Value driver tree kpi examples

What you should then be able to do from your value driver tree is to plot a logical flow into your business definition of performance the business vision. The original value driver tree for nonfinancial institutions is based on the assumption. Instead, it calls on managers to use valuebased performance metrics for. Driver trees how and why to use them to improve your business. This blog covers the history of value driver tree and and how it. Example of a mining value driver tree vdt in high resolution. A driver tree is a map of how different metrics and levers in an organisation. Its the profit branch from a financial kpi tree i built for my latest book. Regardless of whether youre familiar with them or youre still asking. This leads to that, which leads to something else, which.

Lets look at an example of a value driver tree in action. An example of a firm setting sales targets to all its divisions. Vdts are basically a picture of the gears or value drivers that power a business. The critical success factor would be the objective to maximize the conversion rate. If, for example, inventory management is a key value driver, management can focus on the system and process improvements that will result in increased inventory turns. Example of an endtoend value driver tree in a high resolution pdf. One way to highlight value driver performance is to build measures. With the value driver tree tool you can calculate complex scenarios in value driver trees and simulate and visualize value driving kpis.

Key performance indicators are a measurable value that tells owners how. Kpis focus managements attention on a finite array of statistics that are indicative of a companys performance, and are believed to have explanatory power over the companys desired financial results, such as profitability. About a century ago, du pont created a metric concept called the value driver tree, which splits value based metrics such as eva and roi into their submetrics. Key performance indicators kpis have long been a fundamental tool for a companys management to measure performance. Note that value driver tree models facilitate not only the analysis but also. A value driver tree is basically a flow diagram which plots all the things that lead to business value creation and how they relate to each other. Consulting has worked with a wide variety of companies to help them manage key value drivers. Performance metrics kpis are therefore focused on that individuals area of control, and most often do not pay respect to the impact on other disciplines or. Such trees provide a clear structure that helps position the kpis to ensure balance, clarity and hierarchy. Identify the key performance indicators kpis so you know what to measure remember, if you. Driver trees how and why to use them to improve your. In doing so, we have found that a number of fundamental questions are raised which we will start to address in this executive insights series. Driver trees also known as kpi trees are a simple effective tool that can be used in almost any organisation. A kpi tree refers to the graphical representation modeled on a tree diagram that manages kpis.

A kpi driver tree is an abstraction that breaks down what levers affect profit. Signup using the form below if you would like the full tree sending to you by email as a pdf. Value drivers include measures of growth, margins, capital efficiency, and leverage. Here we have an example of the basic building block of a vdt. About a century ago, du pont created a metric concept called the value driver tree, which splits value based metrics such as eva and roi into their sub metrics. An example of a value driver tree format experience in the application of vdt know how i have been using vdts over a number of years but the most intensive application of this concept was during my period working in chile and the usa where i completed a set of vdts for three mining operations owned by the same organisation.