smartKPIs.com Performance Architect update 45/2011

It is time to reinvent management. You can help.

An interesting question I came across this week got me thinking. The question, rather rhetorical was along the lines of: “Why follow some model developed by a consultant when hundreds of smart people from hundreds of companies have spend tens of years developing and refining models line Baldrige and EFQM?”

The long answer to such a question, from my perspective is the following:

  • For the same reason the several of the dozen companies involved in the Nolan Norton Institute study experimented in 1990 with Balanced Scorecard prototypes expanded from Art Schneiderman’s original “Corporate Scorecard” piloted at Analog Devices. It is a classic tale of practitioner insight, mixed with academic rigour and consulting acumen and embraced by organizations willing to innovate while contributing to the enrichment of management as a discipline. (Details in the preface of Kaplan and Norton’s 1996 book.)
  • For the same reason Motorola’s CEO Bob Galvin embraced in 1985 the quality improvement ideas expressed in a research report by two of its employees: Mikel Harry, PhD. (academic rigour) and Bill Smith (practitioner insight, with 35 years of experience in engineering and quality assurance). Their proposed MAIC problem-solving approach became a stepping stone in the evolution of  Six Sigma. The D was added by IBM and other early adopters after Motorola winning the Baldrige Award in 1988.
  • For the same reason why after being presented in an efficiency report to the Executive Committee, Donaldson Brown’s return on investment formula was adopted by Du Pont in 1912. Brown was a 27 years old engineering graduate at the time. The subsequent work done by Brown at Du Pont and General Motors is legendary, with many cost accounting techniques and principles such as Return on Investment, Return on Equity, Forecasting and Flexible being established and used in a corporate context. They were gradually adopted by corporate America and grew to became part of the financial fabric of today’s corporate environment.

The short answer to the question is innovation and progress. Management is constructivist in nature. It is based on innovative ideas being proposed, tested and followed as they prove their value.

My 15 years of work as a management practitioner and consultant and 6 years of academic research offered me the opportunity to analyze plenty of models, frameworks, methodologies and abstract concepts. Some of them are puerile, some of them make sense to me, some of them don’t make sense to me, but make sense to others, many of them are trademarked in an effort to protect and monetize and lots of good work is inaccessible to many due to it being published in academic journals. My advice to anyone, be it consultant, researcher or practitioner is to never stop learning and exploring with an open mind. Great management concepts do not emerge overnight. Over time, some ideas lead to others, some impractical tools had some good points that inspired new hybrids, many organizations had the courage to support innovative staff members and consultant promoted prototypes and great things happened.

Then again, we have the option to put blinkers on and follow industry standards, widely recognized methodologies and popular management tools. That is perfectly fine, too. I myself hold a TOGAF certification (Enterprise Architecture) and I am an PRINCE2 certified practitioner (Project Management). That didn’t stop me to learn about and use components of the Zachman Framework, DODAF, FEAF (Enterprise Architecture), as well as PMBOK and other hybrid project management concepts. I enjoy exploring and generating my own taxonomies, typologies and conceptual systems.

Earlier this year, Gary Hamel launched a call for Management 2.0 in his blog posts: Inventing Management 2.0 and Improving our capacity to manage. The movement is already gaining traction at: The Management Innovation eXchange (MIX) and is supported by academic institutions (i.e London Business School), Industry Organizations (i.e. Dell, National Australia Bank) and research drive consulting companies (i.e. McKinsey&Company and Gartner). In my opinion, such a triumvirate is essential for progressing administrative science theory and practice.

Gary Hamel’s answer to the above question would probably be: It’s time to reinvent management. You can help.

Aurel Brudan
Performance Architect,
www.smartKPIs.com

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

smartKPIs.com Performance Architect update 44/2011

Advice on KPI documentation and configuration

Configuring KPIs following their selection is represented by the documentation of the complete set of relevant details for each KPI and the activation of KPIs so that data can be reported and analyzed.

  1. Link KPIs upstream with business objectives and downstream with organizational initiatives. KPIs should be connected to organizational objective as they make objectives SMART. Initiatives should be establish to support the achievement of objectives by improving KPI results.
  2. Assign a data custodian responsible for gathering measurement data for the KPI. Data gathering for each KPI requires clarity and ownership. Having a responsible for collecting KPI data is a management approach to ensure accountability with data being available for analysis on time.
  3. Assign a KPI owner responsible for the achievement of the desired results. Each KPI should have a manager allocated as its owner, to ensure responsibility regarding its analysis, results and improvement options.
  4. Avoid tunnel KPI definitions – repeating the KPI name in the definition doesn’t add value. Good practice in working with KPIs requires thorough documentation of what they reprezent. Proper KPI definitions should go beyond repeating the KPI name, by providing a plain English explanation of what the KPI is about.
  5. Categorize KPIs by their reporting status - active = data is tracked, inactive = data not available. Activating KPIs is the process of moving a KPI status from inactive, when the data is not available to active, when data is reported and a clear process is in place for doing so on a regular basis.
  6. Clearly identify the unit type, most of the time % (percentage), # (number) and $ (dollar value). KPIs being measurable entities, they have an associated unit type. To simplify communication, the symbol should be used instead of the word expressing it.
  7. Data accuracy for each KPI should be evaluated as low, medium and high and treated as such. Not all KPIs have the same data reliability. Survey based KPIs are always going to be less reliable compared to revenue KPIs, due to objectivity issues. Other aspects to be considered are data automation and auditing.
  8. Determine the frequency of data generation and the frequency of reporting for each KPI. Data for some KPIs, such as ‘# Website visits‘ can be easily gathered on a daily basis. For other KPIs, such as ‘% Employee engagement‘, data gathering requires considerable costs and efforts, impacting a large number of staff. The frequency of reporting is influence by factors such as cost, efforts and technical complexity.
  9. Develop a customized KPI documentation form that contains the relevant details describing the KPI. Documenting KPIs can be easily done in a template that structures the main description fields considered relevant for the organization. smartKPIs.com contains such a model that can be customized at organizational level.
  10. Document if the trend is good when increasing, decreasing or when data is within a range. For some KPIs the results are good when they are decreasing from a period to another - for example ‘# Customer complaints’. For others, such as ‘$ Revenues‘, the results are good when increasing, while in the case of ‘% Budget variance‘, the results are good when within a specific range.
  11. Document where the reporting data for each KPI is sourced from and who produces it. Understanding a KPI relies on having a clear understanding of the data behind it and its source.
  12. Don’t worry too much about a KPI being leading or lagging. Differentiating between the two is debatable and confusing. What is considered a leading KPI for some is a lagging KPI for others. As agreement around this differentiation is oftentimes difficult to achieve, it is secondary in importance and impact.
  13. Ensure each KPI is clearly explained in a definition and has a purpose for usage. The separation between definition and purpose is essential. The purpose expresses the reason for using the KPI and is one of the key components of the documentation form.
  14. KISS - keep it short and simple: Use the # and % symbol to replace “number” and “percentage” in KPI names. Standardizing KPI names and shortening them supports communication and enables clear data visualization of KPIs in dashboard and scorecards.
  15. Simplify KPI names by eliminating the word “of”. As a “common denominator” it can be cut from the name. KPIs are analytical in nature and where possible, their names should be as concise as possible. Definitions, calculation and purpose fields provide context and can be more wordy.

Aurel Brudan
Performance Architect,
www.smartKPIs.com

smartKPIs.com Performance Architect update 43/2011

Advice on KPI selection

Selecting KPIs is a process which seems simple, yet is inherently complex, due to the interdependencies involved. Here are 15 things to consider before embarking on this journey.

  1. Review existing internal reports and support documents at the beginning of the KPI selection exercise. These may include previous business / strategy plans, annual reports, performance reports and other documentation that relates to performance management, measurement and benchmarking.
  2. Use external lists of examples and other secondary documentation to inform and support KPI selection. It is always a good idea to begin a journey having the end in mind. Reviewing KPI examples used in the industry or functional area, by competitors or other organizations provides context around what is in used in practice by others and improves understanding around the desired output.
  3. Engage internal stakeholders in the process of KPI selection through interactive workshops. KPI selection is not a desk exercise. It is an opportunity to communicate and learn, hence an open discussion in a workshop format is a better approach for enabling not only KPI selection, but also understanding and ownership.
  4. Calibrate KPI selection around business objectives and value drivers. KPIs are not used in isolation. They are just one component of the value creation chain and of the performance management system. A simple way to position them is al links between business objectives and related organizational initiatives.
  5. Select KPIs based on the realities of organizational activity and environment. Each organization is different, operating in different environments, with different guiding principles. Hence the KPIs used need to reflect the specifics of each organization first and industry/functional area characteristics second.
  6. Maintain a centralized catalogue of KPIs for the entire organization. Structuring KPI documentation in a central repository facilitates their understanding and usage in a similar way across the organization, growing the know-how and facilitating KPI selection and usage on an ongoing basis.
  7. Understand the difference between input, process, output and outcome KPIs. This value creation sequence is essential in facilitating the understanding of KPIs in the context of the value added by the process/activity they are related to. It is an essential mapping technique that facilitates KPI selection.
  8. Don’t hesitate in changing KPIs in scorecards and dashboards. KPIs should reflect activity and activity should adapt to a changing environment. The use of KPIs should be fluid and flexible, reflecting the change in business priorities as a result of the change in the operating environment.
  9. Review KPI relevance regularly. If new KPIs are required, they can be established at any time. An essential aspect of double loop learning. Using KPIs is not only about achieving set targets and objectives, but also about ensuring the objectives and targets were the right ones to be set in the first place and the KPIs used to track their achievement were the appropriate ones.
  10. KPI selection and target setting should be done in accordance with organizational maturity and direction. There is no one size fits all approach when it comes to using KPIs. As strategies vary from one organization to another, the use of KPIs also varies.
  11. Project milestones are not KPIs. Understanding the difference between what is and what is not a KPI is a prerequisite of successful KPI selection.
  12. Targets are not KPIs. Understanding the anatomy of a KPI is essential in KPI selection and usage.
  13. Some things are not worth measuring. For example measuring love might not be such a good idea. Not everything that can be measured should be measured with KPIs.
  14. Some things are too difficult to measure. For example cuteness. The “measuring everything that moves’ mentality should be avoided.
  15. Eliminate or replace inactive KPIs with simpler, yet measurable ones. Using some KPIs may have seemed a good idea at the time of their selection, however if measuring them proves to be too costly or time consuming, they should be replaced. An active KPI is better than an inactive KPI.

Aurel Brudan
Performance Architect,
www.smartKPIs.com

smartKPIs.com Performance Architect update 42/2011

Initiatives for sustainable organizational performance

Continuing the exploration of ways for organizations to do more for biodiversity and environmental sustainability, here are three novel initiatives that may be established by any organization:

  1. Adopt a threatened animal species, plant species and habitat. In addition to the donations allocated to programs dedicated to their protection, such an approach would also raise awareness with both internal and external stakeholders. It would have a motivational factor for staff, knowing that through their work they do something for giving back to the environment. Thus, the company sponsored animal species and company sponsored plant would be symbols of organizational concerns towards the environment and complement their business driven role.
  2. Launch of a product or service with all profits generated through its sales donated to non-profits running programs focused on sustainability issues. A number of such examples already exist, with proceeds dedicated to humanitarian or research causes. Dedicating such an initiative to environmental causes, would complement the emphasis put on Corporate Social Responsibility.
  3. Donate 1% of revenues to environmental causes. Established in 2002, 1% for the Planet is a not-profit organization that has established a network of over 1,400 companies across 44 countries willing to allocate at least 1% of revenues (top line sales) directly to non-profit organizations focused on issues of sustainability. The donations can be allocated to non-profits selected from a list of over 2,600 pre-approved non-profit organizations from around the world. Not surprisingly, most of the companies that have committed to this cause are privately held.

Through such initiatives and similar other ones, organizations can gradually bridge the separation between business and environmental/sustainability issues. Protecting the environment should be seen as part of the business, built in the business model. Success stories such as Interface demonstrate the benefits of such approaches. However corporate environmental initiatives should not be seen as something that is in scope for large companies and market leaders only. Each organization, small or large has a footprint that should be acknowledged and compensated for. A change of mentalities and business models may be necessary for such a transition, enabling smaller, more agile companies to be at the forefront of such a change.

In addition to the organizational level impact, a secondary benefit of such initiatives is at individual level, as awareness in sustainability issues would cascade down from organizational level to employee level, thus being amplified through social networks. Ultimately both individuals and organizations have a footprint on the environment and a shared sense of responsibility should exist at both levels.

Aurel Brudan
Performance Architect,
www.smartKPIs.com

smartKPIs.com Performance Architect update 41/2011

Sustainability as a strategic theme or Balanced Scorecard perspective

In two of my previous blog posts I addressed the link between biodiversity, sustainability and performance, raising questions around the role each organization has in addressing these issues. Companies such as Interface have demonstrated that efforts to reduce carbon footprint and environmental stewardship practices are rewarded by customers and the stockmarket. Such examples are for now exceptions and more can be done to embed sustainability practices in organizations. Besides theory and rhetoric, there are a number of practical ideas that are worth exploring:

  • At a business philosophy level, environmental concerns need to be at the core of the business model and not be seen simply as a marketing / public relations stunt. Sustainability is today a key value driver of organizational performance.
  • Environmental / sustainability statements elements should be used across organizational performance management systems and not in isolation. While specific organizational wide environmental plans and reports are useful, elements of environmental rhetoric should appear in mission and vision statements, values and other elements of the corporate identity. Being at the core of who and what the organization is, sends a strong message both internally and externally.
  • Environmental / sustainability components should also have a prominent role in the organizational strategy. While many organizations have objectives and KPIs dedicated to these aspects, there is merit in considering sustainability a dedicated strategic perspective. The traditional approach of grouping organizational Balanced Scorecards in strategic perspectives is structured around: Financial, Customer, Internal Processes and Learning & Growth. One of the most powerful catalysts of increasing this profile is the inclusion of a sustainability perspective in addition to the traditional four perspectives of the Balanced Scorecard. Ultimately organizations don’t operate in a vacuum, as the environment influences their activity. A possible name for it is Corporate Environmental Responsibility or Sustainability, with objectives related to aspects such as: nurturing biodiversity, footprint reduction and community support.
  • A less drastic alternative to establishing a sustainability perspective is the use of a strategic theme that cuts across organizational strategy (and Strategy Map), linking sustainability related objectives and KPIs. A benefit of this would be a clear articulation of the financial support dedicated to sustainability aspects, as a subset of the financial perspective.

Some might say “we are in the business of making money for our shareholders”, however as the current system of ensuring biodiversity and sustainability is failing, perhaps the role of companies in this context needs to be revisited. While many programs are underway in organizations around the world, more can be done in terms of inclusion of staff across the organization, as well as inclusion of organizations of all sizes in aligning their performance management system with sustainability.

Aurel Brudan
Performance Architect,
www.smartKPIs.com

smartKPIs.com Performance Architect update 40/2011

Milton Friedman, Interface and performance ecosystems

There is widespread awareness today about the climate change and other environmental issues we are facing today at a global scale. In a simplistic way, I would categorize companies in three categories: the ones that don’t care, the ones that do something about it and the ones in the middle.

Perhaps the largest group is formed of the companies that don’t care, adepts of the principle that there are out there suitable institutions (government, UN bodies) to do something about these issues. This group is embodied by Milton Friedman’s quote in his notorious 1970 New York Times Magazine article, The Social Responsibility of Business is to Increase its Profits:

“There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

Unfortunately, human behaviour oftentimes has difficulties with finding a balance and all too often issues with traffic of influence, deception and fraud emerge as unwanted consequences of the profit driven behaviour.
Many organizations are doing something about it. At the forefront of sustainable business practices is Interface, the world’s leading producer of soft-surfaced modular floorcoverings. Its mission embodies an emergent approach to sustainability as a value driver for the business:

“Interface will become the first name in commercial and institutional interiors worldwide through its commitment to people, process, product, place and profits. We will strive to create an organization wherein all people are accorded unconditional respect and dignity; one that allows each person to continuously learn and develop. We will focus on product (which includes service) through constant emphasis on process quality and engineering, which we will combine with careful attention to our customers’ needs so as always to deliver superior value to our customers, thereby maximizing all stakeholders’ satisfaction. We will honor the places where we do business by endeavoring to become the first name in industrial ecology, a corporation that cherishes nature and restores the environment. Interface will lead by example and validate by results, including profits, leaving the world a better place than when we began, and we will be restorative through the power of our influence in the world.”

The financial results of Interface prove that embracing sustainability translates into excellent financial results. The gross profit as a percentage of net sale was at over 33% for the last 5 years. In terms of stock performance, for the five-year period ended January 2, 2011, its total returns to shareholders (stock price plus dividends, divided by beginning stock price) outperformed both the NASDAQ Composite Index and competitors (Self-determined peer group of 13 stocks). For $100 invested in January 2006, Interface delivered a cumulative total of return in January 2011 of $197, compared to $ 126 for NASDAQ and $80 for competitors.

For the organizations that are in the middle and are exploring options, an important point to realize is that today’s interconnected society is much different than the one in 1970. Running successful organizations in the 21st century, requires a different mentality and management thinking compared to the 20th century. The level of complexity, speed of doing business, transparency and consumer influence is unparalleled. Continuous change and integration are the new value drivers in today’s business environment. Even separating the business environment from the environment overall is not an option. Natural disasters, climate change and environmental footprint are key to the viability of business ecosystems. Especially as the efforts of government and non-profit organizations are not enough to deal with the complex issues surrounding our environment, it is time for corporations to take a more active role in addressing sustainability for both the survival of their business and the protection of the Earth ecosystems overall. Considering that everything we do is possible due the resources provided by Planet Earth, a moral “Earth tax” on the use of these resources is a duty at both personal and organizational level. Efforts in this direction already exist at institutional level, a recent example being the Carbon tax scheme intensely debated in Australia this year. However complementing these efforts with a grassroots global commitment to sustainability would be exponentially more effective. The foundation for such an approach is the belief that sustainability is today a key value driver of organizational performance. The sooner companies will adopt this the better it will be for all the actors in the ecosystem.

Aurel Brudan
Performance Architect,
www.smartKPIs.com

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

smartKPIs.com Performance Architect update 39/2011

Biodiversity, sustainability and performance

Although widely unacknowledged, as declared by the United Nations, 2010 was the international year of biodiversity. It was meant to raise awareness in the fragile state of many species of plants and animals around the world and mobilize in safeguarding biodiversity. There is much talk about climate change, however the profile of biodiversity as a world crisis is somehow overshadowed. Perhaps many made terms with the idea that more and more species and threatened and disappear: ”…well, there are plenty…there is not much we can do…someone will look after them..”.

While on the short term the impact of the disappearance of species may be small, the medium and long terms implications may be considerable. A recent example is the jellyfish invasion in many parts of the Sea of Japan and other parts of the world, attributed by many to the overfishing of small fish and the growth in dead ocean zones (portions of the ocean with depleted oxygen levels in water due to chemical unbalance). Around the world, biodiversity is an issue of alarming proportions. One hundred species per million are currently estimated to be lost per year (Rockstrom and others, 2009).

The 2010 IUCN Red List of Threatened Species estimates that:

  • 21 % of the total 5,491 described mammal species;
  • 12% of the total 9,998 described bird species;
  • 29% of the total 6,433 amphibian species;
  • 5% of the total 31,300 described fish species;
  • 5% of the total 9,084 described reptile species;
  • 3% of the total described 281,821 flowering plant species;
  • 29% of the total gymnosperms (conifers, cycads, Ginkgo and Gnetales) species

are deemed endangered or vulnerable to extinction. Due to the large number of plant species only 12,914 had an evaluation completed and of these 73% are considered threatened.

The United Nations Environment Programme (UNEP) has been publishing the UNEP Year Book since 2003, which reports on new environmental science and recent developments in the environment. The latest report for 2010, outlines new research that illustrate the boundaries have been crossed for climate change, interference with the nitrogen cycle and mostly biodiversity loss, of the nine components of Earth systems that show signs of global environmental change driven by human activities.

Source: UNEP Year Book, 2010

The Global Biodiversity Outlook 3 report, published by the United Nations Secretariat of the Convention on Biological Diversity in 2010, confirms something many already knew: the target set by world leaders in 2002, to achieve a significant reduction in the rate of biodiversity loss by 2010 was not met. In addition, the five principal pressures directly driving biodiversity loss (habitat change, overexploitation, pollution, invasive alien species and climate change) are either constant or increasing in intensity. The report also states that the ecological footprint of humanity exceeds the biological capacity of the Earth by a wider margin than at the time the 2010 target was agreed. Progress in addressing such challenges is slow and made mostly at policy and governance level, thus having a delayed impact on biodiversity. While at least 31 bird species (out of close to 10,000) would have become extinct in the past century, in the absence of conservation measures, by comparison the figure is small. Among the conclusions and recommendations of the report, several highlight the need to elevate the profile of biodiversity as a key concern not only for governments and institutions, but for organizations and individuals as well:

  • Better decisions for biodiversity must be made at all levels and in all sectors, in particular the major economic sectors, and government has a key enabling role to play.
  • We can no longer see the continued loss of and changes to biodiversity as an issue separate from the core concerns of society.
  • The action taken over the next decade or two, and the direction charted under the Convention on Biological Diversity, will determine whether the relatively stable environmental conditions on which human civilization has depended for the past 10,000 years will continue beyond this century. If we fail to use this opportunity, many ecosystems on the planet will move into new, unprecedented states in which the capacity to provide for the needs of present and future generations is highly uncertain.

Such developments highlight stronger than ever the need for more emphasis on sustainability at organizational level. As existing efforts seem to be not sufficient, among the questions that organizations should ask themselves are:

  • Is it our business?
  • What can we do more?
  • How can we contribute to addressing biodiversity loss?

Aurel Brudan
Performance Architect,
www.smartKPIs.com

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

smartKPIs.com Performance Architect update 38/2011

6 Performance Management trends in 2011

As we are half way through 2011, it is an excellent time to take stock of the trends shaping up in the performance management space this year.

The link between organizational performance management and risk management. The topic of linking enterprise performance management systems such as the Balanced Scorecard to risk management has been discussed for some time now. The buzz around the topic accelerated this year with the topic being prominently on the agenda of the Balanced Scorecard Forum in Dubai, where a number of speakers including Dr. Robert Kaplan and Paul Niven addressed it. The question for many is who will be the first author to write a book dedicated to this link. Dr. Kaplan seems to be in pole position, with several of his recent presentations addressing the topic and a declared research focus on measuring and managing organization risk. The Australian flavoured ISO 31000 risk management standard has been around for almost 18 months now and can certainly use some help from the Harvard Business Publishing marketing machine in popularizing the topic and raising the profile.

Data visualization. Some of the benefits of visualization are that it helps in generating insights from unstructured data, while supporting communicating these insights to a wider audience. Proof of the ever increasing role of data visualization in communicating performance outcome is the co-optation of Edward Tufte, a leading visualization expert in the Recovery Independent Advisory Panel of the Obama Administration. His insights were essential in the design of www.recovery.gov and a recent article about Tufte introduces him as “the graphics guru to the power elite who is revolutionizing how we see data”. Today data visualization is used across industries and popularised by an ever-increasing number of infographics on topics that range from digital media to economics and social aspects.

Performance management in government and mandated by government. A number of countries have already enacted legislation that establishes the right and/or obligation for employers to establish criteria of evaluating the performance of employees, others are in the process of doing so (a recent example is Romanian labor law). In addition, countries such as Malaysia use KPIs to evaluate the performance of public service organizations and even MPs, a model that continues to gain ground. In the USA, a new bill was signed by President Obama in January 2011, representing the first major revision of the 1993 Government Performance and Results Act, outlining major changes to public sector performance management.

Transparency of performance reporting. We have gone a long way from performance results being in the exclusive domain of decision makers. Technology and changes in human dynamics facilitated both the will and means for disseminating performance data to wider audiences. Intel now making the performance report of its IT division available online. Federal IT spending in the USA is publicly available at www.ITDashboard.gov and in Australia, the performance profiles of over profiles of almost 10,000 Australian schools are available to the wider public on www.myschool.edu.au. The trend of performance transparency is likely to continue, in our information driven society.

Social media metrics and web analytics as ambassadors of performance management. The ubiquity of social media and the availability of data make it easy to ponder on figures and their meaning, introducing vast numbers of Internet users to concepts related to performance management. Questions such as ‘How do you measure social media Return over Investment?’ are asked more frequently and illustrate the increasing sophistication of measurement in this area. At the same time, Google Analytics is perhaps the most used free performance management reporting tool available today and an excellent resource to illustrate what performance management is about. It provides the data, reporting functionality, KPI selection/configuration, training and communication tools in an integrated seamless experience.

Happiness and performance. The link between performance and happiness is an area of increasing interest for both researchers and the general public. The change of perspective from managing performance as driven by the corporate agenda to managing performance for living a more balanced and fulfilled life (both corporate and personal) has the potential to transform attitudes and approaches to performance management. Several speakers at a recent conference in Australia dedicated to the topic of Happiness and it causes discussed the role of doing and achieving in the context of happiness. Measuring happiness is not easy, but research is underway measuring how happiness varies based on location, activities, people and time among other factors.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21

smartKPIs.com Performance Architect update 37/2011

smartKPIs.com - a year in review

The end of June marks in Australia the end of the financial year, a time to evaluate the past 12 months and reconfirm the plans for the next 12 months. In terms of growth, smartKPIs.com figures speak for themselves:

  • 6500 KPI examples documented;
  • 1034 KPIs in Practice reports analyzed and cataloged;
  • 410 Blog posts written;
  • 40 Example of organizational objectives listed;
  • 36 iKPI profiles developed;
  • 21 Performance Panorama interviews published.

Enabling these results are thousands of hours our research team spent on researching and analysing tens of thousands of performance management resources. The insights gained as part of this work were captured in a series of premium products launched over the last few months:

  • smartKPIs Premium, containing 1500 KPI examples documented in over 30 fields;
  • The Top KPIs of 2010 series of research reports, with 17 launched so far outlining over 400 KPI examples, proved to be the most popular with members of the smartKPIs.com community in 2010;
  • smartKPIs.com pre-populated templates, containing 24 products supporting the deployment of KPIs in organizations through scorecards, dashboard and entire performance management systems.

Over the year, members of the smartKPIs.com team travelled for research, conferences or workshop facilitation in Australia, England, Lebanon, Malaysia, Qatar, Romania, Scotland, UAE and Vietnam, reconfirming the commitment to learn from practice, integrate academic rigour/insights and deliver practical solutions.

more))

smartKPIs.com Performance Architect update 36/2010

A taxonomy of sources used for KPI selection

Working with Key Performance Indicators (KPIs) requires selecting a group of relevant KPIs first. There are many options for this: start with a blank page, review other sources, or get someone else (such as a consultant) to do this for you among others.

Some of the general rules to follow on embarking on such a journey are:

1. Do your research. Selecting KPIs is a learning experience, a journey in itself. There are many insights to gain by taking it step by step instead of just getting to the destination. Research is an important component of this journey.

2. Acknowledge the uniqueness of your environmental settings. While some KPIs are widely used across organisations (i.e. % Satisfied customers, $ Sales revenue and % Profit rate), others are unique to each organisations as they reflect their strategy and specific conditions of operating. Each organisation should select the KPIs based on their relevance and not on their popularity.

3. Clarify what you want to achieve. If you want to improve things and learn from KPIs, you should not avoid selecting challenging KPIs, difficult to measure or difficult to improve. The easy choice is selecting KPIs that make you look good. While this may serve some purpose on the short term, on the medium to long term it will impact the relevance and credibility of KPIs in the organisation.

Having these general rules in mind, the question is: “Where do we do our research to inform the KPI selection process?”. The main sources of information can be grouped in three categories:

Primary Sources

  • Front-line employees input – they are at the core of the value generation chain and know what matters for operational success.
  • Input from managers – due to their perspective across the value generation process, role in shaping strategy and their relationship with various stakeholders.
  • Board input – in many instances they mandate the use of specific KPIs and their selection in strategic / operational is non-negotiable.
  • Input from suppliers – their insight in the supply chain is valuable as they can bring an external perspective to what needs to be measured and improved
  • Customer input – their opinion matters.

Secondary sources

  • Strategic development plan (3-5 years)
  • Annual business/strategic plan
  • Annual reports
  • Internal operational reports
  • Competitor review reports

External sources

Individually or in combined, these sources can generate a list of prospective candidates for KPI selection, anchored to organisational objectives. Ultimately the decision on which KPIs will be used should be based on discussions within the organisation to determine the most relevant ones. Consultants can be useful in this process as facilitators, but not necessarily as “fountains of truth”. Their role should be more as guides on this journey, providing tools, information and advice, but not developing the final list of selected KPIs in an ivory tower. Enjoy the journey!

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

Walker, Rob 1992, “Rank Xerox – Management Revolution”, Long Range Planning, Vol. 25, No. 1, pp. 9 to 21