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business benefits: measuring, valuing financial, non-financial

business benefits: measuring, valuing financial, non-financial

How do you answer questions like these: What is this benefit worth, in real money? What's the business value of this or that benefit? To answer such questions, analysts start by defining business benefit this way:

That definition serves well for many business planning, decision support, and other analysis needs. Defining business benefits by referring to business objectives provides a practical basis for measuring, valuing, and comparing all benefitsfinancial and nonfinancial.

The business benefit concept is central in strategic planning, cost/benefit studies, and business case analysis. For these tasks, business analysts evaluate investments and actions by anticipating likely cost and benefit outcomes. People new to these activities learn quickly, however, that some kinds of benefits are easier to measure and value than others.

The analyst who first learns benefits definitions and principles is ready to deliver measurements and values with credibility and legitimacy. Analysts know from experience they will probably have to explain and justify benefit values they present to stakeholders and senior managers.

Those working in business planning and decision-support find, over and over, they must estimate the business value of specific action outcomes before they occur. Predicting future costs and benefits this way is, in fact, the central task in cost/benefit studies and business case analysis.

Those definitions, however, have little practical value for those in business planning and decision support, or those who manage projects, programs, products, and the asset lifecycle. They need instead cost and benefit definitions that provide a practical basis for identifying, measuring, valuing, and comparing all classes of business benefits and costs.

These definitions may seem awkward at first, but they provide a sound way tobring both financial and nonfinancial benefits and costs into the same analysis. They are especially useful when you must show that nonfinancial benefits are real and vital.

A business cost, incidentally, is not necessarily an expense. Cost is a broader term that includes expense but other kinds of outcomes or events as well. Exhibit 1, below, summarizes the types of actions that qualify as costs in business analysis.

Accountants and financial specialists define expense formally as a decrease in owners equity caused by using up assets. More broadly, however, other business think of "expenses" as spending, and many use the terms expense, expenditure, and cost interchangeably. For more on the meanings of Exhibit 1 terms, see Expense.

Business typically state the highest level objective for profit-making companies as "earning profits." The business school professor, however, might prefer tosay the goal is "increasing owner value by earning profits." In any case, companies can use profits in only two ways.

Most other objectives in private industry existat least in principleto support the high-level profit objective. As a result, any action outcome that arguably contributes to the profit objective qualifies as a business benefit.

The highest level objectives for government and non-profit organizations, however, are something besides "earning profits." Highest-level objectives for these groups appear in mission statements about service delivery and the populations they serve. These organizations, nevertheless, also pursue revenue and spending objectives such as these:

Not all business objectives start with financial definitions. Business set goals for customer satisfaction and company image, for instance, defining target levels with nonfinancial key performance indicators (KPIs). Unfortunately

Several benefit terms commonly turn up that astute analysts find to be deceptive or imprecise. Foremost among these are soft benefits and intangible benefits. Every analyst presenting results for review should prepare to explain why such terms are unhelpful.

These terms inevitably position the "soft" benefits as second-class outcomes in the eyes of many. automatically credit so-called soft benefits with less weight or importance than hard benefits. It is better to avoid the terms "hard" and "soft" altogether. Instead, classify outcomes as being either financial benefits or nonfinancial benefits.

Tangible means touchable, but many speak inaccurately by saying "tangible" when they mean "financial." sometimes say "intangible" when referring to objectives and benefits such as improvements in customer satisfaction, branding, employee morale, safety, or reduced risk. They probably do so because they believe the financial value of these outcomes is unclear.

Business objectives and benefits are indeed tangible if there is objective evidence they exist. "Tangible objectives," in other words, are "touchable." Calling a "business benefit" intangible says there is no evidence it exists and no way to measure it. The analyst's task, often, is to find credible tangible evidence for the kinds of benefits in the paragraph above.

In other words, actions and outcomes in the business setting have business value only when they contribute towards meeting business objectives. And, when contributions point to financial value, the analyst can apply investment metrics such as return on investment (ROI) or payback period.

The step-by-step benefit value process below begins by associatinglinking togetherthree things: (1) A Business Objective, (2) a proposed action to address the objective, and (3) a tangible action outcome that helps reach the objective.

When looking for objectives that an action might address, do not overlook business problems and needs. Remember that any discussion of needs or issues likely mentions an objective. When employee turnover is high and costly, for instance, the problem points to a goal: Reduce employee turnover rate.

Notice that actions for approaching one objective may help reach other goals as well. Acting to improve product quality, for instance, may also help reach targets for lower warranty service costs, branding, and customer satisfaction.The benefit (higher product quality)can receivebusiness value from each of these objectives.

Non-financial objectives like customer satisfaction or branding can be very important or even crucial to a company's strategy. Consequently, who want to assign a value tononfinancial benefits must find concrete ("tangible") measures for the objectives they represent. They can do this, even if they have to measure indirectly.

Objectives and business benefits having to do with customer satisfaction, for instance, are extremely important to companies inhighly competitive industries. And, customer satisfaction no doubt supports other objectives such as the following:

No one doubts that improvements in these factors lead ultimately to financialgains. Nevertheless, the objective itselfcustomer satisfactionis a condition of the customer mind. Because they cannot measure that directly, some label the goal "intangible."

Analysts with experience know that assigning value to benefits calls for more than a single formula and more than a single measurement. Instead, benefit value results from applying a rationalereasoningthat builds a case for the stated value, step by step.

Table 1 below illustrates the kind of information the analyst needs to produce for Step 1. Notice especially that for some financial and nonfinancial objectives, the business benefit (right column) is essentially the same thing as the business objective (left column), as in Rows A, B, C, and F. For other business objectives, benefits that address the left-column objective appear as multiple KPIs in the right column, as in Rows D and E.

Scores on brand-preference surveys. table 6 Belowercentage of customers who reliably re-purchase the same brand.purchase Scores on competitive brand-awareness surveys, Customer evaluation of brand strength in focus-group qualitative research studies.

Scores on employee job satisfaction surveys. Performance review report data. Numbers of workplace disciplinary actions. Number of "sick-day" claims Absentee rates and numbers of days late-to work. Scores on the firm's employee productivity metrics.

Deliver a training and coaching program for service delivery specialists with components focusing on: Service work efficiency. Quality of service work Improvements in service dispatch accuracy. .

Step2beginsthe process of legitimizing the benefit outcome from Step 1. The reasoning for measuring and valuing the benefit (Steps 4-7) is worth developing only after the analyst first shows convincingly that the benefiet indeed follows from the action (Step2) and that the benefit indeed contributes to meeting the objective (Step 3). Success in Steps 2 and 3 legitimizes the benefit value that comes with later steps. If the analyst cannot complete Steps 2 and 3, successfully, any results from Steps 4 - 7 are meaningless. Step 2. Confirm the benefit outcome is truly due to the action. To show convincingly that an outcome truly follows from an action, the analyst may use cause cause-and-effect reasoning, anecdotal evidence, or examples of historical precedent. Whatever the approach, the result must score high in credibility. Step 2 is the primary reason that cost/benefit studies and business case analyses must have contributions from in the business unit. These know the details of day-to-day operations, what motivates employees, what drives costs, and the real reasons that actions either work or do not work. Step 2 Example: Will a highway safety program really lower the highway accident rate? Munciple and regional governments sometimes respond to public problems with multi-part programs, trying to correct or reduce problem severity. A provincial or state government could, for instance, aim to address the accident problem rate with a safety program that has several components: Improving lighting and road grading at dangerous intersections. Improving highway signage and lighting. Enforcing speed limits and stop sign rules more rigorously. Enforcing impaired-driving laws more aggressively. Expanding and enriching driver-education forPeople new drivers. Mandatory remedial driver-education mandatory for problem drivers. To prove that the proposal program will very likely reduce the accident rate, the program manager must first understand the causes of the problem. The manaager must then argue convincingly that each proposal step directly addresses accident causes. For example Some program components aim directly at known causes. Better lighting should result in fewer accidents due to darkness. Historical data on the relationship between speed laws and accidents is easy to find for many localities. The relationship between alcohol-impairment and accidents, and drug-impairment and accidents is a matter of record. However, the program manager must also show how the proposal program can truly reduce instances of these conditions. Other program components may already have a track record in different localities. For instance, historical data are easy to find on the impact of driver-education programs on accident rates. Business CaseTemplates Business Case Templates 2018When You Need a Real Business Case! Info Buy Now $49 PageTop Contents

Success in Steps 2 and 3 legitimizes the benefit value that comes with later steps. If the analyst cannot complete Steps 2 and 3, successfully, any results from Steps 4 - 7 are meaningless. Step 2. Confirm the benefit outcome is truly due to the action. To show convincingly that an outcome truly follows from an action, the analyst may use cause cause-and-effect reasoning, anecdotal evidence, or examples of historical precedent. Whatever the approach, the result must score high in credibility. Step 2 is the primary reason that cost/benefit studies and business case analyses must have contributions from in the business unit. These know the details of day-to-day operations, what motivates employees, what drives costs, and the real reasons that actions either work or do not work. Step 2 Example: Will a highway safety program really lower the highway accident rate? Munciple and regional governments sometimes respond to public problems with multi-part programs, trying to correct or reduce problem severity. A provincial or state government could, for instance, aim to address the accident problem rate with a safety program that has several components: Improving lighting and road grading at dangerous intersections. Improving highway signage and lighting. Enforcing speed limits and stop sign rules more rigorously. Enforcing impaired-driving laws more aggressively. Expanding and enriching driver-education forPeople new drivers. Mandatory remedial driver-education mandatory for problem drivers. To prove that the proposal program will very likely reduce the accident rate, the program manager must first understand the causes of the problem. The manaager must then argue convincingly that each proposal step directly addresses accident causes. For example Some program components aim directly at known causes. Better lighting should result in fewer accidents due to darkness. Historical data on the relationship between speed laws and accidents is easy to find for many localities. The relationship between alcohol-impairment and accidents, and drug-impairment and accidents is a matter of record. However, the program manager must also show how the proposal program can truly reduce instances of these conditions. Other program components may already have a track record in different localities. For instance, historical data are easy to find on the impact of driver-education programs on accident rates. Business CaseTemplates Business Case Templates 2018When You Need a Real Business Case! Info Buy Now $49 PageTop Contents

If the analyst cannot complete Steps 2 and 3, successfully, any results from Steps 4 - 7 are meaningless. Step 2. Confirm the benefit outcome is truly due to the action. To show convincingly that an outcome truly follows from an action, the analyst may use cause cause-and-effect reasoning, anecdotal evidence, or examples of historical precedent. Whatever the approach, the result must score high in credibility. Step 2 is the primary reason that cost/benefit studies and business case analyses must have contributions from in the business unit. These know the details of day-to-day operations, what motivates employees, what drives costs, and the real reasons that actions either work or do not work. Step 2 Example: Will a highway safety program really lower the highway accident rate? Munciple and regional governments sometimes respond to public problems with multi-part programs, trying to correct or reduce problem severity. A provincial or state government could, for instance, aim to address the accident problem rate with a safety program that has several components: Improving lighting and road grading at dangerous intersections. Improving highway signage and lighting. Enforcing speed limits and stop sign rules more rigorously. Enforcing impaired-driving laws more aggressively. Expanding and enriching driver-education forPeople new drivers. Mandatory remedial driver-education mandatory for problem drivers. To prove that the proposal program will very likely reduce the accident rate, the program manager must first understand the causes of the problem. The manaager must then argue convincingly that each proposal step directly addresses accident causes. For example Some program components aim directly at known causes. Better lighting should result in fewer accidents due to darkness. Historical data on the relationship between speed laws and accidents is easy to find for many localities. The relationship between alcohol-impairment and accidents, and drug-impairment and accidents is a matter of record. However, the program manager must also show how the proposal program can truly reduce instances of these conditions. Other program components may already have a track record in different localities. For instance, historical data are easy to find on the impact of driver-education programs on accident rates. Business CaseTemplates Business Case Templates 2018When You Need a Real Business Case! Info Buy Now $49 PageTop Contents

To show convincingly that an outcome truly follows from an action, the analyst may use cause cause-and-effect reasoning, anecdotal evidence, or examples of historical precedent. Whatever the approach, the result must score high in credibility.

Step 2 is the primary reason that cost/benefit studies and business case analyses must have contributions from in the business unit. These know the details of day-to-day operations, what motivates employees, what drives costs, and the real reasons that actions either work or do not work.

Munciple and regional governments sometimes respond to public problems with multi-part programs, trying to correct or reduce problem severity. A provincial or state government could, for instance, aim to address the accident problem rate with a safety program that has several components:

To prove that the proposal program will very likely reduce the accident rate, the program manager must first understand the causes of the problem. The manaager must then argue convincingly that each proposal step directly addresses accident causes. For example

In situations that do call for a separate Step 3, this third step is critical. In these cases, omitting Step 3 destroys the reasoning that establishes benefit value in Steps 4-7. Examples below also show how to decide whether or not you need Step 3.

In Step 1, the analyst links a business objective to an action and tangible outcomes from the action. Step 2 is the process of showing in convincing terms that the outcome truly follows from the action. This step, Step 3 is necessary sometimes to confirm also that the outcome helps meet the business objective.

When the analyst measures the business objective and the action outcome in the same terms--by the same metriccompleting Step 2 also provides the proof element for Step 3. Under those conditions, a separate Step 3 is superfluous.

Deliver a training and coaching program for service delivery specialists with components focusing on: Service work efficiency. Quality of service work Improvements in service dispatch accuracy.

Other times, however, the analyst cannot automatically assume that tangible outcomes contribute to meeting the business objective. This assumption is especially uncertain (a) when the business objective itself has a nonfinancial definition, and (b) the action in view has multiple tangible nonfinancial outcomes.

Scores on brand-preference surveys. Percentage of customers who reliably re-purchase the same brand.purchase Scores on competitive brand-awareness surveys, Customer evaluation of brand strength in focus-group qualitative research studies.

Scores on employee job satisfaction surveys. Performance review report data. Numbers of workplace disciplinary actions. Number of "sick-day" claims Absentee rates and numbers of days late-to work. Scores on the firm's employee productivity metrics.

Examples D and E illustrate the case when organizations publish strategic objectives in nonfinancial terms. Government, Military, Non-Profit Organizations, and firms in private industry commonly publish mission statements and strategic objectives pointing to objectives like these:

Taking option 2 automatically completes Step 3 of the benefit valuation process. Organizations that want to track progress towards meeting these objectives, year to year, will keep the same KPI KPI definitions year-to-year.

Step 4 measures the total financial value of the action outcome. Remember that the this value can differ trom the benefit value for the action. The outcome, in other words, may have several causes besides one action in view. The analyst expects to adjust the Step 4 value further, in Step 7 below, to recognize the contributions of multiple actions.

Financial benefits should represent net value gains, not gross cash inflow. Analysts often designate Sales Revenues as a business benefit. For cost/benefit or business case studies, however, they should replace this benefit with Net gains from sales increase or Net profit from revenue increase.

The size of a sales revenue increase is easy to calculate as the difference between revenues one year and revenues the next year. Consider the auto dealer in Example A who ran a year-long marketing campaign in Year 2. The campaign objective was to grow sales revenues for the business.

With this calculation, the analyst settles the financial value of the benefit (increased sales revenues) Ths step establishes Net benefit value as $4,580,000. However, the portion of this benefit value to credit to the action in view (the marketing campaign) is still uncertain. The benefit may be due to several actions. In Step 7, below, the analyst may choose to apportion the total benefit value ($4,580,000) among several contributing actions. Example Case C: Valuing Reductions in Warehouse Pilerage Losses Business owners in example Case C took action aiming to reduce unacceptably high inventory losses. They installed a state-of-the-art warehouse security system that includes (1) door-lock controls, (2) surveillance cameras, and (3) electronic sensors and alarms. The system began operating at the end of July. At the end of August, the analyst calculated the first monthly change in loss value follows: July pilferage losses: $420,000 August pilferage loses: $110,000 Pilferage loss reduction: $310,000 This calculation settles the monthly pilferage loss reduction benefit value as $310,000. Before calculating an ROI for the security system, however, the analyst will report the Step 4 result to owners with two cautions: Caution: The step 4 result may be due to multiple actions beyond installing a new security system. For instance, the firm may also have warned warehouse employees, loading dock workers, and their managers, and their security personnel they are underPeople new and more rigorous monitoring. The firm may have warned shippers and other delivery services that inventory accounting is now more accurate and under continuous tracking. Benefit value credit to the security system will have to wait until Step 7, where multiple actions may have to share credit for the Step 4 value ($310,000). Caution: Security specialists know that benefits from security actions may recede over time. Burglars, shoplifters, untrustworthy employees, and dishonest shippers constantly improve their ability to diminish the effectiveness of security systems. The analyst should wait several months, at least, before declaring a definitive ROI for the security system. Financial ModelingPro Financial Modeling Pro The Living Model Makes Your Case! Info Buy Now $49 PageTop Contents

Ths step establishes Net benefit value as $4,580,000. However, the portion of this benefit value to credit to the action in view (the marketing campaign) is still uncertain. The benefit may be due to several actions. In Step 7, below, the analyst may choose to apportion the total benefit value ($4,580,000) among several contributing actions. Example Case C: Valuing Reductions in Warehouse Pilerage Losses Business owners in example Case C took action aiming to reduce unacceptably high inventory losses. They installed a state-of-the-art warehouse security system that includes (1) door-lock controls, (2) surveillance cameras, and (3) electronic sensors and alarms. The system began operating at the end of July. At the end of August, the analyst calculated the first monthly change in loss value follows: July pilferage losses: $420,000 August pilferage loses: $110,000 Pilferage loss reduction: $310,000 This calculation settles the monthly pilferage loss reduction benefit value as $310,000. Before calculating an ROI for the security system, however, the analyst will report the Step 4 result to owners with two cautions: Caution: The step 4 result may be due to multiple actions beyond installing a new security system. For instance, the firm may also have warned warehouse employees, loading dock workers, and their managers, and their security personnel they are underPeople new and more rigorous monitoring. The firm may have warned shippers and other delivery services that inventory accounting is now more accurate and under continuous tracking. Benefit value credit to the security system will have to wait until Step 7, where multiple actions may have to share credit for the Step 4 value ($310,000). Caution: Security specialists know that benefits from security actions may recede over time. Burglars, shoplifters, untrustworthy employees, and dishonest shippers constantly improve their ability to diminish the effectiveness of security systems. The analyst should wait several months, at least, before declaring a definitive ROI for the security system. Financial ModelingPro Financial Modeling Pro The Living Model Makes Your Case! Info Buy Now $49 PageTop Contents

However, the portion of this benefit value to credit to the action in view (the marketing campaign) is still uncertain. The benefit may be due to several actions. In Step 7, below, the analyst may choose to apportion the total benefit value ($4,580,000) among several contributing actions. Example Case C: Valuing Reductions in Warehouse Pilerage Losses Business owners in example Case C took action aiming to reduce unacceptably high inventory losses. They installed a state-of-the-art warehouse security system that includes (1) door-lock controls, (2) surveillance cameras, and (3) electronic sensors and alarms. The system began operating at the end of July. At the end of August, the analyst calculated the first monthly change in loss value follows: July pilferage losses: $420,000 August pilferage loses: $110,000 Pilferage loss reduction: $310,000 This calculation settles the monthly pilferage loss reduction benefit value as $310,000. Before calculating an ROI for the security system, however, the analyst will report the Step 4 result to owners with two cautions: Caution: The step 4 result may be due to multiple actions beyond installing a new security system. For instance, the firm may also have warned warehouse employees, loading dock workers, and their managers, and their security personnel they are underPeople new and more rigorous monitoring. The firm may have warned shippers and other delivery services that inventory accounting is now more accurate and under continuous tracking. Benefit value credit to the security system will have to wait until Step 7, where multiple actions may have to share credit for the Step 4 value ($310,000). Caution: Security specialists know that benefits from security actions may recede over time. Burglars, shoplifters, untrustworthy employees, and dishonest shippers constantly improve their ability to diminish the effectiveness of security systems. The analyst should wait several months, at least, before declaring a definitive ROI for the security system. Financial ModelingPro Financial Modeling Pro The Living Model Makes Your Case! Info Buy Now $49 PageTop Contents

Business owners in example Case C took action aiming to reduce unacceptably high inventory losses. They installed a state-of-the-art warehouse security system that includes (1) door-lock controls, (2) surveillance cameras, and (3) electronic sensors and alarms. The system began operating at the end of July. At the end of August, the analyst calculated the first monthly change in loss value follows:

This calculation settles the monthly pilferage loss reduction benefit value as $310,000. Before calculating an ROI for the security system, however, the analyst will report the Step 4 result to owners with two cautions:

Three examples from Table 1 (D, E, and F) above identify tangible action outcomes as possible benefits due to actions in the middle column. To ultimately assign business benefit value to outcomes in cases D, E, and F, the analyst completes Step 5.

Scores on brand-preference surveys. Percentage of customers who reliably re-purchase the same brand.purchase Scores on competitive brand-awareness surveys, Customer evaluation of brand strength in focus-group qualitative research studies.

Scores on employee job satisfaction surveys. Performance review report data. Numbers of workplace disciplinary actions. Number of "sick-day" claims Absentee rates and numbers of days late-to work. Scores on the firm's employee productivity metrics.

Deliver a training and coaching program for service delivery specialists with components focusing on: Service work efficiency. Quality of service work Improvements in service dispatch accuracy. .

Business firms and government organizations sometimes use KPI scores to make tangible objectives and benefits that may seem intangible. Employee job satisfaction (Row E), for instance, is a state of employee mindsnot a physical state to measure directly. For this reason, some business say that employee satisfaction is an intangible quality. The same people also apply the intangible label to qualities such as customer satisfaction, group morale, safety, livability, company image, brand strength, military readiness, and risks of various kinds. However, Intangible means untouchablethere is no evidence the objective or benefit exists and no way to measure progress towards it. Considering the accurate meaning of intangible, professional analysts usually decide that objectives and benefits that are truly intangible have no place in a professional cost/benefit study or business case. A solution that works, often, is to turn so-called intangibles into tangible qualities with key performance indicators (KPIs). Analysts view KPIs as tangible outcomes that are credible indirect evidence of an underlying quality they cannot measure directly. They can assume, for instance, that the KPI employee retention rate is a valid indicator of employee job satisfaction. For practical purposes, the firm in case E above uses the set of tangible KPI's in the right column to define employee job satisfaction. Organizations that use KPIs in this way typically measure the same KPIs periodically over time, and also after actions aimed at improving the underlying qualityemployee job satisfaction customer satisfaction, or branding, for instance. Measure KPI impact in Step 5 The firm in the Case E example launched an initiative aimed at improving employee job satisfaction. The initiative had these characteristics: Business Objective: Rise employee job satisfaction Action Addressing the Objective: Change workplace HR practice by moving to flexible working hours, career-enhancing training, and basing pay increases on performance. Table 6 below shows the Before and After KPI metrics for the Case E firm's action. The difference between Before and After is the size of the impact aimed at improving employee job satisfaction. Case E. Employee Job Satisfaction Action OutcomeKey Performance Indicators TargetKPI Pre-ActionKPI Post-ActionKPI KPIImpact Employee job satisfaction survey scores: Percentage scoring Excellent 40% 40% 60% +20% Employee performance review data: Percentage rated high ("1" or "2") 80% 40% 705 +30% Workplace disciplinary Actions per 1000 employees, per year. 0 10.0 4.0 6.0 Average sick day claims per employee per year. 2.0 7.5 3.0 4.5 Average absent or late to workdays per year per employee 0 10.0 5.3 4.7 Average aggregate score on firm's productivity metrics 90% 52% 75% 23% Table 6. Six KPI's for example case E (left column). The purpose of Step 5 is to measure the action impact on each KPI. Action Impacts in the right column receive benefit value in Steps 6 and 7. Business CaseGuide Business Case Guide. Everything YouNeed to Know About the Business Case! Info Buy Now $64 PageTop Contents

Employee job satisfaction (Row E), for instance, is a state of employee mindsnot a physical state to measure directly. For this reason, some business say that employee satisfaction is an intangible quality. The same people also apply the intangible label to qualities such as customer satisfaction, group morale, safety, livability, company image, brand strength, military readiness, and risks of various kinds. However, Intangible means untouchablethere is no evidence the objective or benefit exists and no way to measure progress towards it. Considering the accurate meaning of intangible, professional analysts usually decide that objectives and benefits that are truly intangible have no place in a professional cost/benefit study or business case. A solution that works, often, is to turn so-called intangibles into tangible qualities with key performance indicators (KPIs). Analysts view KPIs as tangible outcomes that are credible indirect evidence of an underlying quality they cannot measure directly. They can assume, for instance, that the KPI employee retention rate is a valid indicator of employee job satisfaction. For practical purposes, the firm in case E above uses the set of tangible KPI's in the right column to define employee job satisfaction. Organizations that use KPIs in this way typically measure the same KPIs periodically over time, and also after actions aimed at improving the underlying qualityemployee job satisfaction customer satisfaction, or branding, for instance. Measure KPI impact in Step 5 The firm in the Case E example launched an initiative aimed at improving employee job satisfaction. The initiative had these characteristics: Business Objective: Rise employee job satisfaction Action Addressing the Objective: Change workplace HR practice by moving to flexible working hours, career-enhancing training, and basing pay increases on performance. Table 6 below shows the Before and After KPI metrics for the Case E firm's action. The difference between Before and After is the size of the impact aimed at improving employee job satisfaction. Case E. Employee Job Satisfaction Action OutcomeKey Performance Indicators TargetKPI Pre-ActionKPI Post-ActionKPI KPIImpact Employee job satisfaction survey scores: Percentage scoring Excellent 40% 40% 60% +20% Employee performance review data: Percentage rated high ("1" or "2") 80% 40% 705 +30% Workplace disciplinary Actions per 1000 employees, per year. 0 10.0 4.0 6.0 Average sick day claims per employee per year. 2.0 7.5 3.0 4.5 Average absent or late to workdays per year per employee 0 10.0 5.3 4.7 Average aggregate score on firm's productivity metrics 90% 52% 75% 23% Table 6. Six KPI's for example case E (left column). The purpose of Step 5 is to measure the action impact on each KPI. Action Impacts in the right column receive benefit value in Steps 6 and 7. Business CaseGuide Business Case Guide. Everything YouNeed to Know About the Business Case! Info Buy Now $64 PageTop Contents

A solution that works, often, is to turn so-called intangibles into tangible qualities with key performance indicators (KPIs). Analysts view KPIs as tangible outcomes that are credible indirect evidence of an underlying quality they cannot measure directly. They can assume, for instance, that the KPI employee retention rate is a valid indicator of employee job satisfaction. For practical purposes, the firm in case E above uses the set of tangible KPI's in the right column to define employee job satisfaction. Organizations that use KPIs in this way typically measure the same KPIs periodically over time, and also after actions aimed at improving the underlying qualityemployee job satisfaction customer satisfaction, or branding, for instance. Measure KPI impact in Step 5 The firm in the Case E example launched an initiative aimed at improving employee job satisfaction. The initiative had these characteristics: Business Objective: Rise employee job satisfaction Action Addressing the Objective: Change workplace HR practice by moving to flexible working hours, career-enhancing training, and basing pay increases on performance. Table 6 below shows the Before and After KPI metrics for the Case E firm's action. The difference between Before and After is the size of the impact aimed at improving employee job satisfaction. Case E. Employee Job Satisfaction Action OutcomeKey Performance Indicators TargetKPI Pre-ActionKPI Post-ActionKPI KPIImpact Employee job satisfaction survey scores: Percentage scoring Excellent 40% 40% 60% +20% Employee performance review data: Percentage rated high ("1" or "2") 80% 40% 705 +30% Workplace disciplinary Actions per 1000 employees, per year. 0 10.0 4.0 6.0 Average sick day claims per employee per year. 2.0 7.5 3.0 4.5 Average absent or late to workdays per year per employee 0 10.0 5.3 4.7 Average aggregate score on firm's productivity metrics 90% 52% 75% 23% Table 6. Six KPI's for example case E (left column). The purpose of Step 5 is to measure the action impact on each KPI. Action Impacts in the right column receive benefit value in Steps 6 and 7. Business CaseGuide Business Case Guide. Everything YouNeed to Know About the Business Case! Info Buy Now $64 PageTop Contents

Organizations that use KPIs in this way typically measure the same KPIs periodically over time, and also after actions aimed at improving the underlying qualityemployee job satisfaction customer satisfaction, or branding, for instance. Measure KPI impact in Step 5 The firm in the Case E example launched an initiative aimed at improving employee job satisfaction. The initiative had these characteristics: Business Objective: Rise employee job satisfaction Action Addressing the Objective: Change workplace HR practice by moving to flexible working hours, career-enhancing training, and basing pay increases on performance. Table 6 below shows the Before and After KPI metrics for the Case E firm's action. The difference between Before and After is the size of the impact aimed at improving employee job satisfaction. Case E. Employee Job Satisfaction Action OutcomeKey Performance Indicators TargetKPI Pre-ActionKPI Post-ActionKPI KPIImpact Employee job satisfaction survey scores: Percentage scoring Excellent 40% 40% 60% +20% Employee performance review data: Percentage rated high ("1" or "2") 80% 40% 705 +30% Workplace disciplinary Actions per 1000 employees, per year. 0 10.0 4.0 6.0 Average sick day claims per employee per year. 2.0 7.5 3.0 4.5 Average absent or late to workdays per year per employee 0 10.0 5.3 4.7 Average aggregate score on firm's productivity metrics 90% 52% 75% 23% Table 6. Six KPI's for example case E (left column). The purpose of Step 5 is to measure the action impact on each KPI. Action Impacts in the right column receive benefit value in Steps 6 and 7. Business CaseGuide Business Case Guide. Everything YouNeed to Know About the Business Case! Info Buy Now $64 PageTop Contents

Each business objective must come with a tangible target levelif it is to serve for making decisions, planning, or management control. Without the tangible target, after all, no one knows when they reach the objective or if they are moving towards it.

Preferably, the analyst tries first to establish a value for reaching the objective target in financial termseven with objectives that have a nonfinancial definition. Then, in Step 7, the analyst will credit some or all of that value to action outcome measures from Steps 4 and 5. Step 7, in other words, completes the process of assigning business value to business benefits.

There may or may not be direct and obvious connections between KPI targets on the one hand, and financial value on the other. In any case, the analyst has available several tactics for attaching financial value to achieving nonfinancial targets.

The seven-step benefit-valuing process aims to answer just one question: What is the business value from a specific action? Less formally, the first six steps ask: What is the benefit worth? Steps 1-6 build a case showing convincingly that reaching objectives has value, and some of that value is due to a specific action.

When the objective in view is an important strategic objective, however, the organization probably has several actions or initiatives underway, all aiming to help meet the same objective. A high-level objective for increasing market share, for instance, may be the reason for product advertising, customer satisfaction initiatives, and brand-building actions.

If market share does increase over a year, the analyst uses steps 1-6 to establish a business value for the market share increase. However, management also needs to know how much of that value is due to advertising actions, how much is due to customer initiatives, and how much is due to successful brand-building actions. The answers are crucial for choosing and planning next year's investments in marketing efforts.

In the Auto Dealer case from Step 4, the dealer ran a year-long marketing campaign with the objective of increasing sales revenues. Step 4 calculations show how a net benefit value of $4,580,000 derives from $11,400,000 in revenue gains. However, the revenue gains and net benefit value may very well result from two actions during the year:

To gain a sense for the relative sales contribution from increasing market share, the dealer's business manager analyzes the firm's historical win/loss scorecard against the now out-of-business competitor From this, the manager decides that 40% of the year's incremental sales would have gone to the former competitor, if that business were still open. Accordingly, the analyst credits f40% of the benefit value to the windfall market share increase, while crediting 60% to the marketing program.

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feeder fund

feeder fund

Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician (CMT). He is also a member of ASTD, ISPI, STC, and MTA.

A feeder fund is one of several sub-funds that put all of their investment capital into an overarching umbrella fund, known as a master fund, for which a single investment advisor handles all portfolio investments and trading. This two-tiered investment structure of a feeder fund and a master fund is commonly used by hedge funds as a means of assembling a larger portfolio account by pooling investment capital.

The primary purpose served by the feeder fund-master fund structure is the reduction of trading costs and overall operating costs. The master fund effectively achieves economies of scale through having access to the large pool of investment capital provided by a number of feeder funds, which enables it to operate less expensively than would be possible for any of the feeder funds investing on their own.

The use of this two-tiered fund structure can be very advantageous when the feeder funds share common investment goals and strategies but are not appropriate for a feeder fund with a unique investment strategy or aim since those unique characteristics would be lost in the combination with other funds within a master fund.

The feeder funds that invest capital in a master fund operate as separate legal entities from the master fund and may be invested in more than one master fund. Various feeder funds invested in a master fund often differ substantially from one another in terms of things such as expense fees or investment minimums and do not usually have identical net asset values (NAV). In the same way that a feeder fund is free to invest in more than one master fund, a master fund is likewise free to accept investments from a number of feeder funds.

In regard to feeder funds operating in the United States, it is common for the master fund to be established as an offshore entity. This frees up the master fund to accept investment capital from both tax-exempt and U.S.-taxable investors. If, however, an offshore master fund elects to be taxed as a partnership or limited liability company (LLC) for U.S. tax purposes, then onshore feeder funds receive pass-through treatment of their share of the master fund's gains or losses, thus avoiding double taxation.

In March 2017, the Securities and Exchange Commission (SEC) ruled to allow foreign-regulated companies (foreign feeder funds) to invest in open-end master funds (U.S. Master Fund), makingit easier for global managers to market their investment products in different foreign jurisdictions employing a master fund.

The letter modified parts 12(d)(1)(A) and (B) of the 1940 Act, which previously limited the use of foreign feeder funds into U.S.-registered funds. The SEC regulated the practice for several reasons. First, it wanted to prevent master funds from exerting too much influence over an acquired fund. It also aimed to protect investors in the funds from layered fees and the possibility of fund structures becoming so complex that they became difficult to understand.

if biden's infrastructure plan passes, these 3 stocks could have major upside | the motley fool

if biden's infrastructure plan passes, these 3 stocks could have major upside | the motley fool

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

The Biden administration recently unveiled an initial draft for an infrastructure spending bill valued at nearly $2.3 trillion to be spent over the next decade. Aging transportation and manufacturing sectors are in line for a boost, but as could be expected from a proposal this large, there are a lot of areas of the economy that will be affected -- including some areas not traditionally thought of as "infrastructure" but nonetheless important in today's digital economy.

Three stocks that could benefit if an infrastructure spending bill is passed later this year (likely no sooner than this summer) are NVIDIA (NASDAQ:NVDA), Cerner (NASDAQ:CERN), and Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B). Let's find out how.

NVIDIA has been on a tear for the last couple of years. The company designs chips that enable advanced video game graphics and computing accelerators in data centers (for applications like AI). These are all long-term secular growth trends working in NVIDIA's favor, but a modern infrastructure development plan could make the winds filling the company's sails blow even stronger.

For one thing, the GPUs (graphics processing units) that NVIDIA specializes in don't just accelerate computing power in data centers, they also reduce energy consumption. As organizations rely more heavily on digital operations, reducing how much power they need fits in with the Biden administration's focus on updating America's aging power grid ($100 billion earmarked for electrical infrastructure).

And for companies looking to reduce their carbon footprint, building data centers and increasing access to cloud computing and remote work is a fantastic way to do that. After all, less commuting for employees means reduced emissions, a more efficient workforce, and a boost for a business's bottom line. NVIDIA is a key ingredient in enabling all of the above.

Additionally, the initial infrastructure proposal calls for $180 billion to support new research and development into technology like AI and $100 billion for modern workforce education and training. NVIDIA is a top researcher in AI and has millions of developers utilizing its ecosystem of products and services. It could pick up millions more in the decade ahead if the U.S. starts funneling cash into these initiatives supporting the future of computing work.

With a market cap of $380 billion, NVIDIA is already the second-largest publicly traded semiconductor company in the world, behind Taiwan Semiconductor Manufacturing. But chips are only increasing in importance as the digital economy takes over. These basic building blocks of tech aren't slowing down anytime soon, and NVIDIA has a long runway of growth ahead of it -- one that could accelerate if an infrastructure plan gets okayed.

America has an aging population. According to the U.S. Census Bureau, adults over age 65 will outnumber children under age 18 by the year 2034 -- and the divide between the number of elderly and the number of children is expected to widen after 2034 for the foreseeable future. Thus, a linchpin of Biden's spending bill is the "caretaking economy."

Specifically, $400 billion (over 17% of the entire infrastructure bill) is being proposed to expand home- and community-based care for elderly and disabled people. There are some items in the proposal that will be up for polarizing political debate, like minimum wage increases and expansion of Medicaid, but for our discussion here, the focus on building tech infrastructure to support better care is noteworthy.

Companies like Cerner could be poised to benefit. Cerner provides IT solutions for the massive healthcare industry -- including for long-term care agencies and for arms of the government that support caregivers.

More efficient operations enabled by digital systems are key to expanding more personalized care. Cerner has a wide range of software products, from health system data analytics to patient care management. Helping the healthcare industry get up to speed with technology has been a long process that still needs a lot of work, but Cerner has steadily grown its revenue over the last few years.

If the caretaking economy, and related spending for America's aging population, get some extra federal support, Cerner could see an influx of new business as health providers hire new workers and look for new software systems to boost efficiency and positive care outcomes. And with a market cap of under $23 billion, Cerner is still a small business in the grand scheme of things. There's plenty of upside here for this healthcare technologist.

Not to be forgotten from the Biden administration's proposal are, of course, those items we usually think of with the word "infrastructure": Highways, roads, bridges, airports, rail systems, and public transit. Though these physical structures were part of America's development in the 19th and 20th centuries, they still will fulfill critical functions in the digital era of the 21st century. Many of them are in dire need of fixing. The total price tag under Joe Biden's first draft clocks in at $621 billion.

Spending of such epic proportions will be doled out a lot of different ways, but a great way to play the whole spending surge could be Warren Buffett's Berkshire Hathaway. Railroad and transportation holdings feature prominently in Berkshire Hathaway's portfolio of subsidiary businesses -- including America's largest railroad, BNSF, and privately held Pilot gas stations and big rig truck service stations. Manufacturing (like auto parts company Precision Castparts) is also a big piece of Berkshire. And there's the company's sprawling energy and utility business, which includes sizable holdings in renewable energy projects.

Buffett's investment vehicle is already a massive enterprise valued at nearly $620 billion, but it could capture billions of additional dollars in the next decade if the U.S. embarks on an old-school road, rail, and energy update program. And Berkshire has a proven track record of turning sales into profitable returns for shareholders. In fact, now could be the right time to bet on the stock. Though it's already such a massive conglomerate, it's trading at historically low valuations -- which led to Berkshire Hathaway stock being Buffett's largest stock purchase last year.

This is no high-growth stock, but there is plenty of room for it to run higher the next few years -- especially if an infrastructure bill passes. It's not too much of a stretch to say this could be the next company to fetch a $1 trillion-plus valuation during the 2020s as America's forgotten physical structures and transportation get some much-needed attention.

stocks that benefit from inflationinvest wisely

stocks that benefit from inflationinvest wisely

Stocks in asset classes like bonds, real estate, and mortgage-backed securities tend to be inflation-friendly. Also, stocks in banks and insurance companies, which benefit from increased interest rates, are also a good choice to invest in during periods of inflation.

In April, the consumer price index, which measures what people pay for goods and services,shot up 4.2 percent over last year. That was its highest 12-month level since 2008, according to Labor Department data.

Also, the stock market is taking a hit, especially when it comes to technology stocks and growth stocks. On May 12, The Wall Street Journal reported that the tech-heavy Nasdaq Composite fell 1.1 percent, the S&P 500 dropped 0.7 percent, and the Dow Jones Industrial Average slipped 0.5 percent.

Government intervention that interferes with economic activity will always create supply-driven shortages and surpluses when incorrectly calculated, wrote Seeking Alpha columnist Logan Kane in a March 2021 article.

This is a simplified example, but for this reason, it's a classic policy mistake to cut interest rates or do excessive amounts of stimulus into a supply shock, much like treating an infection with the exact wrong kind of antibiotic, Kane wrote.

With interest rates at record lows, now might be a good time to invest in real estate. The shortage of available homes can be frustrating but adding a rental property to your portfolio can help you keep up with inflation.

Treasury bonds, or Treasury inflation-protected securities (TIPS), are designed specifically to protect investors from inflation. Since they are indexed to the rate of inflation, their value changes based on the inflation rate.

In times of inflation, mortgage-backed securities might also be a good investment option. These securities, which are groups of home mortgages pooled together, usually offer higher yields than U.S. Treasuries.

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