Are KRIs and Key Goal Indicators (KGIs) the same thing?
Most likely they are. Indeed some people talk about strategic KPIs and no doubt, we are all on the same wavelength. I prefer result indicators because it makes it very clear to people that they are the result of many activities, but it does not matter what you call them as long as you do not call them KPIs.
You indicate in your book and in this presentation, that the CEO has to be the one driving the KPI buy in and the eventual follow-up. Is there a reason why the person driving the KPI’s can’t be another member of the senior executive team?
A CEO, if they are not fully behind the KPI project, will undermine it by; taking resources from the KPI team, or diluting the concentration on the KPI implementation through other diversions. A good way to get the CEO on board is to sell the KPIs using the CEO’s emotional drivers. See 39-44.
What are CSFs and BSC?
CSF and BSC are short for Critical Success Factors and Balanced Scorecards.
Would you agree that KPIs are tactical in nature and performance indicators would be strategic in nature?
If by tactical, you mean able to be pinned down by an individual or team, monitored daily, etc, then yes I do agree with you. Performance indicators and result indicators can be monitored daily, and therefore one could include these as tactical such as yesterday’s sales, and weekly sales to key customers.
Doesn’t only measuring key customers’ satisfaction ignore the damage a dissatisfied customer can do to your reputation by telling others about the bad experience?
Do we want all customers to be satisfied equally? I would suggest to you the answer is ‘no’. Why? Because we have a core group of customers that are critical to our business and we want our staff to be focused on them. If we have somebody in dispatch we want them to single out all the priority or key customers’ dispatches and make sure these are dispatched first and that these are double checked, maybe with some special quality assurance procedures so that nothing will go wrong with their delivery. What we want to do is find out what makes our key customers happy. It might be something simple like, key customers like to have delivery ‘in-full on time’. Meaning that they want what they ordered, to the quality they expect, at the agreed time. Once we do that, they are happy. If this is the case we start measuring that as it will be their major satisfaction driver.
If you treat all customers as equal, you certainly miss treating those important customers in a way in which they expect to be treated. Harry Mills in a brilliant book, called “Rain Maker”, talks about DROP, breaking your clients down into diamonds ( the top 5-15 customers), rubies, opals, and pearls (those you can live without). Treating all customers the same will lead to major mistakes.
Some or all of the ‘pearls’ will not be profitable customers, they want uneconomic quantities, products that maybe are obsolete, they may quibble about payment, and are never happy. Doing a satisfaction survey of this group is not only expensive but the results will skew satisfaction results and may lead to inappropriate action. These customers may never be satisfied. Do your self a favour and pass them on to your competition. They deserve each other.
Imagine a dispatch supervisor with 100 deliveries, 98 easy ones and 2 large ones to key customers. If the supervisor is measured on all dispatches they will do the 98 easy ones first and may miss the deadline of the two important ones. If, on the other hand we measure only the dispatches to key customers the dispatch team will do those deliveries before the morning beak and juggles the rest as best they can. If we communicated the ‘DROP’ to the dispatch team they could then priories the deliveries. Missing the deadlines for ‘Pearl’ customers is not a problem. In fact we should have given a large lead time for delivery to these customers as we have other higher priority customers.
Do you believe that certain corporate cultures are more metric driven than others? How do you change an organization that doesn’t care about metrics?
The key is the chief executive. If they are not interested, then there is little hope in success. It is my belief that for many chief executives, it is just a matter of selling KPIs to them by their emotional drivers to switch them on. If you have done this properly, most CEOs will be motivated by the project. To fully understand this, listen to my webcast on bettermanagement.com.
Can you talk about truly predictive KPIs? How can I make my data work to move my organization forward?
Look more at the measures in the future. Stop measuring by looking in the past. KPIs that are measured into the future truly change peoples behaviour, listen to the examples in my webcasts on bettermanagement.com. Examples of future measures include: the CEO monitoring weekly the next planned interfaces, next promotions, next social gatherings with key diamond customers (top 5 or 15). For a full answer, listen to my webcast on bettermanagement.com
Do you have any pointers to offer to government organizations who are inherently bureaucratic and have many measures – most if not all are not KPIs per your definition?
According to my 10/80/10 rule, most measures will not be KPIs they would be performance indicators. The issue is we need to revisit what we have done in the past with performance indicators. In the public sector, management have been aware of the importance of measures, but unfortunately, have followed the wrong pathway. For my full answer, listen to the webcast on bettermanagement.com
Do you agree on using the 24/7 KPI’s as alarm triggers?
It is certainly a call to action, so in that sense I agree with you.
Can you give some specific KPI’s in each business area for e.g. Finance (GL, AR, AP, FA, Collections), Operations, Sales, HR, Call center application etc?
There will be few KPIs in head office operations. In other words, it is sad to say that we are not critical to day-to-day operations, other than of course, our systems being in operation. If we only have 10 KPIs in an organization, the remainder are RIs and PIs, which the accounting team will have a number of. In my ‘Pareto 80/20 for the Corporate Accountant’ book, there is a scorecard for the finance team.
What are the top three risk factors that might make a brand new KPI set to fail?
Firstly, not having the senior management team switched on in the first place, especially the CEO. Secondly, Inadequate work done on the CSFs. Thirdly an organization that does not finish what it starts, an epidemic that is sweeping commerce today. In fact, a CSF for many organizations, “we finish what we start”. Imagine if that was on the walls of every Project Management team, department, and group.
David, have you ever worked with a law firm on developing KPI’s?
I am working with a law firm who are throwing out their annual planning process. After that, it will be appropriate to look at improving the use of performance measures. E.g., instead of looking at productivity in the week gone by, we should be asking people for their forecast chargeable hours in the upcoming week/month, in order to better distribute work.
Do you feel that the role of developing a balanced scorecard and relevant KPI / PI should rest more with the IS group or business group?
It rests with the whole organization. Everyone has to be involved. It is a major PR exercise. Please read about the foundations stones (page 20-25), and step five (Page 61-65) in my book.
What do you do with the Executive Board when they measure the correct KPIs – and therefore have a good objective basis for decision-making – yet consistently make intuitive judgements with no logical platform to support them?
The Executive Board has to make intuitive decisions all the time, but if the KPIs are not being used in the
decision process, then the KPIs may need to be rethought. For my full answer, listen to my webcast “Implementing Winning KPIs” on bettermanagement.com
What is the correct time to implement, ‘Implementing Winning KPIs’?
The best time is when you have a 16-week window. I explain more on why 16 weeks is appropriate in my book and how to go about this (page 26-36).
Who should run the BSC project?
Because accountants have limited technical interests and because of technical jealousies I suggest economists be used to develop and use KPIs. They have the advantage of training in forecasting and some background often in accounting. They are not used but represent a great potential. They are also likely to be objective.
I believe the finance team, HR, IT, economists, etc, all could participate in the project team, and be the team to monitor this on an ongoing basis. It all depends on the skill level of the individuals. See Step two (page 44-49) for selecting the KPI team in my book.
Are there large companies you have converted successfully to your method from an already implemented Harvard BSC?
My work has been out there for over 5 years. I know organizations are using it from the calls I get. I was asked once to fly to Melbourne to visit a company that was three-quarters of the way in implementing my concepts. I no longer do project consultancy, as it is not my strength. My focus is to sell the vision and offer a practical way forward in which in-house teams can be empowered to operate. My role now is as a mentor and facilitator and I seek to work with other facilitators who will become certified and able to access all my intellectual property. See www.davidparmenter.com
Should the use of KPIs be an exercise across all levels of the organization and, if so, should the entire organization be focused ONLY on the KPIs of the total organisation, or should various organization levels be focused on their OWN respective KPIs, which in turn feed into those of the full organization?
In an organization that is in one main sector, the KPIs will be for the whole organization. E.g., the late plane KPI is one a number of teams will be monitoring. However, it is unlikely to be on the scorecard for
Finance, HR and IT because they will not be responsible for late planes.
Webcast “Implementing KPIs – a twelve step process”
Where should we trap KPIs –is it in an Enterprise Data Warehouse or in a dedicated system?
An operational system, with wide access, which links to data already trapped and which has a linkage to the intranet is critical for the monitoring of daily/weekly KPIs. Airlines will know up to the minute, which planes are late and by how long. And this data will be available to all staff including key suppliers so that late planes can be brought back on time.
Who should head the KPI team?
An individual who finishes what they start, has a good reputation in the organisation, outstanding motivator, and last but by no means least, a great salesperson. Never underestimate the selling component of this project.
Don’t you believe the requirements to make KPI’s a reality through your steps is unrealistic? CEO committed… Business Owners taking two days to define KPI’s… Time available for marketing your project… long timeframe…
Certainly, over the last 20 years, well over 50% of performance measurement initiatives have failed miserably. I’ve heard it said that over 75% of Balanced Scorecards aren’t working. Millions upon millions of dollars are being invested in measuring and reporting performance which doesn’t change one heartbeat of the organisation. This has to stop. Organisations will be better off without it, than with this comfort layer that does nothing.
I totally agree with the sentiment in your argument. Many organisations through substandard Senior Management who are only experts in firefighting, haven’t a hope of putting in such a project. To those middle managers who can see the benefits of my work, I would suggest to you, to wait till the SMT changes, or move to the many organisations that do exist where the Senior management are well read and informed.
I recently spoke to 450 Chief Executives in Kuala Lumpur. Each of these executives had signed up for one day a month mentoring. These CEOs were certainly much better informed and motivated than CEOs I meet who barely have one day of training a year. One these training days they are playing around with their PDA during the training day, fight fires. It occurs to me that many members of the SMT have believed that learning has stopped once they get on the SMT. They often believe there is no need to have anything more than attend a breakfast session update from a business thought leader.
What technique do you recommend if it is highly unlikely or not feasible to get senior management together for the workshops?
Don’t start the project. You need to do more selling. When they understand what you are talking about, they will want to be there.
Do you have any examples of KPIs used in the publishing and broadcasting businesses?
First lets talk about what the CSF are. One might be publication /broadcast are adequately vetted. Another might be, “we are a news leader”, and so on. We would need then to workout what the top 5-8CSFs are, as set out in step 6. A KPI might be, “how many breaking-news stories our competition releases before us, each week, compared to vice versa” (with the names of the journalists involved) ““ this might lead to some headhunting.
Why wouldn’t an organisation identify CSFs before KPIs? Doesn’t the organisation want to select KPIs that monitor inputs into CSFs?
I agree with your logic, but unfortunately life isn’t; logical. Too many life measures are dreamed up when a corporate accountant or HR manager has an afternoon free.
What if you are trying to implement, at the same time, 2 very important elements i.e. BSC AND Social Responsibility Performance Measurement – how difficult would this be?
I believe social responsibility is not separate from good corporate performance. The two are hand in hand. Current and future customers are living in the community, and therefore any Balanced Scorecard initiative should have a perspective called “environment and community”. Please listen to my early webcast as I explain the benefits of this perspective.
Can we undertake this task if the CEO insists on delegating the role?
If the second in charge to the CEO has the ear and support in all cases, it is possible. However, we need to change the job description of the CEO to ensure that all future CEOs have a working background with Balanced Scorecards.
SMT means what?
In all my presentations SMT means the Senior Management Team
Forgive me – what does BH stand for?
In all my presentations, BH stands for Budget Holder ““ a person who has a budget to spend.
What does PR stand for?
In all my publications, PR stands for public Relations. These are the experts who write the chairman’s annual report, your major promotional documentation, prepare senior management for interviews with the public, etc.
This is all well and good for the implementation of “KPI’s”, but the other-side of the coin is, choosing the correct KPI’s. How can the correct choice of KPI metrics be assured? – What makes a good KPI?
It is important to get the correct CSF. Without those, its like finding a dropped engagement ring on the ocean floor. Please look at my earlier work on the 7 characteristics of KPIs.
In the case of a long term project, will the KPIs be put on the tasks? activities? deliverables or the finishing of the project?
KPIs are not project based, they are based on the organisation. Certainly, one KPI will be late projects, and this will be reviewed weekly. The CSF would be “we finish what we start”. Projects will have measures in themselves, but they will not be KPIs, but PIs and RIs as they are not fundamental to the organisations, and will not meet the 7KPI characteristics.
How relevant is the size of the organisation for the implementation of a project of this nature – it may be much easier to implement it in a company of 500 staff but what about a company which encompasses 30,000 staff?
Most certainly a 30,000 staff member organisation is an enormous project. However, through piloting the process, in two or three of your faster and agile businesses, you will have created a no win situation for the business units who do not want to adopt this methodology. In essence, a 30,000 employee organisation will be made of a number of Balanced Scorecard initiatives, each one to be done in the 16 weeks.
What do we do with our existing KPIs?
Most of your KPIs just need to be reclassified, some will be PIs,RIs, and some will be KRIs. Please read my earlier paper and chapter 1 in the book.
How do you distinguish a KPI from a metric, do you have a rule of thumb?
Please look at my earlier work on the 7 characteristics of KPIs.
Many of the recommendations are geared for large complex organisations. Do you have any advice for small companies of less than 100 people?
See my 8 step process in the Dec. ‘07 webcast, “Implementing KPIs in Smaller Organisations”” see the answers to questions on that webcast.
How do you apply this to public sector organisations that provide regulatory compliance and that may not directly contribute to the bottom line?
The Balanced Scorecard initiative works just as well with public sector organisations. There are no need to change the titles of the 6 perspectives set out in the book, and in my papers (see bettermanagement.com). The major difference is the wording of the CSF and thus the measures.
Who should be in the KPI team?
The KPI team should be a mix of individuals who have a broad skill base. I refer you to the team checklist I have in the book, see chapter 4. It is desirable to have someone from HR, Finance,Operations, other parties should be IT, Planning, Operations Research. All of these individuals must be able to facilitate a one day workshop and be above average communicators. This project team is no place for a person who hides behind emails.
How does the action plan to implement KPI’s within the organisation change when the push is coming from the CEO level down rather than the other way around?
The push has to come from the CEO. What I don’t think works is when you establish the CSFs and then the performance measures in head office, and then start using them without staff understanding what’s going on. We have been doing this way since Charles Dickens times and it has seldom worked!
If due to factors beyond your control, monthly is the most frequent you can measure KPIs, do you have any advice on how to still create a meaningful KPI given this limitation?
There isn’t a meaningful KPI on a monthly basis. They are performance indicators and result indicators. They will be of interest, but will never change anything. All organisations can measure performance during the month. If management doesn’t think its possible, maybe they are a bit tired and need replacing.
Webcast “A Balanced Scorecard in 16 Weeks, Not 16 Months”
We’re part-way through a long implementation which isn’t working. What actions should we take?
First Step – Take the SMT for a 1/2 day session and re look at the CSF, the way the project started, the gaps in between what I say you should be doing what you are currently doing. On reflection, you might say, “I think we have a weakness here” I think it is important that you address these weaknesses during the session and it might be that you freeze the project for a couple months to change the involvement of the team. Perhaps get an external facilitator, etc.
Our BSC needs revitalising. Do we need to start over from scratch?
As I’ve said, you’ll never get it 100% right. The BSC is a sculpture that we are making. It is important that if you want to revitalise it, you are happy with the work done on determining the CSFs. In many cases the CSFs hasn’t been determined at all. Then you should reflect back on your scorecards to find areas of our CSFs that have not been measured properly. Then just add appropriate measures in. We then need to look at those measures that are not tied into the CSFs. Do we need to measure these? Are we measuring them appropriately? Many existing measures will need to be removed/refined.
I am interviewing with an organisation preparing for a reorganisation. Currently, management is planning on beginning BSC development and implementation after the reorganisation is complete. Is that a good strategy or should the BSC development and implementation take place in the earlier stages of the reorganisation? Why?
Number one, I’m against reorganisations in the first place. Why do we reorganise? Is this going to solve the problem? Well it doesn’t, it just makes it worse. Its better to redo the strategy first, determine the CSFs and then find the appropriate measures. I believe your existing structure will perform so much better under this new regime that a reorganisation will not be deemed necessary.
The BSC will help people align themselves with the company objectives. The important thing is how the individuals are aligned to the strategic objectives of the organisation. through the BSC measures, not how the organisation is organised (regionally, branches etc.)
In summary I believe the structure is not important. It is the alignment of the staff to the CSFs factors that is the key, the El Dorado of business.
As a new employee (Director level) can I be considered this external facilitator? I am implementing the BSC for IT.
A BSC for the IT team should be done after the organisation has rediscovered its CSFs. In other words, an exercise where the 40 or so success factors which are known by all of the SMT, are sorted into a hierarchy with the 5 to 8 top ones being the CSFs. The process of doing the team scorecard is quite straight forward, and there is one available in my KPI book. You can acquire this and other electronic templates from my organisation for an investment of $250 NZD. An external facilitator would be required for the CSF workshop. Your assistance with the team scorecards would be most appropriate.
Why do you use 6 perspectives, when Kaplan and Norton only mention 4 in his books?
Kaplan and Norton in their 1st book did mention the possibility of increasing the BSC from 4 perspectives. They said that you may wish to separate out employee satisfaction. In their recent work, they talk a lot about environment and community and its importance. This last perspective is about being an employee of choice as well as creating positive recognition amongst the community and staff through implementing successful green initiatives. In other words, I am sure Kaplan and Norton had they written their 1st book in 2008, would have expanded from the 4 perspectives. Thus we are singing from the same song sheet. I see my word as underpinning the scorecard philosophy and helping make more scorecards become successful.
How important are external benchmarks when it comes to measuring and understanding employee satisfaction?
Don’t need external benchmarks to find out what is annoying the employees. Its best to find those out and then fix the major issues raised. This is all internal, you don’t need to compare to anything external. Entering into ‘employer of choice’ awards can be a good thing if you are sure of your ground!
To clarify, should the consultant be working with the SMT to define the CSFs, or develop them with other folks and present them to the SMT?
It is very important that the SMT attends the 2 day CSF workshop. They have to be at the birthplace of the CSFs. They may not all be there, but its good to get as many as possible. This is where the external facilitator (consultant) is very heavily involved. The consultant facilities the workshop as this gets everyone to participate and involved because they can get around organisational politics.
What are the qualifications for a good facilitator and how/where do you find one?
Certainly what we want is someone who has implemented a balanced scorecard themselves. Whether theirs worked or not is not that important, it is the mistakes they’ve made and learned from, as well as having a bit of experience. I wouldn’t be interested in someone who hasn’t made those big calls. I’d want someone from industry, as someone right out of university just hasn’t had enough experience yet.
I’d suggest you look around online and look for companies that have the experience. But don’t stop there, try and find the individuals within those companies that have been a part of a BSC implementation. Once meeting them, you’ll know if they are right for you or not.
In a family business, should family members be excluded from the KPI project team to prevent bias?
Certainly not. Provided that they can be full time on the project and have the requisite skills. I have set out a checklist in the book for outlining of the characteristics of the team members.
IS there a tool-set (templates etc.) that you would recommend to look at for a start of the implementation?
I have spent 7 years refining a toolset that was originally developed under the sponsorship of Ausindustry (a government department). I hope that the book and associated electronic media I have made available will assist. There are templates and a database of performance measures available for purchase on my website for .
In what key ways do you see sustainability reporting and the BSC approach as complementary tools?
Sustainability reporting fits neatly in the environmental and community perspective. Thus I believe it should be a part of the BSC instead of another report. Management don’t have the time to be reading myriads of reports.
Can you recommend literature on combining KPIs and the Hoshin process?
The Hoshin process clearly has many merits working for it. And as with Kaplan and Norton, we are all singing from the same song sheet. My work on winning KPIs certainly is compatible as we are both trying to align daily activities at the workplace with the strategic activities of the organisation. Using a search string “Hoshin balanced score card case study” you will find many interesting articles. One in particular “Balances scorecard and Hoshin Kanri: dynamic capabilities for managing strategic fit” is worth a read.
What case studies available for non-profit or academic organisations?
There are many scorecards around the world in your sector. I suggest you use the search string “balanced scorecard not for profit case study”. My work simply helps organisations make implementing a BSC more effective. As my organisation is not a consulting machine, i am blissfully unaware of all the change that is happening. While I’d love to hear about every success story, I am often the last to find out about the celebration. However this should not deterred you from viewing what I’m saying your in-depth knowledge of your organisation and your own developed pragmatic sense from seeing the simplicity of what I am putting forward.
The learning & Growth perspective seems to be the hardest to measure. Are there standard measurements for training or growing expertise that can be leveraged?
The best way for getting learning and growth moving into the next stratosphere is to have coaching alive and well. To have recognition’s as a daily/weekly. To have mentor-ship alive and well, available for all senior, middle management, and supervisors. To have a buddy system for all new employees. To monitor, not past training, but future committed training by employees. Because as we all know, 20% of our staff takes 80% of our training budget. This misallocation has got to change.
You said US Navy had implemented BSC also, so in this regard, What strategics themes were used?, and where we can get additional information related with Armed Forces?
The Navy that has successfully implemented a BSC I’m proud to say is the New Zealand Navy. I am sure they would welcome your inquiries.