This article has been extracted from my article ‘Measuring performance in challenging times’ published in the UK by ICAEW

By David Parmenter

Many government departments around the world are having problems implementing performance measurement whether it be in a balanced scorecard way or any other variant. This is not surprising as the private sector is having the same difficulty.

The problem is that many performance measurement initiatives have missed out a vital step, the understanding of the organisations success factors (SFs) and the subsequent assessment of which SFs are critical.

This issue is so important I have dedicated a whole chapter in my second edition of my KPI book on a ‘how to find your CSFs’ and in the workshops I deliver around the world on implementing ‘winning KPIs’ I outline the process to ascertain the success factors and sort out which ones are the ‘critical’ success factors.

Critical success factors are the key to finding the right performance measures

I would argue that most government agencies know their success factors, however few have:

  •  worded their success factors appropriately
  • segregated out success factors from their strategic objectives
  • sifted through the success factors to find their critical ones – their critical success factors
  • communicated the critical success factors (CSFs) to staff
It is the CSFs, and the performance measures within them, that link daily activities to the organization’s strategies.

If your organization does not know its CSFs, performance measurement will be a random process creating an army of measurers producing numerous numbing reports, and which often “measure” progress in a direction very remote from the intended strategic direction of the organization. Pareto’s rule most certainly applies with performance reporting, 20% of the reports and performance measures meet at least 80% of management’s need. The bulk of the reports are prepared and measures gathered because we did them last month.

The CSFs are the “list of issues or aspects of organizational performance that determine ongoing health, vitality and well-being” source
AusIndustry.

Better practice suggests that organizational CSFs should be limited to between five and eight regardless of the organization’s size. However, for a conglomerate, or a government agency with very different activities the CSFs will largely be ‘industry’ specific e.g. the CSFs for an airline are different to a retail record chain store. Thus there would be a collection of CSFs in the conglomerate greater than the suggested five to eight.

The relationship between CSFs and KPIs is vital, as illustrated in Exhibit 1. If you get the CSFs right it is very easy to find your winning KPIs e.g., once the “timely arrival and departure of planes” CSF was identified it was relatively easy to find the KPI – “planes over 2 hours late” for a well known airline.

Exhibit 1: How KPIs stem from strategy and the CSFs

strategy

Some relevant success factors for government agencies include:

  •       Delivery in full on time, all the time to our key services
  •       Finding better ways to do the things we do everyday
  •       Maintaining a safe, happy and healthy workplace
  •       Innovative ideas from staff encouraged and adopted quickly
  •      We finish what we start
  •      Increasing adaptability and flexibility of staff
  •      Attracting quality staff to the organization
  •       Stay, say, strive engagement with staff
Notice that these SFs are all relatively specific. If told these success factors, staff members would understand what was expected of them. I believe all correctly worded SFs should be understandable to a fourteenyear old, I call it the ‘14 year old test’.

You need to avoid wording SFs as broad statements whose meaning is not clear to employees. In other words, such factors
would fail the test of being able to be understood by a 14-year old. Examples that are too broad to be a success factors include:

  • Increased customer satisfaction
  • Maximizing the use of our most important resource: our people
  • Optimal utilization of assets and resources

A number of characteristics of CSFs are worth dwelling on. Critical success factors:

  • are worded so a 14-year-old can understand them and know what to do
  • will be ‘no surprise’ to management and the Minister as they will have
  • talked about them as a success factor
  • apply to more than one balance scorecard perspectives (e.g., the
  • timely arrival and departure of planes impacts nearly all the BSC
  • perspectives of an airline)
  • have a great influence on other success factors
  • are focused in a precise area, rather than being a bland statement so often characterized by strategic objectives
  • The above section was an extract from my ‘Finding your organization’s critical success factors’ whitepaper which can be acquired from
  • http://davidparmenter.com/how-to-guides) Performance measures need reworking based

Performance measures need reworking based on the CSFs

Many companies are working with the wrong measures, many of which are incorrectly termed key performance indicators (KPIs). For many years accountants and other senior officials, with a spare afternoon at hand, have sat down and thought up some new measures. This has lead to a potpourri of performance measurement and reporting that has done nothing for the organisation. None of these measures were tied in anyway to the organisation’s critical success factors.

From my research, very few organizations really monitor their true KPIs.The reason is that very few organizations, business leaders, writers, accountants, consultants have explored what a KPI actually is. From the extensive analysis I have performed and as a by-product of the years writing a KPI book I have come to the conclusion that there are four types of performance measures. These were discussed in an article published in ‘Finance & Management’ May 2006. The four measures are:

key result indicators (KRIs) – these give an overview on past performance and are ideal for the Board/Minister as they communicate
how management have done in a critical success factor or balanced scorecard perspective e.g. return on capital employed
• performance indicators (PIs) – these tell staff and management what to do, e.g., deliveries-in-full-on-time to customers
• result indicators (RIs) – these tell staff what they have done, and all financial measures are a RI as they have quantified activities, e.g.,
daily sales by major product and branch and weekly sales to key customers

key performance indicators (KPIs) – these tell staff and management what to do to increase performance dramatically. I have in an earlier piece explained why all KPIs are non financial. They focus on the activities you want to see happen more or less often e.g., late or incomplete deliveries to key customers, notified to CEO by 9am next day

Government agencies and ‘Not-for-profit’ organizations often tell me that performance measurement will need to be different in our sector e.g., We do not have any need for daily or weekly KPIs”. I disagree with this view. There are a number of measures that government agencies and ‘not-for-profit’ organizations need to monitor on a daily/weekly basis. These include:

Daily Notification to Chief Executive Officer (CEO)

  • Complaints from key stakeholders or donors (notified to CEO)
  • Abandon rate at call centre––caller gives up
  • Complaints not resolved on first call
  • Candidates for new positions who have outstanding job offers
  • Expressions of interest from candidates that have not been
  • responded to within 24 hours of receipt of interest

Weekly Notification to CEO/Senior Management Team

  • Number of attendees registered by division for the in-house training course(s) to be run in the next fortnight
  • Post project wrap-ups outstanding (major projects only)
  • Late/overdue projects by manager
  • Number of employees who have received recognition in last week,two weeks, month
  • Number of recognition events and awards to staff planned for next four weeks, eight weeks
  • Percentage of waste generated/recycled in week
  • Expected launch dates of new services or fundraising campaigns  Capital expenditure projects running behind schedule (top 20
  • projects)
  • Average mainframe response time
  • Percentage of staff who have been absent for more than three weeks, who have a back-to-work programme
  • Percentage of days where key systems were backed up overnight this week
  • Number of post-project reviews still outstanding
  • Number of initiatives implemented from stakeholder satisfaction survey
  • Number of initiatives implemented from the recent staff opinion survey
This list is by no means complete. In other words, much can be measured during the month in government and ‘not-for-profit’ organizations.
The above was an from my ‘Implementing winning KPIs’ whitepaper which can be acquired from http://davidparmenter.com/how-to-guides

Writer’s biography

davidDavid Parmenter is an international presenter who is known for his thought provoking and lively sessions, which have led to substantial change in many organisations. David is a leading expert in: the development of winning KPIs, replacing the annual planning process with quarterly rolling planning, quick monthend processes and converting reporting to a decision based tool.

David’s work on KPIs is recognized internationally as a breakthrough in understanding how to make performance measures work. His book, ‘Key Performance Indicators: Developing, Implementing, and Using Winning KPIs’ is one of the best selling
performance management books on Amazon.com. The second edition has now just be released by John Wiley & Sons Inc who have also published is second book “Pareto’s 80/20 rule for Corporate accountants”.

David has delivered workshops to thousands of attendees in many cities around the world including Sydney, Melbourne, Kuala Lumpur, Singapore, Tehran, Muscat, Johannesburg, Dublin, London, Manchester, Edinburgh and Prague. David has worked for Ernst & Young, BP Oil Ltd, Arthur Andersen, and Price Waterhouse, and he is a fellow of the Institute of Chartered Accountants in England and Wales.

He has written over 50 articles for the accounting and management Journals including “The new thinking on KPIs”, “Finding your organization’s critical success factors – the missing link in performance management”, “quarterly rolling planning – removing the barriers to success”, “Throw away the annual budget”, “Beware corporate mergers”, “Implementing a Balanced Scorecard in 16 weeks not 16 months”, “Convert your monthly reporting to a management tool”, “Smash through the performance barrier”, “Is your board reporting process out of control?” “Implementing winning Key Performance Indicators”, “Quick month end reporting”, “Leadership lessons from Ernst Shackleton” “Measuring performance in challenging times” “Sir Edmund Hillary’s legacy to management”, “Toyota’s 15 year advantage” etc.

He can be contacted at parmenter@waymark.co.nz or +64 4 499 0007.
He has recently completed a series of white papers which can be purchased from his website www.davidparmenter.com