Analysis might be by process, department or business unit to compare which areas of the business are
best at identifying practices and knowledge elsewhere in the organisation and applying them.
There is a need for a central catalyst to the internal benchmarking process which facilitates and
promotes the exchange of knowledge. This catalyst should keep a record of the availability and where
they might be applied. This is where the data for this measure should be collected.
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Employee Commitment / Motivation

A committed and motivated workforce is critical to maximising an organisation's potential
achievements. Although the workforce may have all of the skills required and might have very low
absenteeism, the contribution they make to the organisation will only be maximised if their
commitment and motivation is high.
Employee motivation and commitment is one of the major contributions that employees can make to
the organisation as it ensures that they are employing maximum effort to their activities and working
to the benefit of the organisation. This measure also assesses employee satisfaction levels, as
employees will not be motivated or committed unless they are satisfied.
By its nature the measurement of employee commitment and motivation has to be based on qualitative
assessment. Their measurement should be based on employee satisfaction questionnaires and through
the personal appraisal process.
% of employees that are committed to the organisational goals and objectives
% of employees that are considered to be 'highly motivated'
Commitment - is to pledge or commit to the achievement of organisational objectives and goals.
Motivation - employees desire to do their job as efficiently and effectively as possible.
Highly motivated employees - will seek to work beyond the bounds of their specific job role in order
to improve the operations of the function, process or organisation. Highly motivated employees will
seek to excel in their job, with career progression an objective along with organisational performance
improvement.
Data for measurement of commitment and motivation is qualitative in nature. However it is possible
to collate qualitative information into quantitative measures.
Commitment can be assessed by using employee surveys or appraisals to establish how well aligned
individual objectives are to organisational objectives. This is linked to the measure of goal
congruence. This assessment should result in a ranking of alignment which can be collated for all
employees.
For motivation it is more difficult to use survey data, however assessment of motivation can be
included into the appraisal process. If possible a numerical value should be assigned to motivation.
In each case guidance should be given to the appraiser to indicate scales of commitment and
motivation and to promote consistency of their use.

In addition to direct measurement of motivation and commitment through appraisals and surveys it
should be possible for the organisation to define surrogate measures of motivation and commitment.
The survey and appraisal approaches should be used to identify the drivers of motivation and
commitment within the workforce. Once identified operational measures should be established for
each of these drivers.
The measure of employee feedback / suggestions is an example of a quantifiable measure that
provides an indication of motivation and commitment of employees as they seek to stimulate
improvement of the organisation's performance.
CAUTION - The qualitative and perception based nature of the measure will affect its consistency,
accuracy and precision.
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360 Degree Feedback

360 degree feedback provides all employees with the opportunity to provide feedback on the
performance of other members of the organisation. Feeding back on performance of peers allows
employees to contribute to performance by identifying how other individuals, departments, processes
or the whole organisation might be improved.
360 degree feedback should form part of personal appraisal processes with other employees
providing input to the process. The process should include feedback by peers at the same
organisational level, as well as feedback from supervisors and subordinates.
% of employees involved in providing feedback on peers and line managers
360 degree feedback - is the process by which peers, supervisors and subordinates provide feedback
on an individuals performance as input into the personal appraisal process.
The information provided should be confidential to ensure honesty.
The greater the number of people that provide feedback, the more likely that it will be representative
of the subject's performance and that personal biases be avoided.
Analysis of the measure should identify the groups of employees that participate in 360 degree
feedback. This analysis should provide comparison of the level of the organisation and the function
from which those who are appraised and those who provide feedback originate.
Although the metric assesses participation in the 360 degree feedback process, it is assumed that
action is taken based on the feedback received in order to improve personal and organisational
performance.
360 degree feedback is undertaken as part of the personal appraisal process which should be
managed by the human resource management process. It is this process which will be responsible for
monitoring and measuring participation levels.
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Cost Efficiency of Training Provision

Cost efficiency of training provision measures whether training programmes are best conducted inhouse or by an outside agency contracted from time to time, when the necessity for training arises.
Often the decision that has to be made is whether maintaining an in-house training centre on a longterm basis is financially viable. This will be affected by how often training is needed and in what
numbers.
The above measure looks only at the financial efficiency of this decision. The non-financial
considerations too should be taken into account. Such consideration should include the impact and
satisfaction with training courses, whether courses breed ideas or whether courses lower morale
because they raise employee's frustration levels.
Cost of in-house training: Total cost of maintaining an internal training centre per year. (Where the
internal training takes the form of on the job training, the costs would be the total cost of productive
time lost)
Cost of external training: Average cost of an external training programme X Average number of
training programmes required per year.
Costs of maintaining an internal training centre will include the following:
all the initial fixed costs that went into the establishment of the training centre distributed over an
appropriate time horizon;
the overhead costs associated with the day to day running of the centre;
the costs of all the salaries and other benefits paid to personnel associated with the training
centre.
Average cost of an external training programme and the average number of training programmes made
available to employees per year can be ascertained from the invoices paid for the courses.
Where possible comparison should also be made of the cost effectiveness of the mode of delivery of
internal training courses. This should include comparison of whether computer-based, workplacebased or classroom-based training is most cost effective.
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Impact of Training Programmes on Organisation

Impact of training programmes on the organisation gives an indication of the impact of training
programmes in terms of both quality and productivity.
It is crucial to ensure that training programmes have a positive impact on both the participants and the
organisation. The post training satisfaction survey feedback will indicate the direct impact on the
participants themselves. This measure is more aimed at assessing whether that satisfaction is
translated into measurable increases in quality and productivity.
Where possible performance measures should be monitored in an attempt to identify the impact of
training courses on the efficiency and effectiveness of the organisation and the work performance of
the individual involved. However in most cases it is very difficult to isolate the impact of training on
performance.
Further, measuring training impact in certain industries (especially in the service sector), or in
relation to certain products or services will be more difficult than in others. Especially, where the
training was aimed at improving general skills, which are to be used for a multiple of purposes, or for
purposes, which cannot be objectively quantified.
% difference in the rate of productivity before and after training
% difference in the defects rate before and after training
proportion of training programmes resulting in productivity improvements
proportion of training programmes resulting in quality improvements (reduction in defects)
number of employees indirectly benefited from a single participant
Productivity - can be expressed as the ratio of labour inputs to the number of units of output.
Defects rate - can be expressed as the number of defective units per million (or %).
Measurement of satisfaction with training courses and their impact should be considered, along with
their cost, when deciding training strategies and the portfolio of training that is offered.
Collection of subject data regarding the impact of training should be assessed through post training
course evaluation questionnaires.
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Sub-Facet 3:
Multi-skilling
This measure assess the number of employees who have a number of different skills required within
the organisation. The measure provides an indication of the coverage of skills within the organisation.
Multi-skilling provides the organisation with the flexibility to cope with changes in demand or
absence of employees with key skills. It is important that an organisation has sufficient coverage for
key skills such as those of bottleneck operations or those which provide competitive advantage. It is
important that these skills are always available when required.
It is important that the human resources planning process identifies the appropriate skills and ensures
that there is sufficient coverage of these skills.
Multi-skilling enables employees to make a greater contribution to the organisation by adding greater
flexibility. In addition providing employees with a number of different skills can also have a positive
impact on employee satisfaction as it gives employees the opportunity to undertake different jobs
offering variety in their working life.
This measure is linked to that of 'Skills Coverage' which measures the amount of people within the
organisation holding a specific skill, whereas multi-skilling focuses on the employee assessing the
number who have more than one skill.
average number of employees who have more than 1/2/3 specific / key skills
average number of skills held per employee vs. plan
Skills - are specific competencies appropriate for a particular job or set of jobs. Skills can be both of
a manual and cognitive nature.
skills might be shortage skills where the absence of the skill can stop an activity of the organisation,
or skills which provide competitive advantage, the absence of which could affect the competitiveness
of the firm.
Multi-skilling - is where an employee has more than one skill that is important to the organisation.
Analysis of the measure should include definition of the number of skills considered in metric 1. This
will give a further indication of the level of flexibility.
Use of this measure should be focused on specific key skills that are important to the organisation.
Such skills might be shortage skills, or those that deliver competitive advantage to the organisation.
Data for such a measure should be kept as part of the training plan for the management of human
resources. In addition such information is often maintained at the point at which skills are used, such
as the shop floor. Boards can be maintained in work areas which list the skills required and the
employees that have those skills. This should be linked to the skills inventory which monitors
employees' competence at specific skills.
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Size of HR Department
The size of the Human Resource Management department is a key measure of the efficiency with
which the 'Manage Human Resources' process is undertaken within the organisation.
Planning human resources is an indirect, support activity, as a result organisations should seek to
ensure that the process is undertaken in as efficient and effective a way as possible.
The actual efficiency of the 'Plan Human Resources' process will vary considerably depending on the
way it is executed and the nature of the activities undertaken. In many organisations HR activities are
centralised and the HR department is entirely responsible for all recruitment, staff development and
training, industrial relations, etc. In other organisations many of these activities are delegated to line
managers to whom the central HR department offer support.
The size of the HR department will also be affected by the commitment of the organisation to
employee satisfaction. This will affect the level of communication with employees, the level of
training and staff development, etc. These are activities that are co-ordinated by the HR department.
When measuring the efficiency of the HR department measures of its effectiveness should also be
considered. These include the effectiveness with which vacancies are filled, the effectiveness with
which training or skills development requirements are identified and satisfied, effectiveness of
industrial relations, etc.
number of employees in HR department as % of total headcount
HR department staff costs as % of whole organisation staff costs
HR department - is the centralised department responsible for planning, co-ordinating and executing
the 'Manage Human Resources' process.
Number of employees in HR department - is the number of employees based in the centralised HR
department undertaking the planning and execution of human resource policies.
Total headcount - is the number of employees within the whole organisation.
Staff costs - are all of the costs involved in employing staff. These include salaries and additional
costs such as taxes, bonuses, pensions, etc.
Analysis of the measure should consider where efficiency can be improved and where non value
adding activities can be taken out of the process.
Analysis should also consider the results achieved by the HR department. Assessment of the
effectiveness of the department or process is important to put the efficiency into context.
Comparison of the efficiency of the HR department with other organisations should take into account
of the way in which the 'Plan Human Resources' process is undertaken differently in different
organisations (e.g. the level of centralisation).
The financial accounting information system will maintain data regarding the staff costs incurred in
the HR department while the organisation's personnel records will identify the number of employees
in the department.
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Conditional Job Offers Withdrawn

Measurement of the number of conditional job offers that are withdrawn is a measure of the efficiency
and effectiveness of the HR department and Manage Human Resources process.
The recruitment process is usually time consuming and costly to undertake. As a result if an applicant
is offered a job but then the offer has to be withdrawn for any reason, it represents a considerable
waste of the organisation's resources. Therefore this measure assesses the amount of resources, both
within the HR department and time of line manager involved in the recruitment process, that are
wasted on employees that ultimately do not join the company. It also assesses how well those
involved in the recruitment process can identify potential employees as opposed to those who are
ineligible or inappropriate for recruitment.
% of conditional job offers that are withdrawn
Conditional job offers - are offers of employment with the organisation that are conditional on the
applicant satisfying certain criteria. These criteria typically include provision of satisfactory
references, achievement of qualifications, successful completion of a medical, etc.
Withdrawn job offers - are offers withdrawn due to a change in circumstances, such as failure of the
applicant to adhere to the conditions of the offer.
Causal analysis of withdrawn offers should be undertaken to identify the reasons that applicants are
no longer considered to be appropriate for employment, and whether it should have been possible to
predict that it would have been the case. This might allow improvement of recruitment processes and
reduction in the level of withdrawn offers, reducing the amount of wasted resources.
Withdrawal of condition offers might be made for a number of reasons. Typically this will be as a
result of the failure of the applicant to satisfy the condition that was included in the offer, e.g.
unsatisfactory references, failure to achieve qualifications, failure of medical, etc. However other
causes might also include discovery of inaccuracies in the application or discovery of unacceptable
conduct.
The manage human resources process should monitor the progress of all job applications. This should
include identification of conditional offers made and when they have to be withdrawn.
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Interviews per Job Offer

Measurement of the number of interviews per job offer is a measure of the efficiency and
effectiveness of the HR department and Manage Human Resources process.
The recruitment process is usually time consuming and costly to undertake, as a result it should be
minimised where possible. Interviews consume considerable amounts of resources, both of the
manage human resources process and of line managers in the area that recruitment takes place.
This measure assesses whether the manage human resources process can identify the appropriate
people for interview in order to fill vacancies.
The number of interviews necessary may also provide an indication of the attractiveness of the
organisation as a potential employer. This is particularly the case if the quality of applicants is poor
or re-interviewing has to be undertaken because job offers have been rejected.
While it may be desirable to reduce the number of interviews that are necessary per job offer or
appointment in order to improve efficiency, care must be that reduction in the number of interviews
does not affect whether or not appropriate candidates are appointed.
average number of interviews per job offer
% of occasions re-interviewing is necessary
Interviews - are formal meetings between job applicants and representatives of the organisation to
determine the applicants appropriateness for employment with the organisation.
Job offers - are offers of employment with the organisation.
Re-interviewing - is undertaking further unplanned interviews as a result of failure to fill the vacancy
with the original interviews.
When using the measure consideration should be given to whether job offers are accepted and
whether they are withdrawn. If offers are rejected or withdrawn, further interviews may be necessary.
The manage human resources process should monitor the progress of all job applications including
the number of interviews that are undertaken during the process of making an appointment.
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Vacancy Fill Speed

Measurement of the Vacancy Fill Speed assesses the efficiency and effectiveness of the recruitment
process, which is part of the manage human resources process.
This measure will assess how long positions are vacant and as a result provide information about
how long the organisation is without skills or resources that are required.
Consideration should be given to the time required to fill vacancies when planning operations as the
availability of skills and labour affects whether or not operational plans can be achieved.
Vacancy fill speed also provides an indication of how difficult the organisation finds it to fill
vacancies.
This measure should be linked to the 'speed of skill acquisition'.
average time required to fill vacancies
Time required to fill vacancies - is the time from identification of a vacancy or employment need to
the date a new employee fills the position. This time includes advertising the vacancy, receipt and
review of applications, organisation and undertaking interviews, collection of references, appointees'
current employment notice period, etc.
Use of the measure of vacancy fill speed should include analysis of performance by job and job type
to identify the lead time required to fill specific jobs or types of job. This might include variations
between skill levels and between levels in the organisation identifying how easy it is to fill each of
these categories of employment. Analysis should also consider variations in fill speed in different
departments or sections of the organisation.
Vacancy fill speed performance will be affected by factors such as the number of applications that are
received, the quality of those applications and the number of interviews necessary per job offer.
The manage human resources process should monitor and control the recruitment process, recording
each stage of the application process. This data should be used to assess vacancy fill speed.
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Maintenance Costs
In order to ensure that technologies and infrastructure are available when required it is important that
maintenance and technical support are available to resolve problems when they arise and that
preventative maintenance schemes are put in place. It is important that appropriate levels of skills and
equipment are made available, however this must be balanced against the cost of doing so.
Controlling and minimising costs are always important, as a result it is important to measure and
analyse costs to see where they can be reduced while maintaining the appropriate level of support.
This measure also assesses the condition of an organisation's infrastructure and technologies. The
better the condition of the infrastructure and technologies the less the maintenance costs are likely to
be. As such there is a link between this measure and those of the age and condition of both
infrastructure and technologies.
The cost of maintenance is also a measure of the planning of maintenance activities which is
considered as part of the planning of operations (Plan & Manage the Enterprise). Planning operations
should include identification of the workload of infrastructure and technologies, providing an
understanding of wear and tear so that maintenance can be planned. Effective planning will increase
the amount of preventative maintenance, reducing the need for urgent reactive maintenance which will
be more expensive as it will be required at short notice. Proactive maintenance will also reduce
breakdowns and downtime which are likely to affect the productivity and the ability to meet customer
due dates.
average cost of maintenance costs incurred in a given period
maintenance costs as a % of total operating costs
preventative maintenance spend as a % of total maintenance spend
Maintenance - is the upkeep of an organisation's infrastructure and technologies to ensure that they are
available when required.
Preventative maintenance - is maintenance carried out before any breakdowns occur. Preventative
maintenance is designed to ensure that unplanned breakdowns do not occur.
Maintenance costs - are the costs incurred acquiring and maintaining the level of skills and equipment
required to maintain an organisation's technology and infrastructure to ensure its availability when
required. Maintenance costs include the maintenance of skills and equipment internally or can be
based on contracts with third parties to contract out maintenance services.
While it is always going to be important to manage and reduce costs within an organisation, it is
important to balance cost reduction with the need to provide the appropriate level of maintenance to
ensure that technologies and infrastructure are available when required. Often far greater costs can be
incurred if a key piece of technology or infrastructure in unavailable when required than could be
saved by reducing maintenance coverage. See the 'cost of equipment breakdowns' measure. Because
of the need to balance the cost of maintenance with availability, it is important to consider
maintenance response time and infrastructure / technology availability or down time when using this
measure. The proportion of maintenance and technical support available internally versus that
outsourced will also affect this measure.
Analysis of this measure should include consideration of whether the maintenance is provided
internally or contracted out. As such the measure of Internal Technology Support should also be
considered with this measure.
Analysis should also consider the importance or urgency of the maintenance in question. Analysis
should compare costs that are incurred on maintenance which is preventative / reactive / urgent (e.g.
to resolve a breakdown on a bottleneck, etc.)
Analysis should also compare maintenance costs in different departments and sub sections of the
organisation. This will help in identification of areas of the business with infrastructure that is in poor
condition or where planning of maintenance is ineffective. Clearly differences in the level of
automation and complexity of infrastructure and technologies in different parts of the organisation
will affect the comparability of the measure. Monitoring over time will provide an understanding of
trends in maintenance costs per section / department.
Data for this measure should be available from the organisation's accounting system. To use the
measure effectively the system must record the location that the costs are incurred and causes.
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Equipment Replacement Time

The lead time required to replace a piece of equipment or technology is an important consideration
when planning operations. When managing equipment replacement it is essential that there is an
understanding of how long replacement will take so that a replacement or implementation project can
be started in sufficient time to make sure that the new equipment is available when required. As such
this is a measure of the organisation's technology implementation capabilities and the efficiency and
effectiveness of the implementation process.
As such initially the objective of this measure is to understand the duration of implementation
projects, and specific stages within them. Having gained this understanding it is then important to use
the measure to reduce introduction times. It is important for organisations to reduce introduction times
so that advantage of new equipment and technologies can be taken as quickly as possible and so that
the condition of equipment and technologies can be enhanced as quickly as possible, improving the
efficiency and effectiveness of the activities they support. This measure should therefore be
considered when measuring the 'Age / Condition of Technologies'. Reduction of introduction time
also enables reduction of the 'cost of introduction / implementation', as the shorter the implementation
project the less resources will be used.
The measure of replacement time is linked to that of 'Impact of Technology', as the quicker technology
can be implemented the quicker its positive impact on the business can be realised.
average lead time to introduce a new technology / piece of equipment
average length of a new technology / piece of equipment implementation project
Lead time to introduce a new technology / piece of equipment - is the time from identification of the
need for (or need to replace) a new technology or piece of equipment to the time it is fully
operational and available for use. This time includes each stage in implementation projects.
Implementation project - is the process of converting an innovative idea into a technology which is
practically applied within the organisation. This includes translating the concept into a prototype,
testing, implementation and integrating it into the operations of the organisation. The process should
be considered to include ensuring the technology is running smoothly, hence should include the
appropriate training of employees, etc.
It is important that this measure is aggregated over a long period of time to cover numerous
implementation projects. This enables a full understanding of the time taken to undertake each stage of
an implementation so that future projects can be planned more effectively and areas requiring
improvement can be identified.
Use of this measure should include analysis by different implementation project types. This will
include the type of innovation / equipment being implemented (e.g. product versus process and by
product group / process type), the length of the project, the processes or functions involved and the
type of technical skills required to complete it.
The product and process implementation processes must include project management activities to
monitor execution. These processes should include measurement of the lead time of each stage of the
project and of the entire project. This data should be aggregated across several projects so that the
efficiency and effectiveness of the implementation process as a whole can be assessed, rather than
simply the efficiency and effectiveness of a single implementation project.
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Technology Implementation Project Performance

When implementing new technologies or innovations it is important that the implementation project is
planned and controlled effectively. Completion of projects on time and to cost can fundamentally
affect the viability of the project and the effect it has on the business.
On time completion of implementation projects is important to ensure that technologies are available
when expected and required. This is important in planning, as having technologies available when
required will have a significant effect on the ability to plan and execute operations. Whether the
project is product or process focused, failure to complete an implementation project on time can
cause late introduction of products to market which will have serious implications for revenues and
customer satisfaction. Poor introduction to the market can have a significant impact on customer
perceptions and the profitability of a product or service, especially if it results in a competitor getting
a product to market first or the business missing a market opportunity.
Failure to complete projects on time will also usually cause costs to exceed budgets, as costs
additional to those planned will be incurred.
Clearly failure to complete an introduction project within budget will affect the success of the
innovation or technology in question. Additional costs will reduce the profitability and increase the
break even time. As a result failure to meet cost projections may result in an innovation or technology
no longer being commercially viable.
Measurement of implementation project performance is an important measure of the capabilities of
the organisation to deliver technologies and innovations as planned. It also measures the effectiveness
and efficiency of the process of technology introduction. Having an accurate understanding of project
completion and costs allows more effective planning of all operations as it improves understanding of
when resources will be available to undertake other activities or projects.
% of technology implementation projects that are completed on time
average project delay
% of technology implementation projects that are completed within budget
average under / overspend per implementation project
Implementation project - is the process of converting an innovative idea into a technology which is
practically applied within the organisation. This includes translating the concept into a prototype,
testing, implementation and integrating it into the operations of the organisation. The process should
be considered to include ensuring the technology is running smoothly, hence should include the
appropriate training of employees, etc.
It is important to monitor project milestones and budget achievement for individual projects to control
their execution. However in terms of process improvement it is more important that this measure is
aggregated over a long period of time to cover numerous technology implementation projects. This
enables a full understanding of the reliability of the implementation process and a better
understanding of the likelihood that project deadlines and budgets will be met.
Analysis of the performance of different stages of implementation projects is also important to
identify where improvements in the implementation process can be made and understand whether
projects are likely to be completed to plan. It is particularly important to identify which parts of the
implementation projects are causing delays and overspend.
Use of this measure should include analysis by different implementation project type. This will
include the type of innovation being implemented (e.g. product versus process and by product group /
process type), the length of the project, the processes or functions involved and the type of technical
skills required to complete it.
The product and process implementation processes must include project management activities to
monitor execution. These processes should include measurement of achievement of milestones and
budgets which should be aggregated to measure the implementation process as a whole rather than
just monitor and control one project.
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Sub-Facet 3:
Clarity of Regulations
One of the key requirements that an organisation will have of its regulators is that they provide clear
regulations so that they are easy to follow and adhere to. Regulations that are not clear can lead the
organisation to incur penalties because of misunderstandings. Regulations that lack clarity will also
result in different interpretation by different organisations and might lead to resources being misused
in attempting to achieve inappropriate objectives.
It is important for any organisation to assess the clarity of regulations and feed this information back
to the regulators in an attempt to achieve improvement.
Development of a good working relationship with regulators should enable improved understanding
and clarity of regulations. Such relationships should also increase the possibility of regulations being
made clearer and more appropriate. As such collection of data for this measure should help to assess
the effectiveness with which relations with regulators are developed.
Although clarity is subjective and an assessment of the clarity of regulations can be made, it is also
possible to objectively assess the result of unclear regulations.
% or number of occasions that penalties are incurred due to ambiguities in regulations in a given
period
% of regulations that the organisation has had to clarify with the regulator
cost of identifying / clarifying ambiguities
Regulators - are bodies which control or regulate the operations of organisations. Regulators often act
on behalf of other stakeholders. A variety of regulators might be applicable to different organisations.
These include industry specific regulators, environmental regulators, regulators of competition, health
and safety regulators, accreditation bodies (e.g. ISO), etc.
Regulations - are rules imposed by regulators.
Penalties - are punishments enforced by regulators as a result of failure to adhere to regulations.
Ambiguities - are regulations of which the meaning is doubtful or which have double meaning.
Cost of identifying / clarifying ambiguities - are the costs incurred as a result of misunderstandings
between regulators and the organisation. Such costs might include cost of penalties for nonconformance to regulations, legal costs, costs involved with communication with regulators, etc.
This measure should be used for each regulator, where there is more than one regulator relevant for
an organisation. The collection and analysis of data, and of improvement action should be focused on
the regulator that has the most influence over the organisation. This is the regulator that can impose
the greatest penalties or withdraw the organisation's licence to operate.
Data for this measure should be collected through the process concerned with management of
communication with regulators.
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Consistency of Regulator Requirements

Equality of treatment by regulators is a major requirement of those organisations being regulated, to
ensure that all organisations are operating on a 'level playing field'. Measurement of the consistency
of requirements provides an understanding of differences so that attempts can be made to highlight
and reduce inequalities through negotiation with the regulator.
Differences in regulator requirements might stem from differences in regulations or in the way they
are applied in different cases. Variations in requirements may be based on geographical location
(national, regional or local); industry or individual differences.
As well as equality of treatment between organisations, consistency of regulator requirements over
time is also sought, as this allows planning of future activities to satisfy requirements. Highlighting
the consequences of frequent requirement changes could encourage the regulator to reduce their
frequency, where changes can be avoided.
number of variants of each regulation / regulator requirement applied to different organisations per
regulator
% of regulations / regulator requirements that are consistent to all regulated organisations
average number of changes to regulator requirements in a given time period
average time horizon provided before requirement changes are implemented
Regulations - are rules imposed by regulators.
Regulator requirements - are requirements that must be fulfilled in order to satisfy the regulator.
Requirements may be regulations, or the way in which the regulations are applied.
Consistent to all regulated organisations - refers to regulations and regulator requirements that are
defined and applied in the same way to all of the organisations regulated by the same body.
Variations in requirement - are differences in requirements demanded by the regulator of different
organisations. Variations in requirement might relate to performance requirements, penalties or
documentation required.
Time Horizon - is the length of time before regulator requirement is changed that regulated
organisations are notified.
When considering variations in requirement it is important to consider the magnitude of the
inconsistency in question and the reason for it. It is possible the relatively small variations in
regulations or their application are necessary as a result of differences between organisations being
regulated. Such differences should be considered when using this measure.

Analysis of the data collected from metric 1 should be made to identify the causes of differences in
regulator requirements. This should allow understanding of the validity of the assumptions that lead to
the difference. The organisation needs to consider this in order to determine how just the variations
are.
Data to calculate metrics 3 and 4 are relatively easy to collect as they can be observed by the
organisation over time and collated into the metric. Data for metrics 1 and 2 are more difficult to
identify as they concern the relationship between the regulator and other organisations. Other
organisations are likely to be reluctant to divulge such information, although it might be available
from the regulator. The unit of measure for metrics 1 and 2 is that of individual regulations and
requirements. These might relate to an entire regulatory document or individual requirements within a
document as appropriate to the organisation.
All of the data collection and analysis for this measure should be undertaken by the process
responsible for managing the relationship with regulators.
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Sub-Facet 3:
Willingness of Regulators to Listen and Advise

The willingness of regulators to listen and advise the organisation is an important way in which
regulators can ease the regulation burden and contribute to the performance of the organisation.
Advice from regulators will make it easier for the organisation to identify and satisfy specific
regulator requirements. It is also important as it assesses whether regulators are willing to listen to
constructive suggestions regarding possible changes to regulations or the way in which regulation is
undertaken.
The willingness of regulators to communicate with regulated companies will be significantly affected
by the quality of the working relationship between the organisation and the regulator.
qualitative assessment of willingness of regulators to listen and advise
Measurement of the willingness of the regulator to listen can only be undertaken by qualitative
assessment of the relationship between the organisation and the regulator.
Qualitative assessment should be undertaken by monitoring regulator opinion and monitoring the
opinion of those within the organisation who have contact with the regulator.
Where the regulator is deemed to be unwilling to listen, or to advise the organisation, analysis of the
reasons for this should be undertaken. It may well be that particular regulators do not communicate
with any organisations as there are too many to deal with, or because they are not inclined to do so. If,
however, the regulator communicates with other organisations it suggests that there is a problem with
the relationship between the organisation and the regulator. If this is the case then action should be
taken to improve this relationship so that communication can also be improved.
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Frequency of Infrastructure Audits

It is important that the organisation monitors the infrastructure available in relation to that required to
satisfy demand and execute strategies. A full and accurate understanding of infrastructure availability
enables the maximum advantage to be taken of the resources that are available. Increasing the
frequency of audits will help improve the accuracy and understanding of infrastructure availability,
however this has to be weighed against the cost of undertaking an audit. This is a particular
consideration in large organisations where audits will be more costly to undertake, however in larger
organisations it is also more difficult to maintain an accurate understanding of the availability and
condition of infrastructure.
infrastructure available and required within the organisation. This will be determined by the
frequency with which products are introduced and with which technologies and operations must
change in order to remain competitive. Level of infrastructure usage (which affects condition) will
also influence how frequently audits should be undertaken.
Maintaining a centralised understanding of the infrastructure that is available throughout the
organisation allows the transfer of infrastructure between locations to be planned to maximise
utilisation. This will form an input to the strategy review process, which will consider
decommissioning of facilities and relocation of operations and hence the transfer of assets between
locations.
Infrastructure audits are an important part of undertaking an infrastructure inventory and identifying
the gaps in infrastructure availability that must be closed in order to improve the effectiveness and
competitiveness of the organisation.
number of infrastructure audits undertaken in a given period
Infrastructure audit - is a review of all of the infrastructure available within the organisation or part
of it. The purpose of the review is to identify what infrastructure is available within the organisation
and to assess its age and condition. The review should identify whether the organisation has sufficient
infrastructure in appropriate condition to satisfy organisational objectives. The audit should identify
where there are infrastructure gaps and new infrastructure is required.
The time period for this measure should reflect the frequency of audits which is determined by the
frequency with which the infrastructure within the organisation changes. The frequency with which
infrastructure changes is affected by the industry in which the organisation operates as this will
determine how frequently requirements for infrastructure change. Particularly important determinants
are the frequency with which new products are introduced and the frequency with which technologies
and infrastructure requirements change.
them to maintain an accurate understanding of the condition of their infrastructure. However they
should encourage regular proactive feedback on the condition of infrastructure from those using the
items of infrastructure directly.
The infrastructure audit should be linked to the fixed assets inventory which monitors and controls
fixed asset movements and changes.
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Overall Equipment Effectiveness

Overall equipment effectiveness is a measure of output that takes account of process availability,
process performance and process quality. It is therefore a far more rounded measure of equipment
effectiveness than any one of these individual measures.
Particularly important is the combined emphasis on availability, performance and quality. The
measure highlights the fact that there is no point having a very efficient process that produces scrap,
just as there is no point having a very inefficient process that produces high quality output.
The measure can be used for an individual piece of equipment or a group of pieces of equipment such
as a production line. The measure can then be used to assess the contribution that those pieces of
equipment make to the process being undertaken. It can also be used when planning operations as it
provides a realistic indication of the output that can be expected from a piece of equipment.
Overall Equipment Effectiveness = Availability x Performance x Quality
Availability is defined as the (total planned operating time the total down time), divided by the total
planned operating time. Hence availability measures the proportion of time for which the equipment
is available.
Performance is defined as the number of parts produced divided by the number of parts planned to be
produced. Hence performance measures whether or not the process performs as efficiently as
planned.
Quality is defined as the (number of parts produced the number of parts scrapped) divided by the
total number of parts produced. Hence quality measures the effectiveness of the process in terms of
quality of output.
OEE can be used to compare the effectiveness and efficiency of equipment to identify and eliminate
bottlenecks, and to identify where improvement actions should be taken.
Use of the OEE measure should be focused on bottleneck equipment, i.e. that which is a constraint on
output. Maximising output on other equipment will result in production of output for which there is no
demand.
Prism Facet 1:
Capabilities Sub-Facet 1: Technology & Infrastructure
Prism Facet 2:
Prism Facet 3:
Processes Sub-Facet 3: Plan and Manage Enterprise - Operations
Fixed Asset Inventory

An inventory of fixed assets is important to understand the fixed assets that are available within the
organisation. Understanding of fixed assets owned by the organisation is a statutory requirement and
must be contained within the statutory accounts.
The value of fixed assets is used as a factor in other measures especially profitability, as fixed assets
usually reflect the largest component of capital employed in generating profit.
Measurement and control of fixed assets will be more important for manufacturing companies due to
the need for locations and equipment with which to manufacture. Most service organisations are more
reliant on labour than fixed assets.
The inventory of fixed assets should be linked to the 'Age / Condition Profile' of the infrastructure and
of the fixed assets, as these measures assess the condition of the infrastructure and fixed assets so it
can be established whether they need to be replaced.
The inventory of fixed assets should provide input to strategic decisions regarding the need to invest
in fixed assets in order to satisfy target markets.
total value of fixed assets
average change in value of fixed assets in a given period
Fixed Assets - are assets held by the organisation for retention, rather than being held for resale.
Fixed assets include land, buildings, plant, machinery, vehicles and furniture.
Value of fixed assets - normally stated as cost less depreciation. However in some countries,
accounting standards dictate that assets are valued at replacement cost.
Property assets are likely to appreciate rather than depreciate, and their value should be reassessed
from time to time. The frequency of such reassessment should be as appropriate based on:
changes in the value of the property (determined by local property prices)
alterations made to the property
Analysis of this measure should be based on the type of asset - i.e. separate analysis for land,
buildings, plant, machinery, vehicles and furniture.
A fixed asset monitoring process should be maintained by the finance department to maintain control
of fixed assets. The process should monitor acquisition and disposal of fixed assets, their
depreciation and location. The process should be audited to ensure that the fixed asset data is
accurate.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Infrastructure Acquisition Speed

This measure assesses the speed with which infrastructure can be acquired once a gap or need has
been identified. This is an important determinant of the availability of infrastructure when required.
This will be an important measure to consider when planning infrastructure requirements as it will
determine when new pieces of infrastructure will be available and hence when specific activities can
be undertaken.
This is also an important measure for organisations where infrastructure requirements change
frequently as this requires new infrastructure to be acquired quickly and frequently.
The speed of infrastructure acquisition will also vary depending on whether the infrastructure is
purchased or built in-house. If the speed of infrastructure acquisition and deployment is very
important to the organisation, the difference between purchased and built in-house speed will be an
important factor for the decision. The make vs. buy decision might also have an impact on the quality,
fitness for purpose and level of customisation to requirements of the resultant item of infrastructure,
as well as its cost. All of these factors must be considered when deciding whether to make or buy
new infrastructure.
This measure should be linked to that of Fixed Asset Inventory and Infrastructure Availability, as
infrastructure acquisition is key to closing infrastructure gaps. However consideration also has to be
given to the availability of capital which will determine whether investment in infrastructure takes
place and whether infrastructure is made or bought.
average lead time to acquire an item of infrastructure
average lead time to close infrastructure gaps
Lead time to acquire infrastructure - is the time from the identification of a need for an item of
infrastructure to the time that it is available.
Acquire infrastructure - is the process of obtaining a piece of infrastructure that is required. This will
often be through investment in purchasing a new piece of infrastructure, but might include making it
in-house or modifying an existing item to serve a new purpose.
Infrastructure gaps - are required items of infrastructure which are not available within the
organisation.
This measure will vary considerably depending on the type of infrastructure that is being acquired
and analysis of the measure should reflect that. Large items such as new buildings or complete new
locations will take longer to acquire than smaller items or those that can be purchased 'off the shelf'.
As a result analysis of this measure should include consideration of the type of infrastructure being
acquired.
Analysis of the measure over time is difficult as many industries will not make regular investments in
similar items of infrastructure, making comparison between types of expenditure problematic.
Organisations should select comparable items of infrastructure when analysing performance. Analysis
should also consider whether each stage of the infrastructure acquisition process is executed in the
planned time. This enables an assessment to be made of whether the planning of the project to acquire
infrastructure is effective. Even if it is not possible to calculate an average lead time to acquire
infrastructure, it should be possible to identify whether the acquisition process is improving.
Analysis should also include consideration of the mode of infrastructure acquisition. There are
differences between purchasing new or second hand infrastructure, making new items or modifying
existing items. This choice is likely to have a significant impact on the cost, as a result consideration
should be given to the urgency with which the infrastructure is required. The make vs. buy decision
might also have an impact on the quality, fitness for purpose and level of customisation to
requirements of the resultant item of infrastructure.
There is a need for a feedback process to collect the data for this measure. This should be part of the
process which monitors infrastructure movements for the infrastructure audit and inventory. This
should include recording when infrastructure gaps are identified, when orders are placed and when
delivery and installation take place.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Qualification Levels
The level of qualifications held provides an independent assessment of the level of skills that are held
within the organisation. Although traditionally qualifications reflect academic achievement it is also
possible to assess non-academic achievements in a similar way.
There are a wide range of qualifications available reflecting the wide range of skills that are used
within organisations.
Qualifications are often used as entry criteria to gain employment, as a result the level of
qualifications held will reflect the criteria for recruitment. As such the measure reflects how difficult
it is to gain employment with the organisation which provides an indication of how desirable the
organisation is as an employer.
Giving employees the opportunity to enhance the qualification levels can also contribute to the level
of employee satisfaction. Provision of opportunities and commitment of resources indicates the
organisation's commitment to the personal development of their employees and helps them with
transferable skills which are universally recognised.
CAUTION - must be taken however, as supporting employees as they improve their qualification
might increase the chances of employees leaving the organisation. It is important to ensure that
employee satisfaction is maintained so that employees don't feel the desire to move to other
organisations once they have upgraded their skills.
This measure should be considered along with the availability and development of skills within the
organisation.
number of employees that are university graduates
average number of employees with the appropriate professional / trade qualification
% of qualifications that have been obtained during employment with the organisation
Qualifications - are recognition of accomplishments provided by independent accreditation bodies.
These might include academic qualifications, professional qualifications or recognition of trade
skills. As such they include manual and cognitive qualifications.
Professional qualifications - might include certified accountancy, engineering or legal qualifications,
for example.
Trade qualifications - might include acknowledgement of demonstration of skills or completion of
training courses.
Analysis of this measure by job and qualification type will allow understanding of different types and
levels of qualification that are available within the organisation. Consideration should also be given
to levels of achievement, such as grades.
Analysis might also consider differentiation between qualifications held on entry to the organisation
and those which are achieved during employment with the organisation. This will measure the support
that the organisation provides to education and training.
Data for this measure should be collected through personal appraisals.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Lead Time to Implement Best Practices

This measure assesses how quickly best practices are acquired and implemented and how quickly
best practice gaps are closed. It is important to implement best practices as quickly as possible to
ensure that the benefits are maximised and to speed up the positive impact on performance. Increasing
the speed of implementation will improve responsiveness to changing competitive circumstances,
enhancing the competitive position of the firm.
It is most important that the organisation identifies the key activities and processes that require best
practices to be implemented. These activities or processes are those that are important for the
organisation to gain competitive advantage. Gaps in performance can be identified by comparison of
performance with other organisations, or by identifying the processes and/or activities that are clearly
preventing the organisation from performing to its full potential.
The most accepted way of identifying best practices is by benchmarking the organisation's processes
against organisations that are considered to execute the same or a similar process better than any
other. As a result this is a measure of the effectiveness of the benchmarking / best practice
acquisition, identification and implementation processes.
Learning about the practices that bring performance results is always more important than the absolute
benchmarking of performance data, which should be considered more of a 'spur to action'.
The lead time to implement practices will affect the scope of benchmarking activities. The quicker
practices are identified and implemented the more processes and activities can be investigated and
the appropriate practices implemented. As a result, the use of this measure is important as it provides
an understanding of the length of benchmarking projects so that future activities can be planned.
Similarly it will allow planning of practice implementation to meet specific deadlines such as
meeting customer requirements.
average time required to implement best practices
average length of a benchmarking project
Required best practices - are the practices that the organisation has identified as requiring
implementation. These are processes at which it is important that the organisation improves.
Lead time - is the time from the identification of a need to improve the performance of an activity or
practice to the time that best practice is implemented to improve performance. Additional
consideration should be given to the time required for satisfactory adoption of the practices and the
lead time for the practice to have an effect on the performance of the process or activity, and hence
the whole organisation.
Benchmarking - is 'the search for industry best practices that lead to superior performance' (Camp,
1989). As such the benchmarking process is the process of identifying best practices that exist in
other organisations and implementing them where appropriate. The process includes identifying the
processes or activities that need to be improved, identifying partners from whom lessons can be
learnt and adopting practices that are considered to be best, where appropriate.
The primary way in which the lead time can be reduced is to adopt an internal benchmarking strategy.
This involves identifying best practice that exists within the organisation. The advantage of internal
benchmarking is that it allows some improvement to be made through access that is easier than with
external partners and with a free exchange of knowledge. However it is unlikely that the benefit will
be as great as with external partners.
Analysis of the measure should be by process, department and business unit to identify where
improvement needs to be made. Furthermore the stages of the process should be measured separately
to identify which stages require improvement. Measuring the process in stages can be advantageous
over measuring the whole process as implementation lead times will vary considerably, based on the
type of practice being implemented.
Lead time can be affected by such factors as the complexity of the practice being implemented,
complexity of the processes being benchmarked, number of benchmark partners involved, the level of
performance improvement required etc. Analysis of the measure should reflect this.
Data should be identified and collected during the benchmarking process. All parts of the process
should be documented.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Best Practice Coverage

Best practice coverage measures how many best practices are executed within the organisation and
how many of the organisation's activities and processes are covered by practices that are considered
to be best. Measurement should cover both the whole organisation and key processes and activities.
It is vital that the organisation identifies the key activities and processes, as these are the most
important areas for best practices to be implemented. These activities or processes are those that help
the organisation attain competitive advantage. Whilst an organisation should strive to achieve best
practice in all its activities, in reality this is not possible. The organisation must prioritise the
activities and processes to be benchmarked. As it is not possible to be best at everything, it is
important to focus on those processes and activities which are 'qualifiers' (required to meet industry
norms, the minimum standards required to compete) and 'winners' (which provide competitive
advantage).
The most accepted way of identifying best practices is by benchmarking or comparing the
organisation's processes against those organisations that are considered to execute the process the
best. Comparing processes with others is the only way of determining whether practices can be
considered best. This measure should be used as part of the benchmarking process in order to assess
the amount of benchmarking and performance improvement required and to explore how well
benchmarking activities close the appropriate gaps.
The effectiveness of practice identification and implementation is dependent on an effective
benchmarking process. This measure assesses how well the benchmarking process audits current
processes and activities, thereby enabling the organisation to identify where practices need to be
improved.
% of processes that are covered by practices that are considered to be best
% of key processes that are covered by practices that are considered to be best
% of business processes that need to be improved to beat competitors / achieve competitive
advantage
Key practices - are practices that are important to the competitiveness of the organisation.
It is important that the benchmarking process be continued to ensure that the practices used remain
best, especially where they apply to key practices.
CAUTION
Increasing coverage of best practices can be costly as resources have to be dedicated to the
benchmarking process. It is important that the benchmarking activity be focused on important
processes and activities and on processes where potential improvement will outweigh the cost.
The measure should be analysed based on the scope of benchmarking activity. This analysis might be
by process, department or business unit to identify which areas of the business have the best
practices.
Data should be identified and collected during the benchmarking process, part of which should audit
current activity and processes to identify where best practices exist and where they are required.
In some cases the search for best practices is inappropriate. Instead the organisation might seek
simply to improve its processes.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Cost of Acquiring and Maintaining Best Practices

Cost of acquiring and maintaining best practices measures the cost of ensuring that the practices
employed within the organisation are best practices. This includes the cost of identifying and
implementing best practices and then ensuring that the practices employed remain 'best'.
against organisations that are considered to execute process better than any other. Comparing
processes with others is the only way of determining whether practices can be considered to be best.
As such this is a measure of the efficiency of the benchmarking process.
Having undertaken a benchmarking project and implemented best practices, it is important that action
is taken to ensure that the key practices, upon which competitive advantage is based, remain best.
This should include constant monitoring of the activities of organisations considered to demonstrate
best practice and the constant search for new ways of operating. It is important that these activities
are focused so that resources are dedicated to improving the processes which are in most need and
where the greatest advantage will be gained. It will not be possible to acquire and maintain best
practice for all processes.
Cost will be a key determinant of the level of benchmarking and best practice implementation
activity. The higher the cost of the process the narrower the scope of the activity is likely to be and
hence the lower the benefit.
average cost of acquiring / maintaining best practices in a given period
average cost of completing a benchmarking project
% reduction in the cost of benchmarking projects in a given period
Acquiring / maintaining process - is the result of the benchmarking process concerned with
identifying and implementing best practices. This process should be continued to ensure that practices
remain 'best'.
Costs of acquiring / maintaining best practices - include identification, implementation, employee
training, changes or redesign of processes, etc.
learnt and adopting practices that are considered to be best, where appropriate. Costs will be
incurred at each stage of this process.
The given time period for the measure will be dependent on the level and frequency of benchmarking
activity. Measurement must be over extended periods of time to map trends, over a number of years,
for example.
Often the greatest benefit can be gained from benchmarking organisations in different industries that
specialise in, or gain competitive advantage from, activities or processes which the organisation
needs to improve. The cost of internal benchmarking is less than that of benchmarking with external
partners. Internal benchmarking enables internal best practice to be established so that some
improvement can be made throughout the organisation before deciding whether to embark on the more
difficult and expensive benchmarking with external partners.
Whilst an organisation should strive to achieve best practice in all its activities, in reality this is
impossible as it would be too costly. The organisation must prioritise the activities and processes to
be benchmarked. As it is not possible to be best at everything, it is important to focus on processes
and activities which are 'qualifiers' (required to meet industry norms, the minimum required to
compete) and 'winners' (which provide competitive advantage).
The measure should be analysed based on the scope of benchmarking activity to compare if different
benchmarking projects or teams are more costly than others. In addition there should be analysis of
the cost of different stages of the process over time. This will allow the organisation to identify
where costs are being incurred and where they might be reduced. Data for this measure should be
identified and collected during the benchmarking process.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Frequency of Best Practice Audits

Audits of best practices are important to ensure that the practices that are employed within the
organisation are those that are considered to be best or most appropriate for the organisation.
Practice audits are part of the benchmarking process - identifying which practices exist within the
organisation and where there is a need to implement better practices. Audits identify where there are
practices that can be transferred (see 'Best Practice Transfer' measure) and contribute to the measure
of 'Best Practice Coverage'. As a result this measure should be used as part of the benchmarking
process in order to assess the amount of benchmarking and performance improvement required.
number of best practice audits undertaken in a given period
number of benchmarking projects undertaken in a given period
Best practice audit - is the process of evaluating the execution of processes and activities and
conducting an assessment of whether the practices employed are considered to be best or whether
they require improvement. Practices might be best if they are the best executed in the organisation or
best in industry. Improvement will then be dependant on the importance of the practice or activity.
The given time period for the measure will be dependent on the level and frequency of benchmarking
activity. Measurement must be over extended periods of time to map trends, over a number of years,
for example.
The frequency of audits and the measure will be dependent on the organisation's competitive
environment. Frequently changing market conditions or performance of competitors will require the
organisation to review practices more frequently to ensure competitiveness is maintained.
The measure should be analysed based on the scope of benchmarking activity. This should include
analysis by process, considering the number of times each activity or process is audited. A key
process might be audited frequently to ensure the practices employed remain 'best'.
Data should be identified during the benchmarking process which should document all such activities.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Practice Inventory / Gap

The measure of practice inventory / gap assesses the availability of best practices required to gain
competitive advantage and achieve strategic objectives and whether there is a gap between the
practices employed and those considered to be best. It indicates whether it is necessary for best
practices to be implemented in order to improve performance. Best practices are implemented to
ensure practices are undertaken in the best way possible.
This measure should be used as part of the benchmarking process in order to assess the amount of
benchmarking and performance improvement required and how well benchmarking activity closes the
appropriate gaps.
It is vital that the organisation identifies the key activities and processes, as these are the ones that
require best practices to be implemented. These activities or processes are those that are important
for the organisation in order to be competitive. Gaps in performance can be identified by establishing
which processes or activities are clearly preventing the organisation from performing to its potential.
The effectiveness of practice identification and implementation is dependent on an effective
benchmarking process. Benchmarking is 'the search for industry best practices that lead to superior
performance' (Camp, 1989). As such the benchmarking process is the process of identifying best
practices that exist in other organisations and implementing them where appropriate. The process
includes identifying the processes or activities that need to be improved, identifying partners from
whom lessons can be learnt and adopting practices that are considered to be best, where appropriate
to the organisation.
It is important for organisations to anticipate and define 'emerging best practices' that will become
increasingly important in the future (e.g. internet technologies) and the extension of its business
strategies (e.g. new markets).
Implementation of best practices are linked to improvement of the performance of processes. As a
result practices are closely linked to processes and relate to the specific processes within the
organisation.
% of required best practices that are available within the organisation
% of best practice gaps that are closed in a given time period
performance as % of performance that could be expected if best practices were in place
Required best practices - are the practices that the organisation has identified as requiring
implementation. These are processes at which it is important that the organisation improves.
Best practice gaps - are gaps in the performance of key activities or processes between actual and
required performance. These gaps might be identified by comparing performance measures with other
organisations or by estimating by how much performance would improve if best practice was
introduced.
Expected performance with best practices - is the level of performance that the organisation expects
can be achieved if best practices were implemented.
Often the greatest benefit can be gained from benchmarking with organisations in different industries
that specialise in, or gain competitive advantage from, activities or processes which the organisation
needs to improve. For example manufacturing companies might learn from benchmarking a
supermarket's stock control system, as supermarkets have to maintain close control of very high
turnover of inventory often including items with short shelf lives.
Not all practices will be appropriate in all circumstances. Practices should always be modified to
make them appropriate to the organisation. Lessons learnt from other organisations might encourage
the organisation to redesign its processes to make them more appropriate. Best practice for a process
might be a hybrid practice of a number of organisations' practices or might be practice that is
modified to make it more appropriate to the organisation.
Whilst an organisation should strive to achieve best practice in all of its activities, in reality this will
not be possible. The organisation must prioritise the activities and processes to be benchmarked. As
it is not possible to be best at everything, it is important to focus on processes and activities which
are 'qualifiers' (required to meet industry norms, the minimum required to compete) and 'winners'
(which provide competitive advantage).
The measure should be analysed based on the scope of benchmarking activity. This might be by
process or department for example. Data should be identified during the benchmarking process.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Availability of Technology
This measure assesses whether pieces of technology are available when they are required.
As with other capabilities, it is essential that technology is available when required in order to satisfy
demand. The measure assesses how well technology is planned in order to ensure that the
organisation has the right items of technology, and that the technology is in the right place at the right
time to satisfy demand for the organisation's products and services. Such planning is a key part of the
capacity planning process when scheduling activities. This is an important measure of the
effectiveness of these planning processes.
It is most important to use this measure in relation to key pieces of technology, where their absence
can stop activity of the organisation, or items which provide competitive advantage, the absence of
which could affect the competitiveness of the firm.
The availability of technology can be maintained by making large investments to ensure that the right
technology is always available. This might include maintaining excess technology to cover all
eventualities. Although this will ensure availability it might well be inefficient use of resources as
there will be increased investment costs and increased cost of maintaining technology which might
not be highly utilised. As a result it is important to consider 'Technology Utilisation' when using this
measure to ensure that the organisation's technology is appropriately utilised. The balance between
utilisation and availability of technology should be assessed by the organisation based on its
competitive priorities. Expenditure on excess technology in key strategic areas, or on key strategic
items can be justified if availability and flexibility are key competitive priorities.
The availability of capital to invest can be a key consideration in the availability of technologies
when required as will the speed and cost of technology relocation.
Lack of availability will cause additional costs to be incurred (see cost of equipment breakdowns).
% of occasions that items of technology are available when required
average time between technology breakdowns
Breakdown - is to become in-operational due in unexpected circumstances.
It is most important that analysis of this measure is focused on key items of technology where their
absence can stop activity of the organisation, or infrastructure which provides competitive advantage,
the absence of which could affect the competitiveness of the firm.
identification of the reasons for technology being unavailable and hence action can be taken to
prevent it recurring. Lack of technology might be caused by a lack of investment in the appropriate
technology, failure to effectively deploy available technology in a timely manner or a lack of
appropriate support to minimise down time.
There is a need for a feedback mechanism to determine when technology is not available and to
Prism Facet 1:
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Sub-Facet 2:
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Sub-Facet 3:
Impact of Technology Implementation

Value added by technology implementation is a key measure of the contribution that new technology
makes to the business. This is a key measure as it assesses whether a return is realised on the
investment that is made and is important to assess whether investments in new technology are
worthwhile.
This measure assesses the effectiveness of decision making regarding new technology investment.
Evaluating the impact of implementation on performance is important to ensure that the objectives
have been achieved. Monitoring of the performance impact enables action to be taken if expected
performance benefits are not being realised. It also allows lessons to be learned so that impact of
future implementation projects can be enhanced.
Measurement of the impact of the implementation of technology should focus on the objectives of that
implementation. Although revenue generation or cost savings are the most easily quantifiable benefits,
the objectives may be based on equally important but less quantifiable benefits. It is equally important
that realisation of these benefits is monitored.
average increase in sales turnover generated by new technology introduction
average reduction in costs as a result of new technology introduction
average value added per implemented piece of new technology
Value added - is the value that the new technology adds to the organisation. It will often be necessary
to undertake a qualitative assessment of the way in which the new technology affects the operations
and processes of the organisation in addition to the way it adds to the sales revenue that is generated
and costs reduced.
Data to calculate increased sales revenue and reduced operating costs will be available from
accounting information systems.
New technologies and systems will often be implemented to satisfy strategic objectives, to gain
competitive advantage or in order to facilitate operational improvements. As a result it is often
difficult to assess the full benefits of these investments in financial terms. Therefore it will be
necessary to undertake cost benefit analysis to place quantitative values on the benefits that are
realised. Such analysis should include consideration of the costs and benefits of those affected by the
implementation at all levels of the organisation. The costs and benefits can often be very different at
different levels and in different departments - analysis should reflect this.
Isolating the effect of new technologies from those of other variables is always going to be difficult.
Estimates, rather than precision are therefore appropriate.
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Sub-Facet 2:
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Sub-Facet 3:
Frequency of Technology Innovations

The objective of this measure is to capture information on the rate (how fast) a company is
introducing new technologies.
While the 'New Technology Introduction Time' measures the length of time taken to proceed from
initial concept / identification of a technology need, development, prototyping through to actual
launch. This measure assesses the rate of change (refresh rate) of the existing portfolio of
technologies.
In new and dynamic markets the rate at which new technologies can be introduced will be a key
determinant of competitiveness. In markets where new products and time to market are order winning
criteria, ensuring that introduction rate is better than competitors is essential. It is also important
where high tech processes are required or where critical process improvements can be achieved
through technology implementation.
average number of new technology innovations implemented in a given period
average number of innovative ideas generated in a given period
New technology - A piece of new technology is the application of a new scientific or technological
technologies and/or product development.
The given period should be defined based on the characteristics of the market in which the
organisation competes. In a dynamic market where new products and services are frequently
introduced the measure should be reviewed more frequently to pick up performance trends quickly.
Analysis of the measure must include comparison of introduction rate versus that of competitors and
standard rates within the industry.
There should also be analysis by different type of technology. For example, there should be
comparison of product and process technologies, as well as by product group and process type. Each
of these will affect the frequency of innovations.
The new technology introduction process should maintain a monitoring system to collect data
regarding the rate at which new products and services are developed and introduced. There are likely
to be different processes for the implementation of different types of technology.
Prism Facet 1:

Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Innovation Success Rate

The objective of innovation is to create results that have a positive impact on the business. As such it
is important to measure whether this is the case. Measurement of the innovation success rate is an
important measure of an organisation's innovation capabilities and the effectiveness of the technology
development and implementation process.
The objective of the measure is to monitor and hence increase the proportion of innovations that have
a positive impact on the business, reducing the amount of effort that is wasted on failed innovations
and improving the effectiveness and efficiency of the innovation and technology development
processes. This is particularly important for organisations that undertake large amounts of technology
development and innovation. However it is important that in improving the effectiveness of
innovation, members of the organisation are not discouraged from making suggestions. It is important
that idea generation is encouraged and it is often necessary to take risks in introducing innovations in
order to maximise the advantage of novel ideas.
% of innovations that make a positive impact on the business
average number of successful innovations in a given period
Innovation - an innovation is a new product or process that is introduced following development from
an idea or invention. It is closely related to the concept of new technology, which is the application of
a new scientific or technological development that has practical value to the organisation. As with
new technologies, an innovation can relate to products or processes and will include information and
communication technologies, manufacturing process technologies and/or product development
technologies.
Positive impact on the business - determines whether an innovation has been a success or failure. The
way in which this is defined will depend on the nature of the innovation. As with the technology
breakeven time measure, this measure considers the benefits of the innovation as well as the cost of
development and implementation. Benefits include increased revenue, reduced costs and less
quantifiable strategic or operational benefits, such as establishing competitive advantage. In order to
fully evaluate the impact of an innovation it will be necessary to undertake a qualitative assessment of
the impact and assign a quantifiable value to it.
The given period for this measure will depend on the frequency of innovation. If the organisation
competes in a highly innovative environment it will be necessary to have a higher volume of
innovations and this measure will have to be used more frequently.
The type of industry will have a significant impact on innovation success rate. In highly innovative
and dynamic environments it is important to ensure that there are a large number of innovations and
ideas to choose from. As a result it is important that use of this measure does not deter members of the
organisation from suggesting ideas for fear of failure or lowering the success rate. It is important to
consider success rate in light of the number, not just proportion, of successful innovations.
There are numerous measures which should be considered when using this measure. Success rate
should be considered in the context of the overall number of ideas generated as a low success rate
from a high number of ideas may provide sufficient innovations to maintain the organisations
competitiveness. It should also be considered in conjunction with the value of new technologies and
their break even time.
In order to calculate this measure it will be necessary for the product / technology development
process, which manages innovations, to track all innovations. As with the measure of break even
point, this should include tracking impact on costs and revenues from accounting information systems,
as well as assigning values to qualitative effects of the innovation.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Internal Technology Support

Most items of technology that are implemented within an organisation require support to ensure their
availability when required. Such technical support might be provided internally or may require an
external agent to provide the level of knowledge required. It is often preferable to have such technical
support available internally as this will allow rapid response to problems that arise. Maintaining
internal expertise also allows technology to be developed and modified in-house, so that it can be
tailored to the organisation's requirements. This can be particularly useful with regard to information
technologies which can be modified as more is learnt about their capabilities and as the
organisation's requirements change.
Because internal support can react more quickly than external service suppliers and will have a better
understanding of the urgency of problems, organisations will want higher levels of internal support
the more important it is that downtime is minimised. This importance will be determined by costs and
penalties incurred because of breakdowns. The 'frequency of breakdowns / downtime' will also affect
the importance of maintaining local support.
Whilst it is desirable to maintain internal support capabilities it might be costly to acquire and keep
the capabilities and equipment required. The cost of technical support will often be built into
contracts for the supply of technology especially where they are leased.
% of technology support that is provided internally
% of occasions that technical support is successfully provided internally
Technical support - is the support required to ensure that all technologies are maintained to ensure
their availability when required. This includes the appropriate equipment and people with
appropriate skills to undertake planned and reactive maintenance as required.
The level of technical support offered internally will be affected by the complexity of the technology
employed, the availability of resources required to maintain availability, and the urgency with which
support is required. Each of these factors will affect an organisation's policy regarding the level of
internal support to maintain.
Different types of technology will have different support requirements and the analysis of this
measure should reflect this. Different types of technology should be analysed separately with
appropriate targets.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Technology Inventory / Gap

The measure of technology inventory / gap assesses the availability of technologies required to gain
competitive advantage and achieve strategic objectives. It also measures whether there is a gap
between the technologies currently employed within the organisation and those considered to be
important. It indicates whether it is necessary for new technologies to be implemented in order to
improve performance.
It is most important that the organisation identifies the key areas and processes that require new
technologies to be implemented. Key areas and processes are those that are important for the
organisation in order to be competitive. Gaps in performance can be identified by comparison of
performance versus other organisations and by identifying the processes or activities that are clearly
preventing the organisation from performing to its full potential.
% of required technology available within the organisation
% of technology gaps that are closed in a given time period
current performance as % of that achievable with the introduction of new technology
Required technologies - are the technologies that the organisation has identified as requiring
implementation, especially where they will improve processes or activities which are important to
the achievement of competitive advantage.
Technology gaps - are gaps between required technologies and those which are currently available
within the organisation. Such gaps might be identified by comparing performance with potential
improvements that new technology might provide.
Performance achievable with the introduction of new technology - is the level of performance that the
organisation expects can be achieved if new technologies are implemented.
It is most important that the measure is focused on key items of technology, such as those where their
absence can stop activity of the organisation, or which provides competitive advantage, the absence
of which could affect the competitiveness of the firm.
identification of the reasons for technology being unavailable and hence action can be taken to
prevent it recurring. Lack of technology might be caused by a lack of investment in the appropriate
technology or failure to effectively deploy available technology in a timely manner.
There is a need for a feedback mechanism to determine when technology is not available and to
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Age of Technology
The age and condition of its technology is an important determinant of an organisation's ability to
execute its strategies and satisfy the demand for its products.
New technologies perform more efficiently and effectively than those that are ageing or in poor
condition. As a result it is important to monitor and control the age and condition profile. New
technologies are also more likely to facilitate effectiveness of operations and responsiveness to
changing market conditions.
The age and condition profile is linked to the technology inventory which assesses the availability
and condition and identifies technology gaps which need to be filled for the organisation to be
competitive. It will also be linked to technology availability as new technologies and those that are
maintained in good condition are less likely to break down.
The age and condition profile will provide input to strategy development and technology management
decisions regarding the need and timing of replacement and redeployment.
average age of technologies
% of useful life of pieces of technology completed
% of pieces of technology that are in need of replacement
Useful life - is the time from the purchase of an item until it needs to be replaced. An estimation of the
useful life of an item of technology will be made when justifying investment in it. This estimation
should be updated as it ages and its condition deteriorates.
The overall age of technology throughout the organisation will provide an indication of the control
maintained over infrastructure and the frequency of investment.
The benchmark age of technology and actual performance of this measure will depend on the nature of
the organisation and industry in which it operates. Where technologies are frequently changing and
where the performance of new technologies is very important and technologies will need to be
younger and in better condition.
The importance of age and condition of technologies will vary depending on the type of technology
and the function it performs. Analysis of this measure should reflect this, similar types of technology
should be grouped together with appropriate targets.
Assessment of the age and condition of technologies should be undertaken in conjunction with the
technology inventory / audit which monitors technology availability and gaps that need to be filled.
There should also be a feedback mechanism from operational areas to report changes in condition of
technologies and new technology needs.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
New Technology Breakeven Time

Breakeven Time (BET) measures the time it takes for the benefits of a piece of technology to equal
the cost of its introduction, as measured from the beginning of the project.
This is an important measure as it assesses the speed with which a piece of new technology makes a
positive contribution to the profitability of the organisation. The measure not only considers the costs
of introduction but also considers the success of the piece of technology in terms of additional
turnover generated or cost reduction. As a result it is an important measure of the technology
introduction process as it assesses the efficiency and the effectiveness of that process. The measure
underlines an important principle of not just developing new technologies, but also introducing them
with competitive costs.
The breakeven time measure is appealing as it accounts for the entire new technology development
and implementation process - the assessment of needs, the effectiveness of R&D, the effectiveness
and efficiency of implementation, adequacy of training programmes and related issues.
The measure is useful to serve as a "reality check" against the portfolio of implementation projects.
Using the measure will inform development managers of the likelihood of proposed projects reaching
BET. Those not making BET may then be redefined to make more business sense.
time elapsed when cumulative benefits of the new technology equals the cost of developing it.
Benefits of the new technology - is a quantification of the effects of new technology implementation.
Most obviously this will relate to increased revenues or reduced operating costs. However there will
also be less quantifiable strategic benefits of which some evaluation should be made.
Cost of developing new technologies - includes all the related costs from identification of new
technology needs to its implementation and it is fully operational (including R&D, development,
prototyping costs, production costs and training costs).
The actual breakeven time will vary considerably between industries and technologies within
industries. Analysis of the measure should reflect this. Key factors affecting breakeven time include
complexity, the cost of the R&D involved and the profit margin.
The actual point of breakeven will be affected by the 'Target Cost vs. Actual Cost' measure.
The new technology introduction process should include a process to monitor the progress of
technologies that are developed. This should enable evaluation of the output of the process including
the success of technologies following introduction. This monitoring process should provide important
and valuable feedback regarding the performance of the process.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
New Technology Introduction Time

Measuring the time required to introduce a new piece of technology is important to assess how
quickly technology is implemented following the identification of a technology gap (the need for a
new piece of technology). It will always be important that the advantages of investment in new
technologies are realised as quickly as possible. It is essential that its positive effect on the
operations of the organisation can be realised as quickly as possible, especially where these
investments are substantial.
This is an important measure for organisations that compete in markets where technological advances
are a key competitive priority, especially where technological requirements change frequently. In
such cases rapid introduction is essential to maintain competitiveness. New technologies might relate
to products or processes and will include information and communication technologies,
manufacturing process technologies or product development technologies.
It is important to calculate and use this measure when planning technological requirements as it will
indicate when an item of new technology will be available for use so that activities can be effectively
planned. As such it is linked to the inventory or audit of technologies which identify technology gaps
and when they need to be closed.
The speed of introduction will be affected by the choice to purchase technologies or develop them
internally. This choice is likely to have a significant impact on the cost, as such consideration should
be given to the urgency with which the technology is required. The make vs. buy decision might also
have an impact on the quality, fitness for purpose and level of customisation to requirements of the
resultant item of technology.
This will measure the effectiveness of the process for introducing new technologies and will be
linked to the measurement of the new product introduction process which will include new product
technologies.
average lead time to acquire an item of new technology
average lead time required to close technology gaps
Lead time - is the total elapsed time from initial idea generation to availability of new technology.
Technology gaps - are technologies that do not exist within the organisation but have been identified
as being required. It is particularly important that gaps are closed where the technologies are key to
It is important that all technology introduction projects are completed as quickly as possible, however
often resources are limited. As a result it will often be appropriate to focus this measure on key
technologies that provide the organisation with competitive advantage so that resources are focused
on their rapid introduction. When using this measure it is also important to ensure that the quality of
introduction is not compromised by rapid introduction. Technologies that do not meet the
organisation's requirements are a waste of resources regardless of the speed with which they are
implemented.
The lead time to introduce new technology will vary considerably depending on the type of
technology to be introduced. Analysis of the measure should reflect this, grouping together similar
items such as information technologies, manufacturing technologies, etc. This analysis should include
comparison with implementation in other organisations or other business units. Benchmarks for such
lead time can be obtained from external consultants or business press. Analysis should also include
consideration of the mode of technology acquisition. This will include the difference between
purchasing new technologies and developing them internally.
Use of this measure should include analysis by each stage of the acquisition process over an extended
period of time. This will enable understanding of which stage in the process is causing the greatest
delay. Comparing performance of the same stage in the acquisition process will provide more
appropriate comparisons as similar activities will have to be undertaken. Stages of the process might
include defining the specification for the technologies, finding a source, procurement or development
lead time, installation time, etc.
There should be a process for planning and executing new technology introduction which documents
activities so that they can be reviewed and improved. This should include collection of data for this
measure.
Prism Facet 1:
Prism Facet 2:
Sub-Facet 2:
Prism Facet 3:
Sub-Facet 3:
Debtor Days
Debtors days, or days debt outstanding, provides an indication of how much is currently owed to the
company. Credit terms and late payment of bills or invoices can have a significant impact on a
companys cash flow and hence its liquidity. It is not uncommon for debtor days to run at 60 plus days
in organisations, despite the fact that many payment terms specify payment within 30 days.
Debtor days = days debt outstanding
Average trade debtors
Average daily turnover
Debtors - are individuals or companies that owe debt to another individual or company (the creditor).
Days debt outstanding is calculated by determining how many days sales are required to cover the
outstanding debt. If the debt is 100,000 and monthly sales are 50,000, then two months (60 days)
worth of sales would be required to cover the outstanding debt. Hence debtor days would be 60.
When using this measure in different countries it should be noted that standard terms vary from
country to country. This is an important consideration when comparing the performance of
subsidiaries or business units in different countries. Locally accepted practices must be understood.
Prism Facet 1:
Prism Facet 2:
Prism Facet 3:
Processes Sub-Facet 3: Plan and Manage Enterprise Financial Operations

Measures Catalogue

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Measures Catalogue

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The Catalogue of Performance Measures

Copyright Centre for Business Performance, 2000

How to use the Catalogue of Performance

what contributions do we require from our stakeholders if we are to maintain and

Develop Products and Services

BIM (B.I. Methodology)

Customer Retention / Turnover / Loyalty

Customer Response Time / Delivery Lead Time

Customer Recommendations / Willingness to Recommend

Stakeholder Contribution Sub-Facet 1: Customer Contribution

Customer Feedback / Suggestions

Processes Sub-Facet 3: Plan & Manage Enterprise - Stakeholders

Customer Complaints / Returns

Stakeholder Contribution Sub-Facet 2: Customer Contribution

Customer Complaint Resolution

Customer Complaint / Defect Recurrence

Time to Resolve Customer Complaints

Strategies Sub-Facet 1: Brand, Product & Service Strategy

Revenue / Turnover Growth

existing and new customers).

Order Book vs. Forward Capacity

Perceived Value for Money

Delivery Reliability (Delivery On Time In Full)

Quality of Service (Pre & Post Sales)

Service Level Agreement Achievement

Customer's First Choice Supplier

Preferred Supplier Relationships / Customer Choice

Processes Sub-Facet 2: Plan & Manage Enterprise - Stakeholders

Number of Alternative Suppliers

Sales Price Benchmarks

New Product / Service Quality - Fitness for Purpose

Product / Service Complexity

What do we need to consider when defining the measure?

Proposal success rate/quotation conversion rate

Value of new accounts / customers

Mis-selling Claims Cost

Value of lost accounts / customers

Value of existing accounts / customers

Accuracy of cost estimation / business cases

Project Cost Compliance

On Time Project Completion

Project Completion to Quality Specifications

Communications with Stakeholders

Expenditure on Stakeholder Relations

Employee Turnover / Loyalty

Willingness of Employees to Recommend the Company as an

Employee Improvement Ideas / Suggestions

Remuneration and Benefits Benchmark

are in abundance in a given area.

Internal Promotion Opportunities

Numerical Labour Flexibility (Hire & Fire)

Transferability of staff skills / training

Stakeholder Satisfaction Sub-Facet 1: Employee Satisfaction

Applications per vacancy

Rejected Job Offers

Stakeholder Satisfaction Sub-Facet 2: Regulator & Community Satisfaction

Employee Satisfaction with Training Programme

Frequency of New Training Programmes

Availability of Training Courses

Occupational Health and Safety Assessment

Investor Satisfaction Level

Stakeholder Satisfaction Sub-Facet 1: Investor Satisfaction

Shareholder Value Added (SVA)

Brand Equity / Brand Value