Page 441 - F2 - MA Integrated Workbook STUDENT 2018-19

Performance measurement techniques

The service sector

Conventional financial analysis distinguishes four types of ratio: profitability, liquidity,
gearing and activity ratios. Analysis of a company's performance using accounting
ratios involves comparisons with past trends and/or competitors' ratios. Typical ratios
that could be used by a service organisation include:

 revenue per 'service'

 revenue per 'principal' or partner in, for example, a management consultancy

 staff costs as a % of revenue

 space costs as a % of revenue

 training costs as a % of revenue

 profit %

Financial ratio analysis is of use but due to the 'human' nature of a service provider –
the quality of the service also needs to be considered.

Inspection and monitoring of the inputs to the service process is important for all
organisations. The quality of the solicitors in a practice or the number and grades of
staff available in a consultancy organisation are crucial to the provision of service
quality. The quality of the service may be measured after the event, that is by
measuring the results by outputs of the service.

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