Business Measures & Why The Are Examined

A differentiator between strong scripts and weaker scripts

Business measures or KPIs are regularly examined in the Case Study. Generally, students are less comfortable at using KPIs to support the movement or to support their discussion. It therefore often becomes a good tool for an Examiner to really differentiate between strong students and weaker students. 

Often, the KPIs are included within Applied Judgement columns in the marking key, meaning you can gain a passing box if you understand the KPIs.

With R1 being the best answered, the examiner has to be able to build in concepts they know students are not as comfortable with. His worst fear is that too many students produce good answers or too few meaning he cannot easily grade between strong and weaker candidates.

In our mock exam 2, we have built in a realistic, but difficult discussion on KPIs to allow you to practice ahead of the real exam. You can access mock 2 from here.


Current Business Measures

The three business measures and their targets are:

- Customer satisfaction:  95% target and exceeded in 2019. The increase over the years shows Scours strong reputation. However, its quite an arbitrary measure and being satisfied may not lead to higher retention. In theory, as the measure increases, customer retention should increase and revenue should increase. The examiner states it should correlate more closely with customer retention.

- Customer retention: 70% target, with the actual figure becoming closer (68%). You would expect as this figure increases, then revenue should also increase. However, the figure does not show the value of the contracts being renewed. This will allow the examiner to do something with the measure (e.g. it exceeding 70% for the first time) and yet revenue has fallen. The examiner again warns the measure has limited use unless viewed in conjunction with the monetary values of those contracts.

- Revenue per employee: £35.0k target which was exceeded for the first time in 2019. Whilst there appears to be some correlation with the other measures, be wary of stating this. Revenue per employee can increase as price increases or idle time decreases. Also, retention can increase and yet revenue could decrease if there is lower new business being won or the contracts lost are high. 

Other Current Measures

Whilst not a stated business measure, average cost per employee is also a good measure of performance. The average cost works independently of the average revenue. If average costs increase quicker than revenue you will see a decrease in gross profit margin for Owned Operations.

Even a small increase in wages would have a large impact on profit.  In 2019 there are 359 FTE and a 50p increase in the basic wage rate is likely to cost around £327k before any increase in employment on-costs (e.g. Employers NIC and pension contributions). This shows how sensitive the business is to quite small increases in wage rates. Whilst Scour pays well in excess of the UK's minimum wage rate, as the minimum wage rate increases it erodes this advantage.

New Measures In The Exam

The examiner has certainly set the exam up to allow for new measures to be brought into the exam. Firstly, you need to understand how he can bring new measures in and these are:

  1. Provide you with a range of new measure in the exam and ask you to comment on their suitability.
  2. Provide you with information on how to calculate the new measures and getting you to do the calculation and then comment on the suitability.
  3. Provide you with the measure and get you to estimate the financial impact of the change in the measure from 2019 to 2020 and also to comment on their suitability.


Whilst we believe (1) will be the most likely approach, you cannot discount the other methods and certainly (3) would be the hardest.

If you do need to calculate the measure or the financial impact, don't let the calculation throw your analysis. What we mean by this is if you understand the measure but can't do the calculation you will still be able to answer the suitability.

The most likely new measures:

  • Average lost contract value: When looked at with retention you will get a much better view of the business. If customer retention moves from 68% to 70%, but the average value of the lost contracts increases from £50k to £90k, then this position is worse.  The advantage of the measure is that they can better plan headcount / recruitment levels and idle time. It also provides a financial figure to understand retention. However, unless you know the retention rate, on its own the measure lacks any context.
  • Total value of lost contracts as a % of revenue - again provides some financial value to contracts which have not renewed, but the retention rate is lost by this measure as too is the average value of the contracts. It may not provide quite enough insight as to what element has moved e.g. the retention rate or the average contract value.
  • Customer satisfaction levels of lost customers - is this higher or lower e.g. have the customers who have left had a reason other than potentially price?
  • Idle time or staff utilisation - a key piece of information which is not currently being followed as a business measure. The higher the idle time, the lower the efficiency of the business and the lower the profitability. With 25 hrs being the minimum contractual hours, if there is not enough hours of work then Scour has to pay for this difference.
  • Staff turnover - the industry has a high staff turnover rate. As staff turnover increases there are inevitable costs to be incurred. These are recruitment fees, time to interview, administrative time and training time. Additionally, with customers preferring consistency with cleaners, a high staff turnover is likely to reduce satisfaction.


There may be other measures, we haven't considered as yet. However, in any industry where there are short term contracts, high competition and high staff costs, then the key business measures are likely to be linked to revenue, contracts and people.