Business Change and Key Performance Indicators Part 2

Key Performance Indicators (KPIs) Definition

• Key Performance Indicators are specific criteria used to measure the efficiency and effectiveness of a business in achieving its objectives.

Rates of Staff Absenteeism

• Definition: The number of days employees are absent from work as a percentage of their total possible working time when they are scheduled to be there.

• Formula: $\frac{\text{number of days absent}}{\text{total days should be working}} \times 100$

• High rates may indicate job dissatisfaction, stress, or chronic medical issues.

• Solutions: Investment in worker motivation (performance-related pay, training), staff support, or health and wellbeing programs (e.g., subsidising flu jabs).

Level of Staff Turnover

• Definition: The rate at which employees leave the business and need to be replaced.

• Note: Employees leaving due to redundancy are not included in staff turnover figures.

• Real-World Example: Chipotle Mexican Grill Inc. reported a staff turnover rate of $194\%$ in 2021, compared to $141\%$ previously, suggesting low levels of morale.

• Solutions: Competitive remuneration, career advancement, and fostering a strong corporate culture.

Level of Wastage

• Definition: The amount of resources discarded during the production process.

• Real-World Example: Coles and UK supermarkets (Waitrose, Marks & Spencer, Morrisons) implemented refill stations to reduce packaging waste. This resulted in price decreases for customers, such as a $17\%$ drop for Olive oil and a $55\%$ drop for Laundry detergent.

• Solutions: Lean production strategies, quality assurance, and technology investments for accuracy.

Number of Customer Complaints

• Definition: The amount of consumers dissatisfied with the business or its products who have officially expressed their concerns to the business.

• Complaints serve as feedback for product quality or service standards. For every recorded complaint, many other dissatisfied customers may simply leave without notice.

• Solutions: Staff training, quality management strategies, and increased investment in technology.

Number of Workplace Accidents

• Definition: The amount of unplanned or uncontrolled events resulting in personal injury or property damage.

• Causes: Faulty equipment, poorly trained employees, or unsafe working practices.

• Goal: Businesses aim for zero accidents to ensure employee safety.

Number of Website Hits

• Definition: Measures each request to a server for a file from a website, indicating the volume of traffic.

• While hits show popularity, other metrics like "bounce rates" (visitors leaving quickly) offer deeper insight into user engagement.

• Success Example: Kindness (an organic skincare company owned by Katerina) saw website hits increase from $1,264$ per day to nearly $4,500$ after a website upgrade.

Questions & Discussion Points

• Scenario 1 (The Coffee Roaster, Bean & Brew): Why might net profit decline if sales volume is stable? (Discussion: Rising costs of beans and electricity shrink the "bottom line").

• Scenario 2 (The Tech Startup, Quick-Click IT): Why is resolving tickets $30\%$ faster a measure of efficiency rather than sales? (Discussion: It measures resource use relative to output).

• Scenario 3 (The Retail Clothing Chain, TrendSetter Apparel): How can a business have steady sales but decreasing market share? (Discussion: If the total market grows faster than individual sales, share drops from $15\%$ to $12\%$).

• Scenario 4 (The Subscription Service, StreamLine TV): Is the number of new sign-ups during a "Half-Price Winter Sale" a good measure of profit? (Discussion: Not necessarily, as high acquisition costs or discounted rates may not translate to net profit).