The New Thinking on KPIs, part 2 of 4
The characteristics of KPIs
KPIs represent a set of measures focusing on those aspects of organizational performance that are the most critical for the current and future success of an organization. There are only a few KPIs in an organization (no more than 10) and they have certain characteristics.
KPI characteristics include:
- Non financial measures (not expressed in $s, Pds etc)
- Measured frequently e.g. daily or 24/7 (KPIs are not measured monthly)
- Acted upon by the CEO and the senior management team on a daily or 24/7 basis
- All staff understand the measure and what corrective action is required
- Responsibility can be tied down to a team
- The KPI has a significant impact on the organization e.g. it impacts on most of the critical success factors and balanced scorecard perspectives
- Positive movement affects all other performance measures in a positive way
When you put a Pound or Dollar sign to a measure you have not dug deep enough. Sales made yesterday will be a result of sales calls made previously to existing and prospective customers, advertising, amount of contact with the key customers, product reliability etc. I label any indicator expressed in monetary terms as result indicator, see below for more explanation.
[wcm_restrict]KPIs should be monitored and reported 24/7, daily and a few perhaps weekly. How can a KPI be measured monthly? This surely is “shutting the barn door well after the horse has truly bolted”. KPIs are “current” or “future” measures as opposed to “past” measures. When you look at most organizational measures, they are very much past indicators measuring events of the last month or quarter. These indicators cannot be and never were a KPI. That is why a satisfaction percentage (e.g. 65%) from a customer satisfaction survey performed every six months can never be a KPI.
All good KPIs that I have come across, that have made a difference, had the CEO’s constant attention, with daily calls to the relevant staff. Having a potentially “career limiting” discussion with the CEO is not something staff want to repeat, and in the airlines case, innovative and productive processes were put in place to prevent a recurrence.
A KPI should tell you about what action needs to take place. The British Airways “late plane” KPI communicated immediately to everybody that there needed to be a focus on recovering the lost time. Cleaners, caterers, ground crew, flight attendants, and liaison officers with traffic controllers would all work some magic to save “a minute here and a minute there” whilst maintaining or improving service standards.
A KPI can be tied down to a team. In other words, the CEO can ring the manager and ask “why”. Return on capital employed has never been a KPI as it cannot be tied down to a manager, it is a result of many activities under different managers. Can you imagine the reaction if a GM was told one morning by the CEO “Pat, I want you to increase the return on capital employed today”.
A KPI will affect more then one critical success factor and most of the balanced scorecard perspectives. In other words, when the CEO focuses on the KPI, and the staff follows, the organization scores goals in all directions.
A KPI has a flow on effect on other performance measures. Reducing late planes would improve performance measures around improved service by ground staff as there is less “fire fighting” to distract them from a quality and caring customer contact.[/wcm_restrict][wcm_nonmember]
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About the Author
David Parmenter, author of Key Performance Indicators: Developing, Implementing, and Using Winning KPIs
David’s work on KPIs has received international recognition with clients in Auckland, Wellington, Sydney, Melbourne, Brisbane, Adelaide, Canberra, Perth, Kuala Lumpur, Singapore, Tehran, Prague, Dublin, London, Birmingham, Manchester and Edinburgh. David is a fellow of the Institute of Chartered Accountants in England & Wales and has worked for Ernst & Young, BP Oil Ltd, Arthur Andersen, and Price Waterhouse Coopers.
David’s recent thinking is accessible from www.davidparmenter.com. He can be contacted at parmenter@waymark.co.nz or telephone +64 4 499 0007.
This articles is an extract from his “Implementing winning KPIs” whitepaper which can be downloaded from http://davidparmenter.com/how-to-guides)
How to Lead An Online Business
First and foremost, find an idea you love.
Whether it’s ice cream, bean bags, or shirts with funny slogans, find a product or service you’re passionate about selling. I started my career as a marketing executive. One day, I was invited to dinner with Japanese business associates. The dinner was a great success, and afterwards we moved to a Japanese tea house where, following tradition, everyone removed their shoes. I looked down, and I had two different socks on – one with a hole in the big toe. I sat cross-legged for an entire evening, trying to hide my foot. I’m passionate about helping executives avoid such embarrassments by allowing them to buy fine-quality essentials in one convenient place online, and have them delivered to their doorstep. Because wouldn’t it be wonderful if your sock drawer could replenish itself?
[wcm_restrict]Keep your Internet presence fresh.
The first version of Blacksocks’ website was launched in 1999. It was a single shot of a washing machine. Customers entered their orders into a slot in the machine, which sent an e-mail directly into my inbox. As the Web has developed, our site has become increasingly sophisticated, with the most recent relaunch this April. We’ve positioned content more intuitively and enhanced visual communication to make for smoother and more enjoyable shopping for Blacksocks clients. Ask yourself, if I were a customer looking at my site, what would I want to be different?
Maintain a human connection with your customer.
No one likes to feel they’re buying products from a machine. Remind your customers that there’s a human face to behind your online business. Humor helps. At Blacksocks, we’re lucky to have a funny story behind the origins of the brand, and no one can take the business of selling socks too seriously anyway – after all, they’re just socks. Incorporating humorous touches into your website’s content will make a virtual transaction feel personal, enhancing the customer experience.
Experiment with social media.
Everyone knows that Facebook has now overtaken Google as the most popular U.S. website, but not everyone is sure how to turn social media into profit. Explore these new distribution channels and marketing concepts. Blacksocks has an active presence on Facebook; Joe and Jane Blacksocks run Twitter accounts on the company’s behalf; and Blacksocks is the official sock sponsor of iwearyourshirt.com, run by two guys who serve as human billboards. We also strive to keep our customers engaged by inviting them to post comments on the Blacksocks site.
Invest in long-term success.
Many budding Web-preneurs give up after only a few months. Be realistic about your goals: it’s extremely unlikely that you’ll achieve financial success immediately, particularly if you’re one person on a shoestring budget. Most decisions, whether they’re for online businesses or brick-and-mortar ones, need to be made within a working time frame of two to five years at least. Think about where your website will be a decade from now. If you’re creating original content, timeless content, content that connects with customers, and you have researched the market your product is aimed at thoroughly, you have the tools you need to create a successful online enterprise.
Additional tips can be found at Blacksocks.com.[/wcm_restrict][wcm_nonmember]
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About the Author
Following his studies of economics and business administration at the University of St. Gallen, Paris and Toronto (earning the title of lic. oec. HSG in 1993) Samy Liechti was a marketing and communications consultant for various agencies in Switzerland and abroad, working with numerous prominent brands. Samy Liechti has been Blacksock’s managing director ever since its foundation in the summer of 1999.
Be a GPS System for Change
As change agents, we find ourselves regularly challenged to get the buy-in and follow-through we need. We often start with a great premise and desired outcome, but few tools to enlist the necessary buy-in.
Two things must happen before change will occur:
- the people in a system must recognize, manage, and buy-in to all the elements of the suggested change,
- the system must comprehend that a solution will maintain the integrity of the whole.
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Unfortunately, we’ve never been taught how to help manage the behind-the-scenes – and often unconscious – issues necessary to create and maintain systemic change. We’ve operated on the assumption that with a rational initiative and good communication folks will know how and why to adopt the change – and if they don’t, we handle their resistance.
I suggest there is a more effective way to be successful: become a GPS system and lead the change from the inside out.
Be the GPS System, Not the Consultant
During change initiatives, we often don’t manage the unconscious issues that underlie the status quo and will shift during change. People will take no action – or will resist any request for change – until they address these in a way that maintains internal congruence. But because they are often hidden, we tend to ignore them until it’s too late.
Before designing a change initiative, we need to:
- understand the details, associations, and historic import of the internal systems issues that created the problem that will be changed,
- figure out how it has been maintained and held in place daily,
- recognize the new rules, roles, and relationships that will emerge post-change,
- help folks manage the differential in their beliefs between who they are now and who they will be, to help them accept change on a personal level first.
When we attempt to use negotiation skills or OD skills at the wrong time in the change cycle – and almost all change agents attempt to get folks to agree to change well before they have figured out their personal routes through their change issues – we are delaying the change and opening up the possibilities for rejection and sabotage.
Current strategic change models only manage the ‘push/information’ half of the change process. Let’s add a ‘pull/buy-in’ skill set.
To ensure buy-in to change, become a neutral GPS system to navigate followers through the old and new systems issues that will shift, and help them create their own new rules, roles, and relationship patterns.
Help them develop the sort of environment that will both match the change and manage the personal, idiosyncratic elements that have made the folks successful in their pre-change situation.
As part of your new GPS skill set, become a decision facilitator and lead change where it begins: within the system that created the need for change to begin with, and through the people who will be leading the charge.
About the Author
Sharon Drew Morgen is founder of Morgen Facilitations, Inc. (www.newsalesparadigm.com). She is the visionary behind Buying Facilitation®, the decision facilitation model that enables people to change with integrity. A pioneer who has spoken about, written about, and taught the skills to help buyers buy, she is the author of the acclaimed New York Times Business Bestseller Selling with Integrity
Decision-Making Best Practice 8 – Observe the Opportunity or Problem First Hand
Every problem possesses unique nuanced qualities and it is often these minor details that renders a decision a striking success, a monumental failure, or, most frequently, simply average. Those who recognize these details can exploit them to their organization’s advantage.[wcm_restrict plans=”49267, 25542, 25653″] Those who fail to make the observation at best forfeit the possibility to exploit these opportunities and at worst find their actions rendered ineffective or even counterproductive.
How does on improve the chances of observing the nuanced details important to a decision? By observing the opportunity or problem first hand.
All too often decision-makers legislate from distant offices; relying on the perceptions of others to provide the basis of their option selection. And while well-meant, the observations of others are always, in unintentionally, filtered by their knowledge, experiences, and biases. This filtering of information threatens the loss of the very details the decision-maker may need to recognize and fully seize upon the opportunity at hand. To avoid such filtering, the decision-maker should go to the field and observe the opportunity or issue first hand. Only then will he or she gain a full, unfiltered appreciation of the situation.
Final Thought…
Observing the opportunity or problem first hand is not to suggest that the decision-maker should be the only information gatherer and analyst. The opposite is true. Multidiscipline teams add diverse perspectives to the decision-making process; offering insights to options and opportunities that may not otherwise be identified. But it is equally important for the decision-maker to possess direct knowledge of the circumstances surrounding the opportunity or issue as this individual is typically the most experienced member of the team and as the decision owner, he or she should be personally involved – not an owner at a distance.[/wcm_restrict][wcm_nonmember plans=”49267, 25542, 25653″]
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The Ladder of Commitment
Are you going to achieve your most important targets for the coming year?
Your answer to that question can reveal a lot about where you are on what I call “the Ladder of Commitment “, and is generally highly predictive of how far you’ll go in your pursuit of success.
Here’s a quick look at that ladder from the bottom up, along with what may be a surprising conclusion about what it really takes to reach your targets, in business and in life…
1. Helplessness
Years ago, scientists did an experiment on lab rats that involved dividing a metal cage into four sections and placing electrical current underneath each section. When a section of the cage was filled with live current, the rat would receive a small shock if stepping into that part of the cage. Quickly, the rat would learn to avoid that section.
Over time, each section of the cage was electrified in turn, leaving only one quadrant of the cage as a ‘safe haven’ for our experimental rat.
What happened?
[wcm_restrict]Even after the electricity was shut off completely, the rat would stay in their tiny corner of the world, unwilling to even attempt to venture out into a world that it had already learned from experience would only sting you if you dared to approach it.
If you’re avoiding even setting targets (or setting them and then hiding them away so you won’t see them again until you’ve failed to achieve them by the next quarterly review), chances are you may be caught up in a bit of ‘learned helplessness’.
Fortunately, the next rung on the ladder is also the easiest way to climb…
2. Curiosity
They say that curiosity killed the cat, but it might well have saved the rat from the scientist’s experiments.
When you get curious about what it’s actually going to take to reach a target, you naturally engage a higher level of consciousness. You begin to question everybody’s assumptions about what’s really possible, including your own.
And while curiosity doesn’t always lead to success, it inevitably leads to further exploration and the next rung on our ladder…
3. Engagement
When you engage with a target, project or goal, you call forth resources from yourself that otherwise may never have been brought to bear. You actually become more capable and able. Something which may have genuinely been impossible when approached from the level of helplessness is made possible by the shift in your level of focus and involvement.
To experiment with this, engage fully with a mundane task today. Do the dishes with energy, enthusiasm, and as if they’re the most important thing in the world. Read your child a bed time story as if it really, really mattered whether Horton saved Whoville or the Cat in the Hat came back.
You may be amazed at what a big difference such a small difference in attention and intention can make. And at some point, you may even decide to jump up another rung on the ladder of commitment…
4. Investment
Engagement is a choice that can be made and unmade in any moment. But once you’re invested in anything, from a mutual fund to a political campaign to a project or goal for yourself or the planet, the stakes are automatically raised.
You have something tangible to gain if your investment pays off, and in most cases something tangible to lose. Your level of involvement is higher and it becomes increasingly unlikely that even the most difficult obstacle will turn into an excuse for giving up, walking away and going home.
However, there is still one more rung on the ladder…
5. Commitment
Commitment is that place inside ourselves that recognizes the inevitability of creating any result we are willing to put 100% of our mental and physical energy into achieving. Commitment says “I will get there or I will die trying” – and as such it is one of the most powerful forces in the universe and one which any one of us can tap into at any moment, simply by making the decision to do so.
Somewhat surprisingly, however, I don’t generally recommend it as an effective strategy for creating sustainable personal and professional success. To explain why, let me share a conversation which I have been assured actually took place between a top defense contractor and a 4-star general.
Despite the contractor’s assurance that a particular project would be completed on time, the general felt the contractor’s team were not 100% committed to getting the job done.
He argued that that they should remain at work and do ‘whatever it took’ to succeed, even if it meant working much longer hours, taking extra time away from home and family and putting themselves under additional personal pressure and stress.
He told the contractor that understanding personnel management was like eating bacon and eggs for breakfast. The chicken was ‘invested’; the pig was ‘committed’.
The contractor smiled and said “well, that’s true, General – but the pig is dead and the chicken is still producing eggs. I want my people to stay ‘invested’.
The general backed down, and the project was completed on time.
When you look to achieving your targets for the quarter or your goals for this year, it’s useful to know that if you committed 100% to their achievement, almost nothing could stand in your way.
But it’s even more encouraging to know that a simple investment of curiosity, engagement, and intention will draw forth everything you need to not only reach your targets now, but to approach your next target with a renewed sense of hope, possibility and well-being.[/wcm_restrict][wcm_nonmember]
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About the Author
Michael Neill is an internationally renowned transformative coach and the author of the new book, Supercoach: 10 Secrets to Transform Anyone’s Life