Implementing KPIs in smaller Implementing KPIs in smaller organisations (under 200 staff)organisations (under 200 staff)

Presented by David Parmenter

waymark solutions limited

December 2007

Website: www.waymark.co.nz

Email: parmenter@waymark.co.nz

Blog: www.davidparmenter.com

How many KPIs are there in your How many KPIs are there in your organisation?organisation?

less than 20 between 20-50 between 51-100 over 100

What is the most common timeframe What is the most common timeframe KPIs are reported within?KPIs are reported within?

24/7 daily weekly monthly quarterly

Learning outcomesLearning outcomes

understand that this workshop needs to be reviewed with “Implementing Winning KPIs”

gain an understanding of how to implement winning key performance indicators (KPIs) in a smaller organisation

understand the eight phase implementation process for smaller organisations

The eight phase approachThe eight phase approach

Project week pre 1 2 3 4 5 6 post

1 Selling the change

2 Focus group workshop

3 KPI project team trained and empowered

4 Involving all the employees

5 selecting organisational "winning KPIs"

6 Developing the reporting frameworks at all levels

7 Facilitating the use of winning KPIs

8 Refining KPIs in 12 months to maintain their relevance

Phase :1 Selling the changePhase :1 Selling the change

engage in-house or external PR expert to sell by the emotional drivers!!

send my winning KPIs article to the SMT log into www.bettermanagement.com and set up an

account introduce them to the concept by playing the web cast

on www.bettermanagement.com market the focus group workshop concept emphasis on a bottom-up process

Sell KPI project on emotional driversSell KPI project on emotional drivers there are too many measures that have not changed

anything and cost a lot the CEO and SMT would be more effective in less

time the right KPIs will link daily staff activities to the

strategic objectives reporting on a 24/7, daily, and weekly timeframe

instead of the “too late” monthly update

Phase 2: The focus group workshopPhase 2: The focus group workshop

cross section of 15 to 30 experienced staff the morning session should be attended by

the entire executive team all candidates for the KPI project team to

attend outline the four foundation stones

The workshop agendaThe workshop agenda

understanding of the issues ascertain the CSFs of the organisation (pre-

work already done) refining the CSFs use a relationship mapping process to find

the top 5 to 8 CSFs focus group feedback on viability and

implementation program

Exhibit 4: The four types of performance Exhibit 4: The four types of performance measuresmeasures

80 PIs & RIs

10 KRIs

10 KPIs

The characteristics of KPIs The characteristics of KPIs non financial measures (not Pds, $s etc) measured frequently e.g. daily or 24 by 7 acted upon by CEO and the SMT all staff understand the measure and what corrective

action is required responsibility can be tied down to the individual or team significant impact e.g. it impacts most of the: top eight

CSFs and BSC perspectives has a positive impact e.g. affects all other performance

measures in a positive way

Linking the workface to the Linking the workface to the strategic objectivesstrategic objectives

KPIs

AP AP APSilos Silos Silos

Daily activities

Strategic Objectives out to 5-10 years

Development planout to 3-5 years

Linkage of strategy to KPIs and BSCLinkage of strategy to KPIs and BSCLinkage of Linkage of strategy to strategy to

measurementmeasurementLearning& Growth

Customer satisfaction

FinancialResults

InternalProcesses

Strategies (issues & Initiatives)

Mission / Vision / Values

Critical Success Factors

Key Result Indicators (max 10)

Performance Indicators & Result Indicators (80 or so)

Key Performance Indicators (max 10)

Staff satisfaction

Community& environment

Learning& Growth

Customer satisfaction

FinancialResults

InternalProcesses

Staff satisfaction

Community& environment

KPIs & PIs in a balanced scorecard and KRIs in a dashboard

Importance of getting the CSFs Importance of getting the CSFs wording rightwording right

wording of the CSFs is critical• retention of staff becomes retention of key staff• increase repeat business becomes increase repeat

business from core customers measures become more specific

• daily sales becomes daily sales made to key customers• planned calls becomes planned calls to key customers• deliveries made on time becomes deliveries to key

customers made on time

Explain the four foundation stonesExplain the four foundation stones

PIs and RIs PIs and RIs (80)(80)

Short listing the CSFs – by relationship Short listing the CSFs – by relationship mappingmapping

Increased recognition

Increase repeat businessRetention

of key staff

4 OUT 4 OUT

Ask the focus group in the afternoonAsk the focus group in the afternoon

can we complete this project with other competing activities?

will it fit with the existing measurement culture?

what should we learn from other implementations?

what implementation steps should we change?

is the project red, amber, green?

Phase 3: KPI project team trained Phase 3: KPI project team trained and empoweredand empowered

2 to 4 in-house well-trained staff with:• excellent presentation and communication skills

• a flair for innovation

• ability to complete

• knowledge of both the organisation and sector

report directly to the CEO empowered to make decisions

Training the KPI teamTraining the KPI team

a comprehensive understanding of the KPI book how to facilitate workshops which they will be

running how to deliver informative presentations how to design report formats better practice communication techniques using systems to maintain a vibrant project team

home page

KPI team structureKPI team structure

CEO

KPI project team(up to 4 members)SMT

Business unitcoordinators

KPI teamcoordinators

Interestedstakeholders

External facilitators

teams building theirown performance

measures

Empower a "just do it" culture Empower a "just do it" culture and processand process

• it is a sculpture “right first time” is a rare achievement

• use Kaplan and Norton’s book “Translating strategy into action the balanced scorecard” and my KPI book

• belief that we can do it, and do not need to rely on experts to run the project

• there is no need to heavily invest in BSC applications

Phase 4: Involving all the Phase 4: Involving all the employeesemployees

run a survey on a cross section of staff e.g. about 50 staff out of the 200

organise a series of full day workshops SMT sell the change to staff in first session• teams to brainstorm performance measures

(PMs) in all 6 perspectives• 25 PMs for a team (mix of past, current and

forward looking measures) record the measures during the workshop

Selling the change to staffSelling the change to staff

the right mix of performance measures will make work more rewarding and enjoyable

the focus on the right measures would mean their work would be more effective

staff will be making more decisions winning KPIs will enhance profitability and

thus offer greater job security and remuneration

Staff to record the measures in a Staff to record the measures in a database at the workshopdatabase at the workshop

this needs to be set up early on all performance measures identified need to

be collated in a database (edit later) use a common company wide database make database available to teams to help

with selection train staff to use the database

Workshops held to brainstorm the PMs for Workshops held to brainstorm the PMs for the top 5 to 8 CSFsthe top 5 to 8 CSFs

CSF:

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Performance indicator database Performance indicator database

Name of Performance measure Calculation of measureType of PM ( KRI,PI, KPI)

Person responsible

System where data is going to be gathered

Refinements for real time information

BSC perspective

Number of initiatives implemented from the quarterly rolling client survey

Number of initiatives implemented out of total arising from survey

Number of referrals from clientsHow many clients came from a referral basis. Fields in the one view the current system should provide

Teams interested in seeing measure

Recommended display

Frequency of measurement

cause and effect relationship

Linkage to critical success factor xx xx xx xx xx xx

Number monthlyMaintain high customer satisfaction

Line graph over 12 months for 4 offices

monthly

monthly

Promote Pareto's 80:20Promote Pareto's 80:20

only worth measuring metrically where it is a KPI which is fundamental to the organisations well-being (e.g. late planes)

when not to dive into metrics• measuring project progress (story)

• measuring time (only lawyers need 6 minute units)

• measuring processing volumes- use a sample week in the month

estimates are fine for many measures

Phase 5: Selecting organisational Phase 5: Selecting organisational "winning KPIs""winning KPIs"

KPI team will have learnt from facilitating the teams avoid consolidation of measures upwards all potential KPIs to pass through the KPI 7 point test

(see slide) once levels 1 and 4 are semi-finalised back-fill levels 2

&3 limit the organisation-wide KPIs to no more than 10

Bottom-up starting point is bestBottom-up starting point is best

Organisationalperformance

measures

Divisional

Department

Team

5 - 10 Orgwide KPIs

Org PIs

Div PIs

Dept PIs

Team PIs

80 PIs spread over

All

Some

Some

Only relevant KPIsLevel 4

Level 2

Level 3

Level 1

1st*

2nd*

3rd*

3rd*

1st* = start process here

Phase 6: developing the reporting Phase 6: developing the reporting framework at all levelsframework at all levels

most KPIs should be reported each day, some 24 by 7 segregate KRIs from PIs, RIs and KPIs the Board should only receive the KRIs e.g. in a

governance “dashboard” reporting through the intranet / Executive Information

System avoid specialised BSC reporting system for 12

months empower KPI team to design report formats

Phase 6: developing the reporting Phase 6: developing the reporting framework at all levelsframework at all levels

review Stephen Few’s work see www.perceptualedge.com/articles/Whitepapers/Common_Pitfalls.pdf

establish meaningful graphs that are easy to understand

regularly review of the graphs by teams, departments and divisions

Phase 7: Facilitating the use of Phase 7: Facilitating the use of winning KPIswinning KPIs

use of KPIs must be wide spread in the organisation

SMT and particularly the CEO needs to act daily on the embryo KPIs

the SMT needs to empower staff to take immediate action

empowerment will take time to be taken on by staff

remember the 10,80,10 rule

Phase 8: Refining KPIs in 12 months to Phase 8: Refining KPIs in 12 months to maintain their relevancemaintain their relevance

review organisation-wide CSFs team workshops to modify their KPIs and

PIs (experience, conditions, new processes etc.)

some KPIs will always be maintained sustain the stakeholder consultation

These books came out in 07These books came out in 07

www.waymark.co.nz to order, see link to www.amazon.com

Thank you for attending Thank you for attending look forward to hearing look forward to hearing about your progressabout your progress

Amazon link on www.davidparmenter.com

John Wiley & Sons have published