Archive for February, 2010

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Over 2800 Key Performance Indicator (KPI) examples on www.smartKPIs.com

Monday, February 15th, 2010

www.smartKPIs.com registered users can now select their Key Performance Indicators (KPIs) from over 2800 Performance Measures documented and published in the online repository. The team focused in the last few days on publishing examples of Accounting, Human Resources, Sales and Supply Chain Management metrics.

The functional areas with the highest number of KPI examples are:

The industries with the highest number of documented performance measures are:

Example of a documented performance measure: % Aircraft fleet utilization.

User experience on http://www.smartKPIs.com

  • Learn: To learn more about performance management and Key Performance Management visit the Resources section.
  • Explore: To explore the library of KPI examples by navigating the functional area and industry directory, visit the Browse KPIs section.
  • Customize: To build your customized KPI library by saving favorite examples for later use, visit the My KPIs section.
  • Contribute: To propose a new example of KPI, visit the Submit KPIs section.
  • Collaborate: To collaborate with other users and to discuss KPI examples, add comments on each KPI description page.

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Posted in Customized KPI library, Library of KPI examples, Performance Management, Performance Measurement, smartKPIs.com | No Comments »

When marketing meets finance: Return on Marketing Investment

Sunday, February 14th, 2010

One of the greatest challenges for marketing professionals is to “probate” the results of their activity in terms of financial numbers. To do so, a simplistic approach that might still be in use in organizations which lack an accurate performance measurement system is looking into the value of sales. Fair enough, marketing efforts should, in the end, lead to selling as much as possible. Brand building, image construction, client relationship optimization and all other marketing directions aim, in the end, at generating sales.

However, sales can be due to other reasons than marketing actions, on one hand, and on the other hand, measuring only the result is of no relevance, if not compared to the effort. The metric that integrates this comparison is the Return on Marketing Investment, or briefly, the ROMI.

Return on Marketing Investment is constructed on the same logic as ROI, in general, the difference being that marketing spent is more “easily gone”. If you invest in buying a plant for production, its value depreciates over time, but you can always resell it whereas marketing spent can hardly be recuperated, thus being more risky. From this point of view, it is argued even that marketing is not an investment, but simply an expense. However, as long as the marketing expense is done to generate future cash-flows, it is an investment, although not materialized in a tangible asset.

Although a subject of many opinions, there is a widely accepted calculation formula for ROMI:

% Return on Marketing Investment =

[($ Revenue attributable to marketing * % Contribution) - $ Marketing cost] /

$ Marketing cost

The purpose of measuring the return of the marketing effort is not just that of validating an expense in terms of returns generated, but also that of making comparisons between various marketing projects to outline their effects. And, not least, to impose a “discipline” in marketing actions that are somehow more difficult to quantify, both in terms of expenses (they might not require so much money spent on well defined marketing elements, but lots of time and less common expenses) and in terms of revenue. It can be the case of the below-mentioned social marketing.

However, using this metric requires careful attention as many implications can arise when dealing with the subordinate measures used for calculation. For example, as we have outlined in a previous blog post on Marketing program performance appraisal, $ Revenue attributable to marketing, or $ Incremental sales has to be estimated accurately, which can be a difficult task. In what concerns the marketing cost, inaccuracies can arise also, as organizations have different ways of allocation the marketing budget (by marketing function, by objective etc.), thus being difficult to isolate the part of marketing expense we are interested in.

In order to overpass these cautions, marketers measure marketing ROI for a particular campaign (that has a well defined budget and envisages one product).

Marketing ROI faces criticism in several respects, one of the most popular being that it does not take into account the carryover effect, which defines long term effects of marketing spending on revenue, generated mostly by brand-related aspects. It is considered that marketing spending contributes to brand consolidation, which can have effect on sales for long future periods, that are out of the marketing ROI measurement horizon.

Trend and statistics on marketing ROI:

  • There is an increasing need for marketing ROI and other measurements due mainly to the economic pressures (2009 Lenskold Group / MarketSphere Marketing ROI and Measurements Study)
  • The greatest ROI  is gained in email marketing – $43.52 for every dollar spent (Direct Marketing Association, 2009)
  • However, 42% percent of email marketers do not know their return on investment from email marketing (Econsultancy & Adestra, Email Census 2009)

Further data on marketing ROI can be found on various sources. You can follow:

$

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Over 2700 Key Performance Indicator (KPI) examples on www.smartKPIs.com

Saturday, February 13th, 2010

www.smartKPIs.com registered users can now select their Key Performance Indicators (KPIs) from over 2700 Performance Measures documented and published in the online repository. The team focused in the last few days on publishing examples of Accounting, Human Resources, Sales and Supply Chain Management metrics.

The functional areas with the highest number of KPI examples are:

The industries with the highest number of documented performance measures are:

Example of a documented performance measure: % Vehicle fill.

User experience on http://www.smartKPIs.com

  • Learn: To learn more about performance management and Key Performance Management visit the Resources section.
  • Explore: To explore the library of KPI examples by navigating the functional area and industry directory, visit the Browse KPIs section.
  • Customize: To build your customized KPI library by saving favorite examples for later use, visit the My KPIs section.
  • Contribute: To propose a new example of KPI, visit the Submit KPIs section.
  • Collaborate: To collaborate with other users and to discuss KPI examples, add comments on each KPI description page.

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Posted in Customized KPI library, Library of KPI examples, Performance Management, Performance Measurement, smartKPIs.com | No Comments »

An introduction to theory in Performance Management: Goal Setting Theory

Friday, February 12th, 2010

smartKPIs.com Performance Architect update 6/2010

In my previous update I highlighted the benefits of increasing theory awareness in performance management practice. It has the potential to positively impact the process of selecting, developing and using performance management solutions. Over the next few months, I will gradually introduce some of these theories, in no particular order.

A very important theory informing performance management is the Goal Setting Theory, which is considered to be one of the most effective motivational theories. It was formulated inductively based on empirical research conducted over nearly four decades by Locke and Latham. Its roots are based on the premise that conscious goals affect action (Locke & Latham, 2002).

An important note to make is that the use of the term “goals” in this theory. Goals are considered here to be the object or aim of an action. As the terminology used in performance management as a discipline is loosely structured, the goal setting theory itself applies to objectives, Key Performance Indicators and targets as well.

Principles

There are four general principles that are linked to an increase in motivation, thus generating optimal performance:

  • Goals should be challenging, but attainable. Locke and Latham (2004) found a positive, linear function in that the most difficult goals produced the highest levels of effort and performance. They also found that performance decreased once the limits of ability were reached or when commitment to a highly difficult goal lapsed.
  • Goals should be specific rather than vague. Research by Locke and Latham (1990) showed that specific, difficult goals consistently led to higher performance than urging people to do their best. As specific goals vary in difficulty, goal specificity in itself does not necessarily lead to high performance, but reduces variation in performance by reducing the ambiguity about what has to be achieved. (Locke, Chah, Harrison, & Lustgarten, 1989).
  • Employees should be involved in the process of setting their own goals. When goals are self set, people with high self-efficacy set higher goals than do people with lower self-efficacy. They also are more committed to assigned goals, find and use better task strategies to attain the goals, and respond more positively to negative feedback than do people with low self-efficacy (Locke & Latham, 2002, Locke & Latham, 1990). The goal–performance relationship is strongest when people are committed to their goals.
  • Goals should be measurable in terms of being clearly understood by employees: quantity, quality, time, and cost. For goals to be effective, people need summary feedback that reveals progress in relation to their goals. If they do not know how they are doing, it is difficult for them to adjust the level or direction of their effort or to adjust their performance strategies to adjust their performance strategies to match what the goal requires. Summary feedback is a moderator of goal effects in that the combination of goals plus feedback is more effective than goals alone (Locke & Latham, 2002).

Mechanisms

Locke & Latham (2002) propose four mechanisms through which goals affect performance:

  1. Directive function. They direct attention and effort toward goal-relevant activities and away from goal irrelevant activities.
  2. Energizing function. High goals lead to greater effort than low goals.
  3. Impact on persistence. When participants are allowed to control the time they spend on a task, hard goals prolong effort (LaPorte & Nath, 1976). There is often, however, a trade-off in work between time and intensity of effort. Faced with a difficult goal, it is possible to work faster and more intensely for a short period or to work slower and less intensely for a long period.
  4. Affect action indirectly by leading to the arousal, discovery, and/or use of task-relevant knowledge and strategies (Wood & Locke, 1990).

While Goal Setting Theory is generally analyzed at individual level, its principles are considered relevant at organizational level, too. Locke (2004) argues that goal-setting is effective for any task where people have control over their performance. Research in this field currently explores goal setting theory at both individual and organizational level. Elements of the Goal Setting Theory are present in various degrees in all aspects that relate to performance management practice. Linking theory to practice is up to all of us.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

LaPorte, R.E., & Nath, R. (1976). Role of performance goals in prose learning. Journal of Educational Psychology, 68(3), 260-264.

Locke, E. A., Chah, D., Harrison, S., & Lustgarten, N. (1989). Separating the effects of goal specificity from goal level. Organizational Behavior and Human Performance, 43, 270–287.

Locke, E. A., & Latham, G. P. (1990). A theory of goal setting and task performance. Englewood Cliffs, NJ: Prentice Hall.

Locke, E. A. and Latham, G. P., (2002), “Building a Practically Useful Theory of Goal Setting and Task Motivation”, American Psychologist, Vol. 57, No. 9, pp. 705–717.

Locke, E. A. (2004), “Goal setting theory and its applications to the world of business”, Academy of Management Executive, Vol. 18, No. 4, pp. 124-125.

Wood, R., & Locke, E. (1990). Goal setting and strategy effects on complex tasks. In B. Staw & L. Cummings (Eds.), Research in organizational behavior (Vol. 12, pp. 73–109). Greenwich, CT: JAI Press.

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Over 2600 Key Performance Indicator (KPI) examples on www.smartKPIs.com

Thursday, February 11th, 2010

www.smartKPIs.com registered users can now select their Key Performance Indicators (KPIs) from over 2600 Performance Measures documented and published in the online repository. The team focused in the last few days on publishing examples of Transportation – Airlines / Marine Transport / Shipping, Infrastructure Operators – Airports / Ports, as well as Human Resources, Sales and Supply Chain Management metrics.

The functional areas with the highest number of KPI examples are:

The industries with the highest number of documented performance measures are:

Example of a documented performance measure: % Perfect order delivery rate.

User experience on http://www.smartKPIs.com

  • Learn: To learn more about performance management and Key Performance Management visit the Resources section.
  • Explore: To explore the library of KPI examples by navigating the functional area and industry directory, visit the Browse KPIs section.
  • Customize: To build your customized KPI library by saving favorite examples for later use, visit the My KPIs section.
  • Contribute: To propose a new example of KPI, visit the Submit KPIs section.
  • Collaborate: To collaborate with other users and to discuss KPI examples, add comments on each KPI description page.

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Posted in Customized KPI library, Library of KPI examples, Performance Management, Performance Measurement, smartKPIs.com | No Comments »

Measuring Knowledge Management success

Wednesday, February 10th, 2010

Organizations from different domains make significant investments, in terms of time and money, in Knowledge Management (KM) initiatives. The purpose of these initiatives is most of the times to facilitate and enable the capture, transfer and management of the knowledge available in the organizations.

In their paper “Different Knowledge, Different Benefits: Toward a Productivity Perspective on Knowledge Sharing in Organizations”, Haas and Hansen (2000)   identify two distinct ways in which knowledge sharing usually occurs in organizations:

  1. Direct contact between individuals (the provider and receivers) – allows also for tacit knowledge to be transmitted.
  2. Written documents available in knowledge databases – allows knowledge to be structured and easily accessible.

Not all Knowledge Management initiatives are successfully implemented. For example, in 2005, Morten Hansen (professor of entrepreneurship at INSEAD) and Martine Haas (Wharton management professor) conducted a research project in an important accountancy firm, regarding the use of internal knowledge systems by teams of consultants  trying to win sales bids.

The research was presented in the paper “When Using Knowledge Can Hurt Performance: The Value of Organizational Capabilities in a Management Consulting Company” and it  showed that:

  • Knowledge sharing efforts do not necessarily result in improved task outcomes inside organizations.
  • Implementing knowledge management has more chances of success when the initiative is carefully planned and supported throughout the process.
  • Sharing personal advice improved the quality of work, but consumed time, whereas electronic documents saved time during the task, but did not improve work quality or signal competence to clients.

There is no formula in order to successfully  implement Knowledge Management in organizations. However, there are some KPI examples that show if  the organization is heading in the right direction.

http://www.smartKPIs.com contains a library of Knowledge Management indicators, that supports building the strategy, model and culture for knowledge management within the organization.  This variety of measures include:

 

References

Haas, M.R. and Hansen, M.T., (2000), Different Knowledge, Different Benefits: Toward a Productivity Perspective on Knowledge Sharing in Organizations

Haas, M.R. and Hansen, M.T., (2005) When Using Knowledge Can Hurt Performance: The Value of Organizational Capabilities in a Management Consulting Company

Harvard Business Review Blogs, When Knowledge Management Hurts, Vermeulen, F.

www.smartKPIs.com list of KPI examples: Knowledge Management

 

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Over 2500 Key Performance Indicator (KPI) examples on www.smartKPIs.com

Tuesday, February 9th, 2010

www.smartKPIs.com registered users can now select their Key Performance Indicators (KPIs) from over 2500 Performance Measures documented and published in the online repository. The team focused in the last few days on publishing examples of Transportation – Airlines / Marine Transport / Shipping, Infrastructure Operators – Airports / Ports, as well as  Human Resources and Finance and Accounting metrics.

The functional areas with the highest number of KPI examples are:

The industries with the highest number of documented performance measures are:

Example of a documented performance measure: % Aircraft fleet utilization.

User experience on http://www.smartKPIs.com

  • Learn: To learn more about performance management and Key Performance Management visit the Resources section.
  • Explore: To explore the library of KPI examples by navigating the functional area and industry directory, visit the Browse KPIs section.
  • Customize: To build your customized KPI library by saving favorite examples for later use, visit the My KPIs section.
  • Contribute: To propose a new example of KPI, visit the Submit KPIs section.
  • Collaborate: To collaborate with other users and to discuss KPI examples, add comments on each KPI description page.

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Posted in Customized KPI library, Library of KPI examples, Measure, Performance Management, Performance Measurement, smartKPIs.com | No Comments »

The 2010 Magic Quadrant for Business Intelligence Platforms

Monday, February 8th, 2010

A useful resource for assessing the market of Business Intelligence (BI) Platforms is  The 2010 Magic Quadrant for Business Intelligence Platforms, released on 29 January 2010, by Gartner. The report provides a comprehensive evaluation of the main software vendors for the BI platforms, as well as defining the BI market and its trends. An eagerly expected publication in BI circles, this year’s report was authored by four Gartner analysts: Rita L. Sallam (ex Oracle),  Bill Hostmann (ex IBM – Informix),  James Richardson (ex Hyperion, now Oracle) and Andreas Bitterer (ex IBM).

“In 2009, megavendors held almost two-thirds of business intelligence platform market share. But impatient business users increasingly turned to pure-play BI platforms, particularly those of small innovative vendors, to fill usability and time-to-value needs unmet by the larger vendors.” the report states.

The Business Intelligence Market

According to Gartner’s 2010 BI Magic Quadrant report, the market for BI platforms will remain one of the fastest growing software markets despite the economic downturn. Organizations will continue to turn to BI as a vital tool for smarter, more agile and efficient business. Gartner’s annual survey of CIO technology priorities reflects that BI remained among the top five priorities in 2009, while being No. 1 in each of the previous four years.

Evaluation Criteria for the BI Vendors

Gartner used 8 criteria for evaluating each BI vendor present in the Magic Quadrant for Business Intelligence Platforms. The criteria are presented in the table bellow:

For further reading:

Gartner Publication, 29 January 2010, The Magic Quadrant for Business Intelligence Platforms

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Over 2400 Key Performance Indicator (KPI) examples on www.smartKPIs.com

Sunday, February 7th, 2010

www.smartKPIs.com registered users can now select their Key Performance Indicators (KPIs) from over 2400 Performance Measures documented and published in the online repository. The team focused in the last few days on publishing examples of Accounting, Human Resources and Marketing metrics.

The functional areas with the highest number of KPI examples are:

The industries with the highest number of documented performance measures are:

Example of a documented performance measure: # Community satisfaction index.

User experience on http://www.smartKPIs.com

  • Learn: To learn more about performance management and Key Performance Management visit the Resources section.
  • Explore: To explore the library of KPI examples by navigating the functional area and industry directory, visit the Browse KPIs section.
  • Customize: To build your customized KPI library by saving favorite examples for later use, visit the My KPIs section.
  • Contribute: To propose a new example of KPI, visit the Submit KPIs section.
  • Collaborate: To collaborate with other users and to discuss KPI examples, add comments on each KPI description page.

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Posted in Customized KPI library, Library of KPI examples, Measure, Performance Management, Performance Measurement, smartKPIs.com | No Comments »

On the importance of theory in Performance Management

Saturday, February 6th, 2010

smartKPIs.com Performance Architect update 5/2010

Performance management is one of those disciplines that seem to be intuitively easy. It is closely related to everyone’s life. We all hear about setting goals here, achieving targets there, implementing strategies, writing vision statements, living values and so on.

It is not the same for disciplines such as risk management and enterprise architecture – ask someone on the street a question in these fields and there is a good chance the person will be much quieter than expected. Ask the same person a question about performance management and the chances of obtaining a response are much higher.

All of us have been exposed to performance management in some form through our lives, starting with childhood. Performance management is about doing well in sports, doing well in school, playing an instrument, doing well at work and contributing to the organization we are a part of.

So intuitively we know what it is about, why it is needed and how it works. But how many times did we stop to think about these aspects? Or think about the way we think about performance management? Why does it work? What happens?

Such questions have been asked mainly by researchers (as oftentimes consultants are too busy consulting and experts too busy giving advice to ponder on such esoteric questions). As a result, responses to such questions remained mostly in the realm of the academia. And one of the all time favorite terms in academic literature, almost unknown (in the academic sense) to business practitioners is: theory.

The Merriam-Webster online dictionary states the following about theory:

  • Etymology: Latin (theoria) and Greek (theoria, from theorein)
  • Date: 1592. (Note: There must have been some other term used before that time, as theories are as old as Greek philosophy.)

Of all the uses of the term mentioned by this dictionary, the ones that I prefer are:

  • 1 : the analysis of a set of facts in their relation to one another
  • 3 : the general or abstract principles of a body of fact, a science, or an art <music theory>
  • 4 a : a belief, policy, or procedure proposed or followed as the basis of action <her method is based on the theory that all children want to learn>
  • 5 : a plausible or scientifically acceptable general principle or body of principles offered to explain phenomena <the wave theory of light> (Merriam-Webster, 2010)

So why is theory important in performance management? I propose three reasons why learning and thinking about the theory behind practice is important:

  1. As performance management is such an embedded discipline in our life, it impacts us more than many others. It would be beneficial to know the logic behind many of the processes and tools used for performance management initiatives. A driver with a few skills in mechanics is a better driver than the one that doesn’t have a clue that there is an engine behind the bonnet and it requires fuel.
  2. Understanding the theory behind practice puts us in a better position to make informed decisions and question solutions proposed to us. Too many performance management products and ideas are promoted and taken for granted. A more informed buyer is a smarter buyer and a happier customer.
  3. Critically reviewing the theory behind practice enables us to question its validity and try improving it. How can we improve and advance performance management if we keep focusing on solutions without thinking why and how these solutions work?

Perhaps theory is another item on the already heavy list of elements the Balanced Scorecard should balance. Or perhaps we’ll forget give the Balanced Scorecard a break and start balancing things ourselves… Smartly…

Either way, next time you are offered a solution don’t forget to ask the question: So, what is the theory behind this? You might get lucky and the response will put a smile on your face for the rest of the day.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Merriam-Webster Online dictionary (2010) Retrieved online on 6 February 2010 at: http://www.merriam-webster.com/netdict/theory

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Over 2300 Key Performance Indicator (KPI) examples on www.smartKPIs.com

Friday, February 5th, 2010

www.smartKPIs.com registered users can now select their Key Performance Indicators (KPIs) from over 2300 Performance Measures documented and published in the online repository. The team focused in the last few days on publishing examples of Contract Management, Human Resources and Online Presence – eCommerce metrics.

The functional areas with the highest number of KPI examples are:

The industries with the highest number of documented performance measures are:

Example of a documented performance measure: $ Cost per thousand impressions

User experience on http://www.smartKPIs.com

  • Learn: To learn more about performance management and Key Performance Management visit the Resources section.
  • Explore: To explore the library of KPI examples by navigating the functional area and industry directory, visit the Browse KPIs section.
  • Customize: To build your customized KPI library by saving favorite examples for later use, visit the My KPIs section.
  • Contribute: To propose a new example of KPI, visit the Submit KPIs section.
  • Collaborate: To collaborate with other users and to discuss KPI examples, add comments on each KPI description page.

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Posted in Customized KPI library, KPI, Library of KPI examples, Measure, smartKPIs.com | No Comments »

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