Leadership Inspirations – Confidence, Fun, and Amazing Things
“When you have confidence, you can have a lot of fun. And when you have fun, you can do amazing things.”
Joe Namath (a.k.a. ‘Broadway Joe‘)
NFL Hall of Fame Quarterback,
led the New York Jets to win Super Bowl III
The New Thinking on KPIs, part 1 of 4
“Show me a company who thinks they have KPIs, which are measured monthly and quarterly, and I will show you measures that do not create change, alignment and growth and have never been KPIs”
David Parmenter
Internationally renown presenter and expert on Key Performance Indicators
From my research, very few organizations really monitor their true KPIs. The reason is very few organizations, business leaders, writers, corporate accountants, and consultants have explored what a KPI actually is. This brief paper hopefully will help you unearth what a KPI is and point where to look for them in your organization.
Let me explain what a KPI is through two KPI stories.[wcm_restrict]
An airline
My favorite KPI story is about Lord King who set about turning British Airways (BA) around in the 1980s by reportedly concentrating on one KPI.
Lord King appointed some consultants to investigate and report on the key measures he should concentrate on to turn around the ailing airline. They came back and told Lord King that he needed to focus on one critical success factor (CSF), the timely arrival and departure of airplanes, see Figure 1. Lord King was not impressed as everybody in the industry knows the importance of timely planes. They pointed out to Lord King that British Airways knew it was a success factor, along with 30 to 40 other success factors. The difference was that they were informing BA that it was the most important success factor. The consultants then pointed out that this is where the KPIs lay and they proposed that Lord King focus on late plane measures.
Figure 1: The importance of knowing your critical success factors
He was notified, wherever he was in the world, if a BA plane was delayed over a certain time, say two hours. The BA airport manager at the relevant airport knew that if a plane was delayed beyond a certain “threshold”, they would receive a personal call from Lord King. It was not long before BA planes had a reputation for leaving on time.
The late planes KPI was linked to most of the critical success factors for the airline. It linked to the “delivery in full and on time” CSF namely the “timely arrival and departure of airplanes”, and it linked to the “increase repeat business” CSF etc. The importance the CSF “timely arrival and departure of airplanes” can be seen by its impact on all the six perspectives of a modified balanced scorecard, see Figure 2.
I have added ‘employee satisfaction’ and ‘environment & community’ to the traditional four perspectives. These two perspectives were underestimated in the original work of Robert Kaplan and David Norton. Having a separate employee satisfaction perspective emphasizes the importance of measuring the key drivers of employee satisfaction such as the amount and regularity of recognition (e.g., how many recognition events are planned for the next week/fortnight, how much recognition has been made this week, the past two weeks, and this month). It will also support the need for more regular staff satisfaction surveys performed on a rolling sample basis.
The environment/community perspective will help create a major asset for the HR team, assisting the organization in becoming an employer of choice. Long-term successful linkages with the community, both local and national, are extremely valuable. Also, initiatives in this area feed into positive customer perceptions.
Figure 2: Balanced scorecard with six perspectives
“Timely arrival and departure of planes” impacted all six balance scorecard perspectives. Late planes:
- increased cost in many ways: including additional airport surcharges, and the cost of accommodating passengers overnight as a result of late planes being “curfewed” due to noise restrictions late at night (financial perspective);
- meant unhappy customers and alienated those people affected by the late arrival of the passengers -possible future customers (customer perspective);
- created a negative impact in the wider community and thus reduced the potential pool of future employees (community perspective);
- incurred created wastage of food – hot food has a short serving window and wastage of fuel as planes endeavoured to make up for lost time and operated outside their most economical flight speed (environmental perspective);
- had a negative impact on staff development as staff would repeat the bad habits that had created late planes (learning and growth perspective);
- adversely affected supplier relationships and servicing schedules resulting in poor service quality (internal process perspective);
- led to employee dissatisfaction as they had to deal both with frustrated customers and the extra stress each late plane created (employee satisfaction perspective).
A distribution company
A CEO, of a distribution company, realised that a critical success factor for their business was trucks leaving as close as to capacity as possible. Large truck and trailer units capable of carrying more than 40 tonnes were being sent out with small loads as dispatch managers were focusing solely on “deliver in full on time” to customers.
Each day by 9am, the CEO received a report of those trailers that had been sent out under weight. The CEO rang the dispatch manager and asked whether any action had taken place to see if the customer could have accepted that delivery on a different date that enable better utilization of the trucks. In most cases the customer could have received it a day or two earlier or later, fitting in with a past or future truck going in that direction. The impact on profitability was significant.
Just with the airline example, staff some did their utmost to avoid a career-limiting phone call with their CEO.[/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)
StrategyDriven Podcast Episode 31 – How to Better Engage Employees
StrategyDriven Podcasts focus on the tools and techniques executives and managers can use to improve their organization’s alignment and accountability to ultimately achieve superior results. These podcasts elaborate on the best practice and warning flag articles on the StrategyDriven website.
Episode 31 – How to Better Engage Employees explores the actions executives and managers can take to better engage their employees; revealing how to improve employee satisfaction, productivity, retention, and ultimately the bottom line. During our discussion, Michael Lee Stallard, author of Fired Up or Burned Out: How to Reignite Your Team’s Passion, Creativity, and Productivity
- the most significant driver of employee engagement and why is this factor so important
- actions executives, managers, and supervisors should take to foster an engaging workplace environment
- what a Connection Culture is and why it is so powerful at engaging employees
- how to create a Connection Culture
- actions executives and managers should take when someone within their organization does not buy-in or embrace the organization’s Connection Culture
- the impact of ‘hard’ factors, such as HR policies and benefits, on workforce engagement
Additional Information
In addition to the incredible insights Michael shares in Fired Up or Burned Out
A special gift for StrategyDriven readers…
We are pleased to announce that Michael has made the electronic version of his book, Fired Up or Burned Out: How to Reignite Your Team’s Passion, Creativity, and Productivity, available for download at no cost to our readers. Simply click on the link above to download your copy of this remarkable book on how to better engage employees; igniting their creativity, imagination, and spirits to the success of the organization.
Final Request…
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Thank you again for listening to the StrategyDriven Podcast!
About the Author
Michael Lee Stallard, author of Fired Up or Burned Out
[powerpress]
Fending Off Employee Dissatisfaction: How to Retain Top Talent in a Turbulent Job Market
A number of recent reports have indicated that nearly 50% of the U.S. work force is unhappy with their current job. Amid the prospect of a recovering labor market, if this news doesn’t seriously concern you as a business owner or manager, it should. With such a high level of employee dissatisfaction, it’s a safe bet that once the job market recovers, a great number of people will “jump ship” when the opportunity is right.
The Retention Factor
If it isn’t already, retaining talent within your organization should be a top priority. But, the stakes are even higher now. Why? So much of a company’s success, its value to customers and its potential for future growth reside within its people. Keeping your most talented team members on your side is important for a number of reasons:[wcm_restrict]
- Retaining institutional memory – the how and why of your operations, history, client values and methodologies. Change rarely happens in a vacuum. As your company evolves, it’s incredibly valuable to understand the historical context for changes to maintain the foundation for future growth.
- Retaining relationships – with customers and vendors, and other employees. Many companies have discovered the benefits of cross-departmental collaboration and maintaining these relationships can be vital for optimizing performance and knowing who to turn to in order to get things done.
- Retaining knowledge base – the technical skills, operational expertise and experience of team members. When this is lost, so too is the opportunity to leverage this inherent knowledge across the organization.
- Retaining investment – in your employees as valuable human capital, not just as “worker bees” with a job to do. If you’ve invested in education, skills building and professional development for anyone on your team, the ROI for your company is gone the minute they walk out the door.
Resources vs. Capital
The most important first step in retaining top talent is to change how you view employees within your organization. Think about this: in most companies, workers are considered resources (as in Human Resources). The term “resources” denotes a finite commodity – a material that is diminished or consumed through its use, much like coal, timber or oil. That’s certainly not the best message to be sending to your staff!
On the other hand, “capital” is something that is invested, nurtured and pays dividends in the form of a return on your investment. Most recent studies indicate that chief among the reasons given by employees for leaving their job is a perceived lack of concern for them as an individual – they simply don’t feel invested in or valued. By thinking of your employees as human capital, something in which you invest and that pays dividends, you can look beyond output and production to determine their real value to your organization, based not just on skills and accomplishments, but also the inherent contribution they make to the culture of the organization and motivation they bring to the job, their colleagues and the company.
Act Now Before it’s Too Late
Assessing the talent of individuals within your organization as a function of the potential value they bring to the table is a powerful paradigm shift that must happen before the exodus begins. Will there be some employees you may not be sorry to see go? Certainly. But, there may be valuable others who will leave feeling dissatisfied simply because they weren’t in the right position for their inherent skills and personality. How will you know the difference?
Evaluating, nurturing and cultivating talent is an absolute must for reducing the risk of losing your most valuable human capital once the job market rebounds. To do so requires the right set of tools that can expand human capital management beyond the traditional set of HR functions to integrate career path and succession planning, as well as training and skills, competency and motivational assessment. By overlooking any of these areas, one can only wonder how many of your most valuable and talented employees already have one foot out the door. And, you may not know what you’re missing until it’s already gone.[/wcm_restrict][wcm_nonmember]
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About the Author
Solange Charas joined TalentScope in 2008 as the Global VP of Pre-Sales for the group. Prior to her joining TalentScope, she held several top level HR positions including CHRO of Praetorian Financial Group, SVP, Head of Human Resources for Benfield Group, and Global Head of Human Resources for Havas Advertising. In these roles she was responsible for all aspects of HR for these three organizations. Ms. Charas’ prior professional consulting experience includes many senior-level positions with companies such as Arthur Andersen, Ernst & Young LLP, and Towers Perrin. Ms. Charas served as a chairperson of the Remuneration Committee 2005 to 2009 for NASDAQ-traded Able Energy. Ms. Charas has a Masters in Business Administration in Accounting and Finance from Cornell University, a Bachelor of Arts in International Political Economy from the University of California, Berkeley and a Certificate in Negotiations from Harvard University. In the fall, she will be pursuing her Doctor of Management.
Get Data Directly from the Source
The accuracy and subsequently the trustworthiness of organizational performance measures is founded on the quality of their underlying data. While performance measures are uniquely sensitive to changes in data, even the smallest error in data accuracy undermines a metric’s credibility if not its output. Therefore, emphasis must be placed on maximizing data accuracy.
Data accuracy is enhanced by minimizing the ‘distance’ it travels from creation to report. Reducing this ‘distance’ typically involves the removal of manual and automated data transfers and manipulations; each of which represents an error introduction opportunity. Thus, data gathered directly from the source creating it is less likely to contain errors. For data not collected at its source, the likelihood of error introduction can be minimized by:
- automating data collection
- eliminating manual transference of data between systems by automating these processes
- minimizing the number of systems data is transferred between collection and report development
- rigorously testing system interfaces that support data transfer and calculation
- rigorously testing final reports from data input to indicated performance prior to placing them into service/production
- routinely testing the accuracy of initial data collection
- when possible, validating data gathered using an independent, redundant source
- creating system generated notifications when data transfer errors occur
Enterprise Performance Measurement
We can work with you to assess and improve your performance measurement system; yielding metrics and reports that are operationally relevant, organizationally consistent, and economically implemented. The resulting system helps improve managerial decision-making, organizational alignment, and individual accountability. Learn more about how we can support your implementation and upgrade efforts or contact us for a personal consultation.