Introduction To KPIs
- 1. Performance Management KPI Identification
- 2. What is Performance Management? Performance Management is having access to the right information at the right time; letting decision makers align the right decisions with each other and with corporate goals. The information you track becomes your Key Performance Indicators (KPIs). An effective performance management solution is critical to the success of a company. A performance dashboard provides data visualization — the ability to view your KPIs graphically. © Scope Consulting 2009
- 3. What is Performance Management? While all dashboards provide a graphical view of a set of KPIs, not all dashboards are true performance dashboards. A performance dashboard needs to provide you with the information you need to monitor, analyze, and manage the key activities and processes that lead to achieving your objectives. A true performance dashboard must have the following elements: • Real-time or Right-time data • Compatibility with any data source • Ability to drill-down into the data • Quick to deploy • Easily customisable © Scope Consulting 2009
- 4. KPIs to Dashboards – A Method • Working with the business to determine the KPIs and where they fit in the overall P1 business process • Identify the process owners to determine how the KPIs should be grouped P2 • Work with IT to determine data sources P3 • Work with the business & IT to determine any common coding structures (Part P4 numbers/GL codes etc) • Work with business & IT to document any standard business calculations (Gross Margin P5 etc) to build the data dictionary • Identify data and its relationships to other data, logical groups & sub groups required for P6 analysis and drill-down • Work with IT to determine the correct data structure within the database (how the data P7 is accessed and viewed directly affects how it’s stored). • Work with the business to design the dashboard layout and the best way to visualise the P8 data (tends to be interactive and iterative and has a direct impact on P7). • Build, Test and Deploy P9 © Scope Consulting 2009
- 5. KPI Characteristics Characteristic Description Aligned KPI’s Must always be aligned to corporate strategy and objectives Owned Every KPI must have an owner by an individual or group who is accountable Predictive KPI’s measure value and are therefore an indicator of business performance Actionable Should be populated with timely actionable so that remedial action can be taken when required and not when it’s too late Few in number KPI’s should focus people on a few high value tasks and not scatter attention on too many things Easy to understand KPI’s should be easy to understand and not based on complex formula that users cannot influence Balanced and linked KPI’s should balance one another and not undermine one another sub optimizing a process Trigger Changes The act of monitoring a KPI should trigger action and positive change Standardised KPI’s should be based on standard definitions across the organization so that dashboards show a consistent set of results Context driven Targets and thresholds should be linked to performance so that users can gauge performance over time Relevant Over time KPI’s loose impact and need to be reviewed Reinforced and The impact of a KPI can be magnified through careful use of incentives incentivised © Scope Consulting 2009
- 6. Performance Management • Process Mapping • A “Learn To See” exercise is undertaken • Map the “true” business processes • Identify process owners What to • Identify key inputs and outputs from process flows measure • Identify any current controls and their use © Scope Consulting 2009
- 7. Performance Management • Identify Value • Identify which process add value to your & Non Value organization and which do not Activities • Identify critical and supporting processes How to measure When thinking about value, think about what your customers would be prepared to pay for, and which they would not! © Scope Consulting 2009
- 8. Performance Management • Identify and define any standards used within the Standards organization • Publish and agree the definitions throughout the business • Corporate definitions © Scope Consulting 2009
- 9. Performance Management •Consult on the most appropriate method of Implementation implementation • Scorecards measure people, business units or logical entity against specific targets • Dashboards / Balanced • Dashboards measure a process, a piece of Scorecards equipment or a specific business metric such as YTD sales © Scope Consulting 2009
- 10. Performance Management Identify the “real” processes Where to concentrate the effort • Process • Identify Value Mapping & Non Value Activities What to How to measure measure Implementation Standards • Dashboards / • Corporate Balanced definitions Scorecards Method of implementation Define the standards © Scope Consulting 2009
- 11. KPI Management KPI Management & Implementation The management of a KPI is a critical part of the implementation process The use of a KPI should allow the KPI owners to make positive changes to the business without a corresponding detrimental affect in other areas of the business There are typically two methods of implementing KPI’s •Scorecards: measures performance against specific targets or industry benchmarks, usually over the longer term and can contain both tactical and strategic KPI’s. •Dashboards: measures process/machine or individual performance, normally in (near) real time Remember, you cannot manage or improve anything if can’t measure it! © Scope Consulting 2009
- 12. The Funnel Effect Lots of KPI’s but no control Why? How? 20+ KPI’s No control What am I measuring? 10 - 15 Process Mapping Which processes cause the biggest effects? 8 - 10 Cause & Effect Analysis Where are my biggest risks? 4-8 Failure Mode & Effects Analysis Concentrate effort in areas of greatest return 3-6 Controlling Critical X’s Defined KPI’s © Scope Consulting 2009
- 13. Continuous Improvement © Scope Consulting 2009