Recruit new
representative for
Territory D
Increase current
product volume
by 8%
Strategy
Tell
me how
without
you’lltactics
measure
is ame…
long
road
Strategies
without
connected
actions
to
arevictory.
like
morning
fog…
…and I’ll tell you how I’ll behave.
Recruit new
representative for
Territory C
Increase company
valuation to £8m
Tactics
without strategy
is and
the quick
noiseto fade.
…pointless,
dangerous
Eli Goldratt
before defeat.
Customer
retention up by
12%
IT network
upgraded by
March
First Bill Calls to
95%
SunKhan
Tzu
Ghenkis
Reduce direct
costs by 8%
through mix
KPIs and
Scorecards
Va l i d a t e  E xe c u t e
 Deliver
Bryan Sergeant
07899 062876
[email protected]
Why bother with KPIs
Business
planning
Simplifies
due diligence
Strategy
deployment
2
Early warning
device
From Gut-feel
to informed
Sales tool
Employee
alignment
Reduces
stress
Employee
effectiveness
Bryan Sergeant
Employee effectiveness
Tell me how you’re going to measure me… and I’ll tell you how
I’m going to behave.
Eli Goldratt
The resentment that unfair treatment engenders will
demoralize employees and lead to the loss of your best people.
Dale Carnegie
3
Bryan Sergeant
Would you drive with your eyes closed?
4
Bryan Sergeant
Impact
Companies in the top quintile are more likely to use data for their decisions.
x 4.4
73.7%
x 2.7
45.0%
16.7%
KPIs, scorecards
and dashboards
16.7%
Data analysis
and modelling
Source: IBM Institute of Business Value, 2009
5
Bryan Sergeant
11.3%
Impact
Performance comparison of companies that make extensive use of data, facts,
scorecards and analytics to support decision making.
x 20
+49%
14.4%
9.4%
0.5%
Revenue
EBITDA
Source: IBM Institute of Business Value, 2010
6
Bryan Sergeant
Lord Weinstock’s 7 key ratios
• Return on capital
• Return on sales
• Sales as multiple of capital employed
• Sales as multiple of fixed assets
Are these still appropriate ?
• Sales as multiple of stocks
• Sales per employee
• Profit per employee
7
Bryan Sergeant
In the beginning…
Vision:
Mission:
Paints a picture of how things
will be if the company succeeds.
Defines what will be achieved.
Clarifies the direction.
Specifics of what success looks
like and how it will be measured.
Facilitates human involvement.
8
Bryan Sergeant
The Strategy Hierarchy
Vision
Mission
Objectives
Strategies
Strategic
initiatives
Personal
objectives
Strategic outcomes
Financial
9
Customer
Processes
Learn & Grow
Bryan Sergeant
The Strategy Cascade
Company
Departments
Teams
Individuals
10
Objectives
Strategies
Tactics
Objectives
Strategies
Tactics
Objectives
Strategies
Tactics
Objectives
Strategies
Tactics
Bryan Sergeant
The Strategy Cycle
Vision
Value
Chain
Mission
Core
Comp’s
Strategy
definition
5 Forces
PEST
USP
SWOT
11
Bryan Sergeant
The Strategy Cycle
Strategy
definition
Plan and
validate
KPI
Inform and
guide
Monitor
& adjust
12
Align and
motivate
Deploy
Bryan Sergeant
Agree and cascade
• People
– Discuss and agree targets according to the hierarchy
• The feedback will be invaluable and will probably change your plans
– Visible regular review
– For visionary organisations… Peer Review
• Processes
– Written down, usually diagrammatically, and measured
• Systems
– For capturing data, supporting work-flow and helping collaboration
• Measures and Targets
13
Bryan Sergeant
People  Processes  Systems
Measures & Targets
14
Bryan Sergeant
Adding balance
Financial
How should we appear to our
shareholders
Customer
How must we appear to our
customers
Business Processes
VMOS
T
+ KPIs
What processes must we excel at to
satisfy our stakeholders.
Learning & Growth
What must we do to sustain our
ability to change and improve
15
•Objectives
•Measures
•Targets
•Initiatives
Bryan Sergeant
Aggregate KPIs
10
8
Sales Revenue (F)
Sales pipeline (P)
My Annual Bonus
5
6
16
Staff satisfaction (L&G)
Order quality (C)
Bryan Sergeant
Visualisation… designing a dashboard
• Basics
–
–
–
–
–
Order of importance
Context
Leading and lagging
Processes and Projects
Commentary / message
• Finishing touches
– Eye flow & alignment
– Logo, colour and contrast
• Advanced
– Interactivity
– Roll-over
– Sharing
17
Bryan Sergeant
Making KPIs work well
Linked
Ownership
Leadership
18
Bryan Sergeant
Delegation
• Authority and accountability
– SMART objectives
– Resources (people, time, budget)
Effectiveness
Conscious of …
Unconscious
Delegating
competence
Conscious
Supporting
competence
Conscious
Coaching
incompetence
Unconscious
Directing
incompetence
Time
19
Bryan Sergeant
Challenges
• No plan goes according to plan… be ready to flex
• Fit with existing initiatives… try to leave the baby in the water
• Poor data… lies, damn lies
• Buy-in… the perpetual struggle
20
“I’m a good manager!!”
[and if you start measuring, you
might discover that I’m not]
It’s about aligning to company goals.
If you’re effective, it’ll be recognised.
If you’re not, we’ll be able to help.
“You can’t measure what I do…
it’s unfair”
Everything’s measurable.
How do you know you’ve done a good job.
Aligning everyone to the company mission.
“Are you implying I’m not doing a
good job!”
No
Bryan Sergeant
21
Bryan Sergeant
Test your Vision and Mission
1. Is your V&M achievable or just a fantasy?
2. Does your V&M inspire and excite you?
3. Does your V&M inspire and excite the rest of your
organisation?
4. Will your V&M inspire and excite in a year’s time?
5. Will your V&M inspire others to put their shoulder to the
wagon?
22
Bryan Sergeant
Test Strategy effectiveness
1. Does your Strategy tap a source of true advantage?
2. Will your Strategy beat your competitors and stay ahead?
3. Does your Strategy embrace uncertainty?
4. Does your Strategy balance commitment and flexibility?
5. Is your Strategy contaminated by bias or fantasy?
6. Is there conviction to act on your Strategy?
7. Is your Strategy clear enough to translate into actions?
8. Will others embrace your Strategy?
23
Bryan Sergeant
Test Strategy deployment
1. Are you visibly committed to the Strategy?
2. Does everyone understand the Strategy?
3. Does everyone have a set of KPIs that link to the objectives?
4. Is there balance at all levels?
5. Is accountability clear at every level?
6. Are you delegating authority in line with accountability?
7. Is there some wishful thinking somewhere… really?
8. Do you separate Operational meeting from Strategy?
9. Are the KPIs visible and talked about at most meetings?
24
Bryan Sergeant
Exercise 1
• Current use of metrics (your existing KPIs)
• Your Vision and Mission
Our Vision is:
Our Mission is:
• Current biggest challenge to success
25
Bryan Sergeant
Exercise 2 – KPI Tree
My 5 KPIs:
5 KPIs for: _____________
1:
2:
3:
4:
5:
5 KPIs for: _____________
1:
2:
3:
4:
5:
1:
2:
3:
4:
5:
5 KPIs for: _____________
1:
2:
3:
4:
5:
5 KPIs for: _____________
1:
2:
3:
4:
5:
26
Bryan Sergeant
Exercise 2
27
Bryan Sergeant