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Key Performance Indicators

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Key Performance Indicators
Key Performance Indicators
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Key Performance Indicators

  1. 1. Key Performance IndicatorsKey Performance Indicators
  2. 2. Agenda for the sessionAgenda for the session  What are Key Performance IndicatorsWhat are Key Performance Indicators  Why are KPIs importantWhy are KPIs important  KPIs: A Balanced ScorecardKPIs: A Balanced Scorecard  How to implement KPIsHow to implement KPIs  Sample KPI Measurements andSample KPI Measurements and
  3. 3. What are KPIWhat are KPI’s?’s? “Quantifiable measurements that reflect critical success factors of a business.” • Key Drivers • A handful of numbers “at a glance view” finger on the pulse hot spots act quickly!
  4. 4. Why are KPIs important?Why are KPIs important? Owners…Owners…  are overwhelmed and distracted withare overwhelmed and distracted with day to day activities and tasksday to day activities and tasks  concentrate on the tactical decisionsconcentrate on the tactical decisions and neglect the strategic onesand neglect the strategic ones  must make important decisions, quickly,must make important decisions, quickly, with greater consequences, and oftenwith greater consequences, and often with limited information on handwith limited information on hand
  5. 5. The DashboardThe Dashboard TurnoverResources Overdraft Debtors Days Testing & Measuring
  6. 6. KPIs must be Strategic: How doKPIs must be Strategic: How do we differentiate from thewe differentiate from the competitioncompetition  Define the market to be servedDefine the market to be served  Define the customerDefine the customer  Define the critical internal processesDefine the critical internal processes needed to capture and satisfyneeded to capture and satisfy customerscustomers  What individual and organizationalWhat individual and organizational
  7. 7. KPIs: Four Strategic PerspectivesKPIs: Four Strategic Perspectives  CustomerCustomer  Marketing and SalesMarketing and Sales  Internal Business ProcessesInternal Business Processes  OperationsOperations  SuppliersSuppliers  FinancialFinancial  ResourcesResources  Vision and LeadershipVision and Leadership
  8. 8. Input versus Output:BalancedInput versus Output:Balanced ScorecardScorecard FINANCIAL CUSTOMERS BUSINESS SYSTEMS RESOURCES Plant and Equipment, Working Capital; Employee Satisfaction; Knowledge and Skills Costs; Timeliness; Rework %; Returns Net Profit, Turnover, etc. Client Survey, Customers Service, Client Retention %, Percentage of referring Clients etc.
  9. 9. KPIs should look like a Balanced ScorecardKPIs should look like a Balanced Scorecard
  10. 10. KPIs should focus on a single strategyKPIs should focus on a single strategy  Linked to the strategyLinked to the strategy  ConsistentConsistent  Mutually reinforcingMutually reinforcing
  11. 11. Some Generic KPI MeasuresSome Generic KPI Measures FinancialFinancial Return on Capital; CashReturn on Capital; Cash Flow; Revenue; ProfitFlow; Revenue; Profit CustomerCustomer Customer Satisfaction;Customer Satisfaction; Customer Retention; marketCustomer Retention; market shareshare Internal Business ProcessInternal Business Process Quality; timeliness; costs;Quality; timeliness; costs; returns; reworkreturns; rework Learning and GrowthLearning and Growth Employee Retention;Employee Retention; Employee Satisfaction;Employee Satisfaction; Employee KnowledgeEmployee Knowledge
  12. 12. The Cycle Of BusinessThe Cycle Of Business
  13. 13. Cause and Effect: The BalancedCause and Effect: The Balanced ScorecardScorecard
  14. 14. KPIs: Four Types ofKPIs: Four Types of MeasuresMeasures  Short and Long TermShort and Long Term  Internal (business processes) andInternal (business processes) and External (shareholders,customers)External (shareholders,customers)  Leading and LaggingLeading and Lagging  Objective (financial) and SubjectiveObjective (financial) and Subjective (non-financial)(non-financial)
  15. 15. How should KPIs be used?How should KPIs be used?  CommunicationCommunication  InformingInforming  DiagnosticDiagnostic  LearningLearning  NOT controllingNOT controlling
  16. 16. Diagnostic versus StrategicDiagnostic versus Strategic  Diagnostic measurements:Diagnostic measurements: monitormonitor whether something is in control.whether something is in control.  Strategic measurements:Strategic measurements: define adefine a strategy for competitive excellence andstrategy for competitive excellence and future successfuture success A Balanced Scorecard is aA Balanced Scorecard is a strategic measurement system.strategic measurement system.
  17. 17. Sample Balanced ScorecardSample Balanced Scorecard PerspectivePerspective GoalsGoals Drivers (How)Drivers (How) MeasurementsMeasurements (KPI(KPI’s)’s) CustomerCustomer Improve customerImprove customer satisfactionsatisfaction Decrease lead timeDecrease lead time Deliver on timeDeliver on time Reduce complaintsReduce complaints Average Lead TimeAverage Lead Time % deliveries on time% deliveries on time Number of ComplaintsNumber of Complaints Internal BusinessInternal Business Continuously improveContinuously improve business processesbusiness processes Decrease Cycle TimeDecrease Cycle Time Increase QualityIncrease Quality Increase ProductivityIncrease Productivity Average Cycle TimeAverage Cycle Time # of Defects; % Rework# of Defects; % Rework Output per employeeOutput per employee FinancialFinancial Continuously ImproveContinuously Improve Financial PerformanceFinancial Performance Decrease CostsDecrease Costs Increase Sales growthIncrease Sales growth Increase Market ShareIncrease Market Share Increase ROIIncrease ROI Average Unit costsAverage Unit costs Growth Rate in SalesGrowth Rate in Sales Market ShareMarket Share ROIROI Innovation and LearningInnovation and Learning Deliver new Products andDeliver new Products and ServicesServices Increase sales of newIncrease sales of new products and servicesproducts and services Reduce development timeReduce development time % of sales from new% of sales from new products and servicesproducts and services Time from design toTime from design to implementationimplementation
  18. 18. KPIs: The Big PictureKPIs: The Big Picture   Marketing Sales Stake- holders Operations Production Suppliers Finance and Admin Human Resources Innovation and Learning Clients Team Share- holders Attract and retain clients Build and maintain client relationships and loyalty Provide services that satisfy client’s needs and lifestyle objectives Provision of secure employment Provision of enjoyable happy work environment, that’s aligned with corporate values Provide career and professional development opportunities Provide succession and exit plan for existing shareholders Provide capital growth in asset and return on investment through dividend streams
  19. 19. How to implement KPIsHow to implement KPIs Step 1: Define Strategic SpecificsStep 1: Define Strategic Specifics  Define Your StrategyDefine Your Strategy  Vision, Mission, Culture and Values reflectVision, Mission, Culture and Values reflect strategystrategy  Set GoalsSet Goals  Most important business objectives (e.g. improveMost important business objectives (e.g. improve customer satisfaction)customer satisfaction)  WhatWhat “drivers” are critical to success (e.g.“drivers” are critical to success (e.g. decrease lead time)decrease lead time)  What impactsWhat impacts “driver”“driver” results (leadership, training,results (leadership, training, systems)systems)
  20. 20. How to implement KPIsHow to implement KPIs Step 1: Define Strategic SpecificsStep 1: Define Strategic Specifics (Cont)(Cont)  Clarify the strategyClarify the strategy  Align Team members on strategicAlign Team members on strategic issuesissues  Identify BarriersIdentify Barriers
  21. 21. How to implement KPIsHow to implement KPIs Step 2: Audit Existing MeasuresStep 2: Audit Existing Measures  Assess strategic fitAssess strategic fit  Identify what data is availableIdentify what data is available  Review Measurement ProcessesReview Measurement Processes  AccuracyAccuracy  TimelinessTimeliness  Identify GapsIdentify Gaps
  22. 22. How to implement KPIsHow to implement KPIs Step 3: Develop New MeasuresStep 3: Develop New Measures  Bridge the gaps, examples of strategicBridge the gaps, examples of strategic data often missing:data often missing:  Employee Satisfaction SurveyEmployee Satisfaction Survey  Customer Satisfaction SurveyCustomer Satisfaction Survey  Rework %Rework %  On-time Delivery %On-time Delivery %
  23. 23. How to implement KPIsHow to implement KPIs Step 3: Develop New MeasuresStep 3: Develop New Measures  Measures must reflect performance and progressMeasures must reflect performance and progress of the businessof the business  Must be quantifiableMust be quantifiable  Must be compared to another numberMust be compared to another number  last yearlast year  budget/goalbudget/goal  trendtrend  Can be acted uponCan be acted upon
  24. 24. How to implement KPIsHow to implement KPIs Step 3: Develop New MeasuresStep 3: Develop New Measures  KPI title:KPI title: Employee TurnoverEmployee Turnover  Defined:Defined: number of employees who resign ornumber of employees who resign or are terminated for any reason divided by theare terminated for any reason divided by the number of employees at the beginning of thenumber of employees at the beginning of the year. Reductions in force excludedyear. Reductions in force excluded  Measured:Measured: Payroll termination report byPayroll termination report by reasonreason  Goal:Goal: Reduce turnover by 10% (from 16.6% toReduce turnover by 10% (from 16.6% to 15%); FY 2012 objective is to achieve an15%); FY 2012 objective is to achieve an
  25. 25. How to implement KPIsHow to implement KPIs Step 4: Analyze and ReportStep 4: Analyze and Report  Easy to ReadEasy to Read  One Page SummaryOne Page Summary  GraphsGraphs
  26. 26. Sample KPI ReportSample KPI Report TemplateTemplateKPI Template Curr Mth Sam e M LY Comparison % Sales Budget Mth YTD Actual %Sales YTD LY Act % Sales Com parison Budget YTD Sales 1 Sales 2 Sales 3 Total Sales Cost 1 Cost 2 Cost 3 Total COGS Gross Profit Gross Margin Sales & Mktg. Adm nin. Other 1 Other 2 Facilities Total costs EBITDA(Op.Inc) Op. Margin Interest/Dep/Amort Net Profit FTE 1 FTE 2 FTE Total Inventory Inventory Turover Back Orders Accts Rec Av Coll. Days Quality Meas.1 Quality Meas.2 Production Meas. 1 Production Meas.2 New Customers Total Customers Forecast this month F 30 out F 60 out F 90 out F 120 out F 150 out Work in Progress Projects Status Project 1 Mgr. Project 2 Mgr. Project 3 Mgr. Project 4 Mgr. Project 5 Mgr. Budget and Delivery
  27. 27. Sample KPI Trend ReportSample KPI Trend Report
  28. 28. Sample Trend ReportSample Trend Report
  29. 29. How to implement KPIsHow to implement KPIs Step 5: Continuous ImprovementStep 5: Continuous Improvement  Strategy based on set prioritiesStrategy based on set priorities  SMART GoalsSMART Goals  Assign AccountabilityAssign Accountability  Track ImprovementTrack Improvement  Set New GoalsSet New Goals
  30. 30. WorkshopWorkshop  Review your companyReview your company ’’s Vision ands Vision and MissionMission  Write down the areas in your businessWrite down the areas in your business that require KPIthat require KPI ’’ss
  31. 31. KPIs: The Big PictureKPIs: The Big Picture   Marketing Sales Stake- holders Operations Production Suppliers Finance and Admin Human Resources Innovation and Learning Clients Team Share- holders Attract and retain clients Build and maintain client relationships and loyalty Provide services that satisfy client’s needs and lifestyle objectives Provision of secure employment Provision of enjoyable happy work environment, that’s aligned with corporate values Provide career and professional development opportunities Provide succession and exit plan for existing shareholders Provide capital growth in asset and return on investment through dividend streams
  32. 32. Sample Balanced ScorecardSample Balanced Scorecard PerspectivePerspective CustomerCustomer Internal BusinessInternal Business FinancialFinancial Innovation and LearningInnovation and Learning
  33. 33. Sample Balanced ScorecardSample Balanced Scorecard PerspectivePerspective GoalsGoals CustomerCustomer Improve customerImprove customer satisfactionsatisfaction Internal BusinessInternal Business Continuously improveContinuously improve business processesbusiness processes FinancialFinancial Continuously ImproveContinuously Improve Financial PerformanceFinancial Performance Innovation and LearningInnovation and Learning Deliver new Products andDeliver new Products and ServicesServices
  34. 34. Sample Balanced ScorecardSample Balanced Scorecard PerspectivePerspective GoalsGoals Drivers (How)Drivers (How) CustomerCustomer Improve customerImprove customer satisfactionsatisfaction Decrease lead timeDecrease lead time Deliver on timeDeliver on time Reduce complaintsReduce complaints Internal BusinessInternal Business Continuously improveContinuously improve business processesbusiness processes Decrease Cycle TimeDecrease Cycle Time Increase QualityIncrease Quality Increase ProductivityIncrease Productivity FinancialFinancial Continuously ImproveContinuously Improve Financial PerformanceFinancial Performance Decrease CostsDecrease Costs Increase Sales growthIncrease Sales growth Increase Market ShareIncrease Market Share Increase ROIIncrease ROI Innovation and LearningInnovation and Learning Deliver new Products andDeliver new Products and ServicesServices Increase sales of newIncrease sales of new products and servicesproducts and services Reduce development timeReduce development time
  35. 35. Sample Balanced ScorecardSample Balanced Scorecard PerspectivePerspective GoalsGoals Drivers (How)Drivers (How) MeasurementsMeasurements (KPI(KPI’s)’s) CustomerCustomer Improve customerImprove customer satisfactionsatisfaction Decrease lead timeDecrease lead time Deliver on timeDeliver on time Reduce complaintsReduce complaints Average Lead TimeAverage Lead Time % deliveries on time% deliveries on time Number of ComplaintsNumber of Complaints Internal BusinessInternal Business Continuously improveContinuously improve business processesbusiness processes Decrease Cycle TimeDecrease Cycle Time Increase QualityIncrease Quality Increase ProductivityIncrease Productivity Average Cycle TimeAverage Cycle Time # of Defects; % Rework# of Defects; % Rework Output per employeeOutput per employee FinancialFinancial Continuously ImproveContinuously Improve Financial PerformanceFinancial Performance Decrease CostsDecrease Costs Increase Sales growthIncrease Sales growth Increase Market ShareIncrease Market Share Increase ROIIncrease ROI Average Unit costsAverage Unit costs Growth Rate in SalesGrowth Rate in Sales Market ShareMarket Share ROIROI Innovation and LearningInnovation and Learning Deliver new Products andDeliver new Products and ServicesServices Increase sales of newIncrease sales of new products and servicesproducts and services Reduce development timeReduce development time % of sales from new% of sales from new products and servicesproducts and services Time from design toTime from design to implementationimplementation
  36. 36. Sample KPI Measures:Sample KPI Measures: Marketing and SalesMarketing and Sales  Market ShareMarket Share  Leads by SourceLeads by Source  Number of ProspectsNumber of Prospects  Conversion RatioConversion Ratio  Average Dollar SaleAverage Dollar Sale  Profit Per CustomerProfit Per Customer  Sales by Product LineSales by Product Line  Number ofNumber of Transactions/CustomerTransactions/Customer  Customer SatisfactionCustomer Satisfaction
  37. 37. Sample KPI Measures:Sample KPI Measures: Marketing and SalesMarketing and Sales  Number of newNumber of new customerscustomers  Brand AwarenessBrand Awareness  Value of BrandValue of Brand  Number ofNumber of CustomersCustomers  ReferralsReferrals  Sales MixSales Mix  CustomerCustomer ProfitabilityProfitability  Number of OrdersNumber of Orders  Customer RetentionCustomer Retention  Reasons for lossesReasons for losses  Lifetime Value of aLifetime Value of a
  38. 38. Sample KPI Measure:Sample KPI Measure: FinancialFinancial  DividendsDividends  Current RatioCurrent Ratio  Quick RatioQuick Ratio  Credit ratingCredit rating  Days Sales OutstandingDays Sales Outstanding  RevenueRevenue  Profit MarginProfit Margin  Gross marginGross margin  Revenue/Expense RatioRevenue/Expense Ratio  Variable vs non-variableVariable vs non-variable expensesexpenses  Return on InvestmentReturn on Investment
  39. 39. Sample KPI Measures:Sample KPI Measures: FinancialFinancial  Cash in BankCash in Bank  Retained EarningsRetained Earnings  Cost of Goods SoldCost of Goods Sold  Inventory Turns/YearInventory Turns/Year  Cash FlowCash Flow  Return on CapitalReturn on Capital  Bank OverdraftBank Overdraft  InventoryInventory  Aged AccountsAged Accounts ReceivableReceivable  Aged Accounts PayableAged Accounts Payable  Sales Per Square FootSales Per Square Foot  EBITEBIT  Capital ExpendituresCapital Expenditures  Debt to Equity RatioDebt to Equity Ratio
  40. 40. Sample KPI Measures:Sample KPI Measures: FinancialFinancial  R&D ExpendituresR&D Expenditures  TrainingTraining ExpendituresExpenditures  MarketingMarketing ExpendituresExpenditures  DepreciationDepreciation  Fixed AssetsFixed Assets  Current LiabilitiesCurrent Liabilities  Interest ExpenseInterest Expense  Bad DebtsBad Debts  DiscountsDiscounts Given/TakenGiven/Taken
  41. 41. Sample KPI Measures:Sample KPI Measures: Operations/ProductionOperations/Production  Quality DataQuality Data  TimelinessTimeliness  Response TimeResponse Time  Re-work (#,%)Re-work (#,%)  Cost per unitCost per unit  Number ofNumber of EmployeesEmployees  Capacity UtilizationCapacity Utilization  SafetySafety  # Workers Comp# Workers Comp ClaimsClaims  Days lostDays lost  EnvironmentalEnvironmental  Back ordersBack orders
  42. 42. Sample KPI Measures:Sample KPI Measures: Operations/ProductionOperations/Production  Post Sales ServicePost Sales Service  Warranty Claims (#,%)Warranty Claims (#,%)  RepairsRepairs  ReturnsReturns  DefectsDefects  Number of ComplaintsNumber of Complaints  Value of Customer ComplaintsValue of Customer Complaints  # orders failed before delivery# orders failed before delivery  # Orders not delivered on# Orders not delivered on timetime  Work in ProcessWork in Process  Labour HoursLabour Hours  OvertimeOvertime  Cycle TimeCycle Time  DowntimeDowntime  Maintenance CostsMaintenance Costs
  43. 43. Sample KPI Measures:Sample KPI Measures: PeoplePeople  Employee TurnoverEmployee Turnover  EmployeeEmployee SatisfactionSatisfaction  Output per employeeOutput per employee  Sales per employeeSales per employee  Productivity perProductivity per employeeemployee  Quality of OutputsQuality of Outputs  Drivers of PerformanceDrivers of Performance  Drivers of CapabilitiesDrivers of Capabilities  LearningLearning  Skills mixSkills mix  Core ValuesCore Values  Customer focusCustomer focus  InnovationInnovation
  44. 44. Sample KPI Measures:Sample KPI Measures: PeoplePeople  Number ofNumber of EmployeesEmployees  # of managers# of managers  Manager/employeeManager/employee ratioratio  AbsenteeismAbsenteeism  # new employees# new employees  Hours or $ ofHours or $ of training pertraining per employeeemployee  Ratio direct toRatio direct to overhead employeesoverhead employees  Cost per new hireCost per new hire  % employees fully% employees fully trainedtrained
  45. 45. Sample KPI Measures:Sample KPI Measures: InnovationInnovation  Revenue from new productsRevenue from new products  Revenue from new market segmentsRevenue from new market segments  Revenue from new geographyRevenue from new geography  Number of new customersNumber of new customers  Time to market for new products/serviceTime to market for new products/service  R&D expenseR&D expense
  46. 46. Sample KPI Measures:Sample KPI Measures: SuppliersSuppliers Satisfaction with SuppliersSatisfaction with Suppliers  ResponsivenessResponsiveness  Costs compared withCosts compared with competitioncompetition  On-time DeliveryOn-time Delivery  Overall Satisfaction/ValueOverall Satisfaction/Value  Defects (#,%)Defects (#,%)  Credit termsCredit terms  Number of Suppliers Supplier SatisfactionSupplier Satisfaction  Overall Satisfaction:Overall Satisfaction: Opportunity for profitsOpportunity for profits while providing qualitywhile providing quality  ResponsivenessResponsiveness  PaymentPayment
  47. 47. The Top Ten Drivers ofThe Top Ten Drivers of Business Performance*Business Performance*  Low levels of lateLow levels of late deliveries to customersdeliveries to customers  Higher employeeHigher employee training expendituretraining expenditure  % of workforce trained% of workforce trained  Low absenteeism rateLow absenteeism rate  Higher MarketingHigher Marketing ExpendituresExpenditures  Higher CapitalHigher Capital ExpendituresExpenditures  Higher R&D ExpenditureHigher R&D Expenditure  Higher Stock TurnsHigher Stock Turns  Higher Cash BalancesHigher Cash Balances  Lower Debt Levels (moreLower Debt Levels (more short term than longshort term than long term)term)
  48. 48. Four Things Every OwnerFour Things Every Owner Should KnowShould Know  The profitability of the businessThe profitability of the business depends on how well the employeesdepends on how well the employees consistently perform critical activities.consistently perform critical activities.  Employees perform best when theyEmployees perform best when they understand how their performanceunderstand how their performance affects the bottom line, and how theiraffects the bottom line, and how their performance is measuredperformance is measured ..
  49. 49. Four Things Every OwnerFour Things Every Owner Should KnowShould Know  Small changes in critical areas canSmall changes in critical areas can have a great impact on the bottom line.have a great impact on the bottom line.  What gets measured gets done, andWhat gets measured gets done, and what gets rewarded gets done again.what gets rewarded gets done again.

Hinweis der Redaktion

  • 3 States going in Trusting exciting Engaged,
    Bob Dataplex activity quota trusting
    Working at the footy exciting
    Learning to fly Engaged
    Landing realised I can do this addicted
    Decision to leave
    Proved myself Motivated to act
    Coming out motivated to act, Decisive, Determined
  • Quantifiable measurements that reflect critical success factors of a business.
    Key Drivers that have a major impact on the performance of the business
    A handful of numbers that give the owner an “at a glance” view of the business
    Keep their finger on the pulse of the business
    Identify hot spots that need attention
    Act quickly to drive the business forward
  • KPI’s are very strategic. Before one can set KPI’s, the strategy of the business has to be clearly defined and understood. For a desired outcome, the things that get measured may not be obvious. Take the example of sales people. Most sales people are measured on turnover but the business objective is to make profit.
    Eg sales rep: calls vs, # of sales, vs turnover, vs profit,
  • Can’t say “want more profit” and then say “make the sale whatever it takes”
    If the strategy is to get more “A” customers, then the KPI can’t just be the number of orders, irrespective of the type of customer
    Customer satisfaction/number of orders despatched on time/# of customer complaints
  • So cutting staff training, staff amenities and reducing the number of staff may make the business a less compelling place to work, a less compelling place to shop (as staff morale drops) and a less compelling place to invest.
  • Leading: test & Measure, forecasting
    Lagging: Financials
    Objective: figures eg no of call made
    Subjective: forecast of % that will convert
  • Diagnostic = the number of calls made by the salesman in a week
    Strategic = the quality of the calls made by the salesman

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