An interesting question I came across this week got me thinking. The question, rather rhetorical was along the lines of: “Why follow some model developed by a consultant when hundreds of smart people from hundreds of companies have spend tens of years developing and refining models line Baldrige and EFQM?”
The long answer to such a question, from my perspective is the following:
For the same reason the several of the dozen companies involved in the Nolan Norton Institute study experimented in 1990 with Balanced Scorecard prototypes expanded from Art Schneiderman’s original “Corporate Scorecard” piloted at Analog Devices. It is a classic tale of practitioner insight, mixed with academic rigour and consulting acumen and embraced by organizations willing to innovate while contributing to the enrichment of management as a discipline. (Details in the preface of Kaplan and Norton’s 1996 book.)
For the same reason Motorola’s CEO Bob Galvin embraced in 1985 the quality improvement ideas expressed in a research report by two of its employees: Mikel Harry, PhD. (academic rigour) and Bill Smith (practitioner insight, with 35 years of experience in engineering and quality assurance). Their proposed MAIC problem-solving approach became a stepping stone in the evolution of Six Sigma. The D was added by IBM and other early adopters after Motorola winning the Baldrige Award in 1988.
For the same reason why after being presented in an efficiency report to the Executive Committee, Donaldson Brown’s return on investment formula was adopted by Du Pont in 1912. Brown was a 27 years old engineering graduate at the time. The subsequent work done by Brown at Du Pont and General Motors is legendary, with many cost accounting techniques and principles such as Return on Investment, Return on Equity, Forecasting and Flexible being established and used in a corporate context. They were gradually adopted by corporate America and grew to became part of the financial fabric of today’s corporate environment.
The short answer to the question is innovation and progress. Management is constructivist in nature. It is based on innovative ideas being proposed, tested and followed as they prove their value.
My 15 years of work as a management practitioner and consultant and 6 years of academic research offered me the opportunity to analyze plenty of models, frameworks, methodologies and abstract concepts. Some of them are puerile, some of them make sense to me, some of them don’t make sense to me, but make sense to others, many of them are trademarked in an effort to protect and monetize and lots of good work is inaccessible to many due to it being published in academic journals. My advice to anyone, be it consultant, researcher or practitioner is to never stop learning and exploring with an open mind. Great management concepts do not emerge overnight. Over time, some ideas lead to others, some impractical tools had some good points that inspired new hybrids, many organizations had the courage to support innovative staff members and consultant promoted prototypes and great things happened.
Then again, we have the option to put blinkers on and follow industry standards, widely recognized methodologies and popular management tools. That is perfectly fine, too. I myself hold a TOGAF certification (Enterprise Architecture) and I am an PRINCE2 certified practitioner (Project Management). That didn’t stop me to learn about and use components of the Zachman Framework, DODAF, FEAF (Enterprise Architecture), as well as PMBOK and other hybrid project management concepts. I enjoy exploring and generating my own taxonomies, typologies and conceptual systems.
Earlier this year, Gary Hamel launched a call for Management 2.0 in his blog posts: Inventing Management 2.0 and Improving our capacity to manage. The movement is already gaining traction at: The Management Innovation eXchange (MIX) and is supported by academic institutions (i.e London Business School), Industry Organizations (i.e. Dell, National Australia Bank) and research drive consulting companies (i.e. McKinsey&Company and Gartner). In my opinion, such a triumvirate is essential for progressing administrative science theory and practice.
Gary Hamel’s answer to the above question would probably be: It’s time to reinvent management. You can help.
Configuring KPIs following their selection is represented by the documentation of the complete set of relevant details for each KPI and the activation of KPIs so that data can be reported and analyzed.
Link KPIs upstream with business objectives and downstream with organizational initiatives. KPIs should be connected to organizational objective as they make objectives SMART. Initiatives should be establish to support the achievement of objectives by improving KPI results.
Assign a data custodian responsible for gathering measurement data for the KPI. Data gathering for each KPI requires clarity and ownership. Having a responsible for collecting KPI data is a management approach to ensure accountability with data being available for analysis on time.
Assign a KPI owner responsible for the achievement of the desired results. Each KPI should have a manager allocated as its owner, to ensure responsibility regarding its analysis, results and improvement options.
Avoid tunnel KPI definitions – repeating the KPI name in the definition doesn’t add value. Good practice in working with KPIs requires thorough documentation of what they reprezent. Proper KPI definitions should go beyond repeating the KPI name, by providing a plain English explanation of what the KPI is about.
Categorize KPIs by their reporting status – active = data is tracked, inactive = data not available. Activating KPIs is the process of moving a KPI status from inactive, when the data is not available to active, when data is reported and a clear process is in place for doing so on a regular basis.
Clearly identify the unit type, most of the time % (percentage), # (number) and $ (dollar value). KPIs being measurable entities, they have an associated unit type. To simplify communication, the symbol should be used instead of the word expressing it.
Data accuracy for each KPI should be evaluated as low, medium and high and treated as such. Not all KPIs have the same data reliability. Survey based KPIs are always going to be less reliable compared to revenue KPIs, due to objectivity issues. Other aspects to be considered are data automation and auditing.
Determine the frequency of data generation and the frequency of reporting for each KPI. Data for some KPIs, such as ‘# Website visits‘ can be easily gathered on a daily basis. For other KPIs, such as ‘% Employee engagement‘, data gathering requires considerable costs and efforts, impacting a large number of staff. The frequency of reporting is influence by factors such as cost, efforts and technical complexity.
Develop a customized KPI documentation form that contains the relevant details describing the KPI. Documenting KPIs can be easily done in a template that structures the main description fields considered relevant for the organization. smartKPIs.com contains such a model that can be customized at organizational level.
Document if the trend is good when increasing, decreasing or when data is within a range. For some KPIs the results are good when they are decreasing from a period to another – for example ‘# Customer complaints’. For others, such as ‘$ Revenues‘, the results are good when increasing, while in the case of ‘% Budget variance‘, the results are good when within a specific range.
Document where the reporting data for each KPI is sourced from and who produces it. Understanding a KPI relies on having a clear understanding of the data behind it and its source.
Don’t worry too much about a KPI being leading or lagging. Differentiating between the two is debatable and confusing. What is considered a leading KPI for some is a lagging KPI for others. As agreement around this differentiation is oftentimes difficult to achieve, it is secondary in importance and impact.
Ensure each KPI is clearly explained in a definition and has a purpose for usage. The separation between definition and purpose is essential. The purpose expresses the reason for using the KPI and is one of the key components of the documentation form.
KISS – keep it short and simple: Use the # and % symbol to replace “number” and “percentage” in KPI names. Standardizing KPI names and shortening them supports communication and enables clear data visualization of KPIs in dashboard and scorecards.
Simplify KPI names by eliminating the word “of”. As a “common denominator” it can be cut from the name. KPIs are analytical in nature and where possible, their names should be as concise as possible. Definitions, calculation and purpose fields provide context and can be more wordy.
August 12, 2011, Melbourne, Australia – smartKPIs.com, the world’s largest source of thoroughly documented Key Performance Indicator (KPI) examples announces that “Diagnosis and Treatment” and “Workload and Productivity” KPIs dominate the “Top 25 Healthcare KPIs of 2010”. The report presents in detail KPIs such as: “% Hospital bed occupancy rate”, “# Average daily census” and “# Hospital-acquired infections”, among other KPI examples reviewed by the smartKPIs.com research team. “Top KPIs of 2010″ is a collection of research reports discussing the most popular KPIs of 2010 across functional areas and industries. smartKPIs.com is an expert in the field of performance management and measurement, researching the use of KPI based performance management systems in practice around the world.
The “Top 25 Healthcare KPIs of 2010” report provides insights in the state of Healthcare performance measurement today by listing and analyzing the most visited KPIs on smartKPIs.com in 2010. It is part of the “Top KPIs of 2010” series of reports and a result of the research program conducted by the analysts of smartKPIs.com in the area of integrated performance management and measurement. smartKPIs.com hosts the largest catalogue of thoroughly documented KPI examples available today and representing an excellent platform for research and dissemination of insights on KPIs and related topics. The hundreds of thousands of visits to smartKPIs.com and the thousands of KPIs visited, bookmarked and rated by members of this online community in 2010 provided a rich data set, which combined with further analysis from the editorial team, formed the basis of these research reports.
Fact: businesses are concerned to measure their success in social media. The question is how they can do it. So, how important is to have hundreds or thousands of “likes” if these “likes” fail to engage beyond their initial subscription? So, social media ROI should be based on “interaction and engagement” as primary goal, could be increase sales, share of voice, brand sentiment and many other things but, it’s also important to measure, monitor and compare with other investments in order to be sure that your money is spent wisely.
Selecting KPIs is a process which seems simple, yet is inherently complex, due to the interdependencies involved. Here are 15 things to consider before embarking on this journey.
Review existing internal reports and support documents at the beginning of the KPI selection exercise. These may include previous business / strategy plans, annual reports, performance reports and other documentation that relates to performance management, measurement and benchmarking.
Use external lists of examples and other secondary documentation to inform and support KPI selection. It is always a good idea to begin a journey having the end in mind. Reviewing KPI examples used in the industry or functional area, by competitors or other organizations provides context around what is in used in practice by others and improves understanding around the desired output.
Engage internal stakeholders in the process of KPI selection through interactive workshops. KPI selection is not a desk exercise. It is an opportunity to communicate and learn, hence an open discussion in a workshop format is a better approach for enabling not only KPI selection, but also understanding and ownership.
Calibrate KPI selection around business objectives and value drivers. KPIs are not used in isolation. They are just one component of the value creation chain and of the performance management system. A simple way to position them is al links between business objectives and related organizational initiatives.
Select KPIs based on the realities of organizational activity and environment. Each organization is different, operating in different environments, with different guiding principles. Hence the KPIs used need to reflect the specifics of each organization first and industry/functional area characteristics second.
Maintain a centralized catalogue of KPIs for the entire organization. Structuring KPI documentation in a central repository facilitates their understanding and usage in a similar way across the organization, growing the know-how and facilitating KPI selection and usage on an ongoing basis.
Understand the difference between input, process, output and outcome KPIs. This value creation sequence is essential in facilitating the understanding of KPIs in the context of the value added by the process/activity they are related to. It is an essential mapping technique that facilitates KPI selection.
Don’t hesitate in changing KPIs in scorecards and dashboards. KPIs should reflect activity and activity should adapt to a changing environment. The use of KPIs should be fluid and flexible, reflecting the change in business priorities as a result of the change in the operating environment.
Review KPI relevance regularly. If new KPIs are required, they can be established at any time. An essential aspect of double loop learning. Using KPIs is not only about achieving set targets and objectives, but also about ensuring the objectives and targets were the right ones to be set in the first place and the KPIs used to track their achievement were the appropriate ones.
KPI selection and target setting should be done in accordance with organizational maturity and direction. There is no one size fits all approach when it comes to using KPIs. As strategies vary from one organization to another, the use of KPIs also varies.
Project milestones are not KPIs. Understanding the difference between what is and what is not a KPI is a prerequisite of successful KPI selection.
Targets are not KPIs. Understanding the anatomy of a KPI is essential in KPI selection and usage.
Some things are not worth measuring. For example measuring love might not be such a good idea. Not everything that can be measured should be measured with KPIs.
Some things are too difficult to measure. For example cuteness. The “measuring everything that moves’ mentality should be avoided.
Eliminate or replace inactive KPIs with simpler, yet measurable ones. Using some KPIs may have seemed a good idea at the time of their selection, however if measuring them proves to be too costly or time consuming, they should be replaced. An active KPI is better than an inactive KPI.
August 4, 2011, Melbourne, Australia – smartKPIs.com, the world’s largest source of thoroughly documented Key Performance Indicator (KPI) examples announces that Sales Performance and Sales Management dominate the “Top 25 Retail KPIs of 2010”. The report presents in detail KPIs such as: “# Inventory to sales ratio (ISR)”, “% Same store sales growth” and “$ Sales per unit area”, among other KPI examples reviewed by the smartKPIs.com research team. “Top KPIs of 2010″ is a collection of research reports discussing the most popular KPIs of 2010 across functional areas and industries. smartKPIs.com is an expert in the field of performance management and measurement, researching the use of KPI based performance management systems in practice around the world.
The “Top 25 Retail KPIs of 2010” report provides insights in the state of Retail performance measurement today by listing and analyzing the most visited KPIs on smartKPIs.com in 2010. It is part of the “Top KPIs of 2010” series of reports and a result of the research program conducted by the analysts of smartKPIs.com in the area of integrated performance management and measurement. smartKPIs.com hosts the largest catalogue of thoroughly documented KPI examples available today and representing an excellent platform for research and dissemination of insights on KPIs and related topics. The hundreds of thousands of visits to smartKPIs.com and the thousands of KPIs visited, bookmarked and rated by members of this online community in 2010 provided a rich data set, which combined with further analysis from the editorial team, formed the basis of these research reports. (more…)
By attending the Balanced Scorecard Forum Dubai 2011, the smartKPIs.com team to gain insights regarding performance management practices in leading organizations around the world. Such an organization is Infosys Technologies from India, a pioneer in what concerns the development and use on Customer Relationship Scorecards.
The discussion with Mr. Sanjay Purohit, VP Corporate Planning and Business Assurance at Infosys, reveals insightful findings regarding:
How the idea with the Relationship Scorecard emerged and how it is used within the organization;
How the Scorecard has helped Infosys;
What are the main challenges in using it.
We invite you to watch this video and find out the answers to these questions and more on relationship performance management:
Note: smartKPIs.com thanks Mr. Sanjay Purohit, VP Corporate Planning and Business Assurance, Infosys Technologies, for having made possible the realization of this interview.
Executive Scorecard: Vice President of IT Operations, Source: www.hp.com, 2011
According to a recent press release, HP announced that it has launched a new software suite to operationalize measure and improve IT performance. Tech Directors require standardized instruments that measure efficiently and improve performance. Having a comprehensive overview of IT performance enables Chief Information Officers (CIOs) to deliver an Instant-On Enterprise which incorporates everything he does in order to serve customers, employees, partners and citizens with all they need, instantly.
Today, most key performance indicators (KPIs) for IT systems are widely dispersed and collected by using different methods. This is creating management deficiencies which may slow responses to changing priorities and market circumstances.
CIO Assessment and Cloud Assessment tools help clients quickly evaluate their current level of IT Performance Management maturity.
HP’s IT Performance Suite is swiftly proving critical to the success of CIOs and the VP of IM in particular because it provides control and visibility into information across the enterprise.
A recently conducted survey What’s Working™ (Mercer, 2011) in USA indicates that nearly one in three (32%) US workers is seriously considering leaving the organization now, the rate increasing sharply from 23% in 2005. Mindy Fox, Senior Partner at Mercer & US Region Leader mentioned that “the business consequences of this erosion in employee sentiment are significant, and clearly the issue goes far beyond retention. Diminished loyalty and widespread apathy can undermine business performance, particularly as companies increasingly look to their workforces to drive productivity gains and spur innovation”(Mercer, 2011).
The study results reflect that:
Only 43% of US employees believe they are doing enough to financially prepare for retirement;
Only 68% of employees rate their overall benefits program as good or very good, down from 76% in 2005, while 59% say they are satisfied with their health care benefits, down from 66%;
Base pay, the most important element of the employment deal, is less satisfying for employees (53% satisfied with base pay, compared with 58% in 2005);
Scores for career development and performance management improved compared to the study results from 2005, remaining however low: only 42% of employees today agree that promotions go to the most qualified employees in their organization, up from 29% in 2005, while 46% agree that their organization does an adequate job of matching pay to performance, up from 33% (Mercer, 2011).
Key measures regarding employee engagementregistered low scores also, while intention to leave the organization is up across all employee segments, with the youngest workers most likely to be looking for a departure – 40% of employees age 25–34 and 44% of employees 24 and younger:
Key engagement measures show consistent decline among US workers
Youngest workers most likely to be ‘seriously considering leaving’ today
The What’s Working™ survey was realized over the past two quarters among nearly 30,000 workers in 17 countries, including 2,400 workers in the US. The survey, last conducted in the US in 2005, includes more than 100 questions on a range of work-related topics and reflects the overall demographics of the US workforce in terms of age, gender and job level. This research also is being conducted in 16 other countries worldwide (Mercer, 2011).
Reference
Mercer (2011), One in two US employees looking to leave or checked out on the job, says What’s Working research, available at: http://www.mercer.com/press-releases/1418665 (accessed 25 July 2011)
Businesses, from the production sector have more data than ever before, stored in more than one system and places, are used in different ways. Progress in information technology has fueled this explosive increase opportunity both in creating fresh ways for producers in order to reach new markets and clients and complexity in an effort to collect, manage and interpret data and information which can help guide them through success.
Assess the maturity of your business analytics, selecting KPIs is a learning experience, a journey in itself.
Look for business analytics tools that are easy to use and flexible
Look for tools that support a range of roles in a manufacturing environment.
Ensure business analytics are widely accessible, while some KPIs are widely used across organisations, others are unique to each organisations as they reflect their strategy and specific conditions of operating.
Don’t let inferior data undermine use of business analytics and metrics.
Replace spreadsheets as tools for business analytics.
It helps when IT and the lines of business work together on analytics.
Understand the value of predictive and forward-looking analytics.
Address barriers standing in the way of improving business analytics and performance.
Resources must be adequate to enable investment in technology to make analytics easy to access and use.
In conclusion clarify what you want to achieve. If you want to improve things and learn from KPIs, you should not avoid selecting challenging KPIs, difficult to measure or difficult to improve. The easy choice is selecting KPIs that make you look good. While this may serve some purpose on the short term, on the medium to long term it will impact the relevance and credibility of KPIs in the organisation.
A performance report becomes functional by using KPIs that illustrate the business context and by which action can be identified or labeled worth trying.
When choosing a KPI it should fulfill one of the following categories (Shevlin, 2007):
To have the ability to explain. Do your KPIs help explaining why something has happened?
To be predictable. Can a KPI predict what will happen in the future within the company?
Behaviour change. The measurement of a KPI makes people to act or to behave in a particular way?
Some of the widely used KPIs for measuring marketing department’s performance are (smartKPIs.com, 2011):
% Brand awareness - Measures the rate at which target customers recognize and recall the brand.
% Customer retention - Measures the organization’s ability to create repeat business among its customer base. High retention indicates customer satisfaction is strong.
"http://t.co/rKwNCFJ9 Another useful resource is the review conducted by The KPI Institute in the use of Balanced Scorecard in practice:..."
smartKPIs
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"http://t.co/I4PN5j1c Hence the issue with labeling financial KPIs as lagging indicators. They may as well be considered leading..."
smartKPIs
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"Job opportunity: Analyst, Business Performance Management at Talisman Energy Inc. - Calgary, Canada Area #jobs http://t.co/40Qdqnp4"
smartKPIs
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smartKPIs
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August 4, 2011, Melbourne, Australia – 
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