An Introduction to:

KPI’s, KSC’s & BSC’s

D. Vanderbist 11/12/2015

KPI’s & KRI’s

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Indicators

• Key: The low hanging fruits!

• PI’s: Performance Indicators = What to do!

• KRI’s: Key Result Indicators = How have you done?

• KPI’s: Key Performance Indicators = What to do!

Typically mix 10/80/10 = KRI/PI/KPI

Lead and lag indicators :

• Leading : info to plan future activities

• Lagging: historical information to learn from the past

Type of performance indicators

• Employee Productivity.

• Cost Efficiency.

• Product Quality.

• Community Engagement.

• Customer Relationship.

• Financial Sustainability.

• Stakeholder Buy-in.

KPI’s: Focus

• Name

• Calculation

• Type: KRI, KPI, PM

• Responsible: for obtaining the measurement and data

• Source System

• BSC perspective

• Recommended display

• Frequency measuring: real time, hourly, daily, weekly, monthly quarterly

• Link to critical success factors: see pyramid below

• Teams

• Target

KPI’s: Structuring & Measuring• Accuracy level of target

• Estimated time to gather = cost of tracking KPI

• Frequency reporting

• Reporting: always or if outside boundaries

• Way of reporting

• Owner

• Type: number, percentage, ratio, index, trend, …

• Time series: grouped, aggregated (imported if you work with trends or averages)

• Polarity: indicate if high measures or low measure is good ("high is good" or "low is good"

• Link to success factors

• Link to statical info: averages, trend, variance (contain quality indicators)

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A KPI should be: • relevant to and consistent with the specific

organization's vision, strategy and objectives • focused on organization wide strategic value

rather than non-critical local business outcomes - selection of the wrong KPI can result in counterproductive behavior and sub optimized outcomes;

• representative — appropriate to the organization together with its operations

• realistic — fits into the organization's constraints and cost effective

• specific — clear and focused to avoid misinterpretation or ambiguity

• attainable — requires targets to be set that are observable, achievable, reasonable and credible under expected conditions as well as independently validated;

KPI: Characteristics

• measurable — can be quantified/measured and may be either quantitative or qualitative

• used to identify trends — changes are infrequent, may be compared to other data over a reasonably long time and trends can be identified

• timely — achievable within the given timeframe

• understood — individuals and groups know how their behaviors and activities contribute to overall organizational goals

• agreed — all continuators agree and share responsibility within the rigorization

• reported — regular reports are made available to all stakeholders and contributors

• governed — accountability and responsibility is defined and understood

• resourced — the program is cost effective and adequately resourced throughout its lifetime

1. Relevant, focused: in line with company vision, focus on correct optimizations

2. SMART: Specific, Measurable, Timely, Attainable

3. Governed: agreed, reported, governed

4. Sourced: who will pay for the set-up and organization

KPI: Characteristics

• Accountability for a KPI is linked with the power to change/to control the process. Accountability without controlling power does not work.

• The goal is not to have many KPI but to have an effective measured business with as few KPI as possible

• What is the frequency, target and threshold for measuring the KPI? You don't report if KPI is within normal boundaries.

• Can the KPI directly be controlled or managed? If we fall outside the thresholds, can we directly initiate a corrective action?

• KPI’s are quality measurements, these are retro-active. Where is the pro-active part the quality assurance: KRI vs. KPI

• When/How are we going to benchmark results? Mutually agreed model between client or supplier.

• Accountable track: KPI’s at all levels will make up the business strategy of the company.

KPI: Characteristics

KPI: Profiler

KPI: Visualization

KPI: Performance Map

Success Criteria: KSC’s

• Finance• Profitability• Cash flow management• Accounts receivable• Accounts payable• Stock management• Cost optimizations: identifying margins and volumes

•• Process:

• Stock and inventory management• Process bottleneck identification• Number of activities in a process• Reduce process length• Number of steps in activity• Reduce process duration• Process quality assurance• Finding information

•• User:

• Bring your own device• Work everywhere• Support for regional process differences• Support for personal differences: setting, language• Relevant information• Easy to understand• Data in X clicks• Budget and targets• Planning

• Customer Relationship• Number of sales• Custumer loyalty• Find new clients• Acquire new customers• Retain existing customers• Select Customers• Customer self service• Grow business with customers• Design and develop new product• Market share: expand product offerings• Identifying product relationships• Identify new opportunities• Identify new R&D ideas• Promote new products• Relevant information• Recommend solutions• Approve quotes• Planning orders• Conversion rate prospect to client• Customer retention• Conversion rate quote to order• Time to delivery•

Success Criteria: KSC’s

Balanced Score-Cards (BSC’s)

BSC: Framework

BSC: Framework

BSC: Framework

BSC Composition

Department Areas

Finance Return On Investment

Cash Flow

Return on Capital Employed

Financial Results (Quarterly/Yearly)

Internal Business Processes Number of activities per function

Duplicate activities across functions

Process alignment (is the right process in the right department?)

Process bottlenecks

Process automation

Learning & Growth Is there the correct level of expertise for the job?

Employee turnover

Job satisfaction

Training/Learning opportunities

Customer Delivery performance to customer

Quality performance for customer

Customer satisfaction rate

Customer percentage of market

Customer retention rate