Post on 03-Apr-2023
Agenda
• What should the entity measure besides
financial results?
• A framework for performance information
• What makes a good performance measure?
• What is a KPI?
• What are Key Performance Questions?
• Designing KPIs to achieve excellence
Measurement – essential concept?
‘When you can measure what you are speaking about, and
express it in numbers, you know something about it; but
when you cannot measure it, when you cannot express it
in numbers, your knowledge is of a meager and
unsatisfactory kind’
Lord Kelvin (1870)
‘You cannot manage what you cannot measure’
Anon
Other input/process/output/outcome
measures
One needs to have a balanced view of the organisation and
not concentrate only on financial results. Other
measures may include/relate to:
Customer satisfaction/dissatisfaction
Customer retention/behaviour
Product and service quality
Waste
Carbon footprint
Organisational capabilities
Yield/ Productivity
......................................and so on....and so on
Doing things
‘People and their managers are working so hard to
be sure things are done right that they hardly
have time to decide if they are doing the right
thing’
Stephen Covey
Measurement frameworks
• Balanced Scorecard
• TQM
• Performance Prism
• Tableau du Bord
Etc, etc, etc…
Objectives of a measurement
framework
A good performance measurement system will
facilitate 3 main objectives:
• Learning & Empowerment
• Better decision making
• Improved organizational performance
Properties of a good Performance
Information System
• Focused: on the organisation’s aims and objective
• Appropriate: to, and useful for, the stakeholders likely to use it
• Balanced: giving a picture of what the organisation is doing,
covering all significant areas of work
The efficiency trap in call centres
‘we make important what we can measure’
(Feinberg et al, 2000)
‘ease of measurement leads to automatic
reporting, which in turn can lead to the deceptive
belief that reported measures are important and
motivating’ (Silverman and Smith 1995)
Properties of a good Performance
Information System
• Focused: on the organisation’s aims and objective
• Appropriate: to, and useful for, the stakeholders likely to
use it
• Balanced: giving a picture of what the organisation is doing,
covering all significant areas of work
• Robust: in order to withstand organisational changes or
individuals leaving
• Cost effective: balancing the information against the costs
• Integrated: into the organisation, being part of the business
planning and management processes
Challenges to overcome
Tendency to identify many
measures – hoping for a few
good men ( i mean measures!)
Tendency to rush to judgement – not
thinking deeply about what
measures are important and why
Leading and lagging indicators
Lagging
• Software bugs reported
to Support in Release x.x
• Q2 revenue
• Call center calls
completed within 2
minutes
• Product returns in
November
Leading
• % of identified software
bugs fixed in Release x.x
• Contracts in negotiation
for Q2
• Customer cases
currently open
• Customer complaints 3
month trend
What makes a good performance
measure ?
A performance measure should be:
• Relevant to what the organisation is aiming to achieve;
• able to Avoid perverse incentives - not encourage unwanted or
wasteful behaviour;
• Attributable – the activity measured must be capable of being
influenced by actions which can be attributed to the organisation;
and it should be clear where accountability lies;
• Well-defined - with a clear, unambiguous definition so that data
will be collected consistently, and the measure is easy to understand
and use;
What makes a good performance measure ?
A performance measure should be (con):
• Timely, producing data regularly enough to track progress and,
and quickly enough for the data to still be useful;
• Reliable - accurate enough for its intended use, and responsive
to change;
• Comparable with either past periods or similar programmes
elsewhere; and Verifiable, with clear documentation behind it, so
that the processes which produce the measure can be validated.
What is a KPI?
KPI’s are clearly defined, quantifiable measures that reflect the critical success factors of an organisation.
KPI’s help organisations understand how well they are performing in relation to their strategic goals and objectives.
KPI’s should be clearly linked to objectives to enable stakeholders to determine if the organisation is on track.
The ICE approach
Instead of clearly identifying the information needs and then carefully designing the most appropriate indicators to assess performance, we often observe what has been termed the ‘ICE’ approach:
• Identify everything that is easy to measure and count
• Collect and report the data on everything that is easy to measure and count
• End up scratching your head thinking “What the heck are we going to do with all this performance data stuff?
Using KPIs correctly
Best practice organisations:
• Understand what indicators are required for
learning and improvement
• Separate out external reporting indicators if not
relevant for internal purposes
• Try to avoid using indicators to control people
and concentrate on organisational performance
How to design KPI’s
KPI’s should be:
• clearly linked to strategy ie. the things that matter most
• properly defined
• measurable
All units within an organisation should have their own KPI’s which should in turn be linked to the organisation’s KPI’s (cascading effect)
Key Performance Questions
KPQs are an API innovation in the field of corporate performance management.
KPQ is a management question that captures exactly what managers need to know when it comes to each of their strategic objectives.
KPQs are designed to raise the most important questions and trigger a search for the answers
Good targets
• ‘We will reduce the number of missed household
bin collections by 5% by next year.’
• ‘We will cut the number of unfilled places in
primary schools by 10% by 31 December 2010’
• ‘We will increase the number of customers from
Italy by 20 per cent before the end of 2011.’
Bad targets
• ‘We aim to have the best transport service in the
region.’
• ‘We will improve the way we handle complaints.’
• ‘We will answer 75 per cent of all complaints
within 5 days’ (a poor target if the remaining 25
per cent take 3 months to answer).
Concluding comments
KPIs are one of the most powerful tools available to
enable organizations to achieve improved
performance and aim towards excellence. But using
KPIs appropriately comes replete with challenges.
KPIs should be primarily deployed for learning and
improvement and not for command control. When
KPIs are used inappropriately they also become the
most ‘resisted’ of management tools.