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24.6 Describe How Companies Use Variance Analysis Beyond Financial Metrics

Extending Variance Analysis​

Variance analysis can be applied to non-financial KPIs:

  • Customer satisfaction variance (target vs. actual)
  • Process efficiency variance (e.g., cycle time)
  • Quality variance (defect rate vs. target)
  • Learning variance (training hours vs. target)

Non-Financial Variance Example​

KPI: Customer satisfaction score (CSAT)

  • Target: 90%
  • Actual: 85%
  • Variance: -5% (unfavorable)

Analysis:

  • Investigate causes: Service delays, quality issues, staff attitude
  • Action: Training, process improvement, more staffing

Process Variance Example​

KPI: Order accuracy rate

  • Target: 99%
  • Actual: 97%
  • Variance: -2%
  • Root cause: New staff onboarding
  • Action: Improve training

Learning Variance Example​

KPI: Training hours per employee

  • Target: 10 hours per quarter
  • Actual: 6 hours
  • Variance: -4 hours
  • Action: Schedule training sessions, allocate budget

Customer Variance Example​

KPI: Net promoter score (NPS)

  • Target: +50
  • Actual: +40
  • Variance: -10
  • Action: Customer feedback analysis, service improvement

Integrating Variances with Scorecards​

Use variance analysis to monitor scorecard performance:

  • Track deviations from targets
  • Investigate causes
  • Implement corrective actions
  • Update targets if necessary

Balanced Scorecard Review Meetings​

Hold regular meetings to review scorecard variances:

  • Include cross-functional teams
  • Discuss both financial and non-financial metrics
  • Share best practices
  • Adjust strategies as needed

Luxembourg Compliance Note​

Non-financial variance analysis helps Luxembourg SMEs meet customer expectations in highly competitive sectors (finance, hospitality), where regulatory compliance and service quality are critical.

Think It Through​

Why is it important to investigate non-financial variances with the same rigor as financial variances?