Video: Introduction to Performance Management Metrics

In this lesson, delve into the realm of performance management metrics with Nick Palazzolo, CPA, who unpacks the financial and non-financial indicators that businesses use to track and improve their operational performance. Discover how these metrics serve as a feedback mechanism to set incentives and motivate employees towards profitability. Nick breaks down key financial measures such as return on assets, return on investment, residual income, and economic value added, explaining their relevance and interconnectivity with other concepts. Moreover, he sheds light on exclusive non-financial measures, such as total factor and partial productivity ratios, emphasizing their crucial role in measuring efficiency—getting more outputs with fewer inputs. Get to grips with the definition and importance of productivity, a potential multiple choice question topic, and understand why efficiency is a cornerstone of performance management.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Well, we want to manage performance in our company. We want to make sure that we are performing well. We have some sections here that in this lesson, in this whole exam that deal with complying with regulations, there are some that are concerned with just making sure that we are meeting certain standards, right? Good internal controls. But no, this lesson is about being profitable, performing well as a company, and there are both financial and non-financial measures in managing performance.

These measures are there to provide feedback, to guide and motivate employees and guide the company, so feedback is significantly important to have incentives and establish incentives, goals, measures, financial measures in order to get people motivated, right? You want to motivate your employees to make as much money as possible so that the company can make as much money as possible. So what are some financial measures? And then we have non-financial measures. Well, financial measures, we will see all of these, the financial scorecards, return on assets, return on investment.

Some of these we've seen in other lessons. I mean, it's just a big jumble. You'll see them all at some point and something fit better in other lessons. Residual income, economic value added, all these good points, again, might not see these, particularly in here, but they are in either the valuations lesson or capital structure or working capital. And then we have non-financial measures, non-financial measures.

These include the total factor productivity ratios and the partial productivity ratios we'll see. Those are exclusive. They're performance management metrics. Exclusive. You will not find them anywhere else.

You'll find them in this lesson only. And lastly, what is productivity? Well, the definition of productivity is the comparison of outputs in relation to how many inputs are produced. You want more

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Performance Analysis & Cost Accounting

Module: 4 Concepts, 44 Videos

Performance Management Metrics Overview and Objectives

1:43

Introduction to Performance Management Metrics

2:13

Productivity Ratios

4:20

Benchmarking