Mar

31

Questions and Answers – March 31, 2007

March 31, 2007 | Leave a Comment

I recently was apart of a webcast over at bettermanagement.com. Below are some of the questions and answers from the webcast. If you have any more questions, feel free to ask them in the comments below.

Are KRIs and Key Goal Indicators (KGIs) the same
thing?

Most likely they are. Indeed some people talk about
strategic KPIs and no doubt, we are all on the same
wavelength. I prefer result indicators because it makes it very clear to
people that they are the result of many activities, but it does not matter what
you call them as long as you do not call them KPIs.

You indicate in you book and in this presentation, that the CEO has to be
the one driving the KPI buy in and the eventual follow-up. Is there a reason
why the person driving the KPI’s can’t be another
member of the senior executive team?

A CEO, if they are not fully behind the KPI project, will
undermine it by; taking resources from the KPI team,
or diluting the concentration on the KPI implementation through other
diversions. A good way to get the CEO on board is to sell the KPIs using the
CEOís emotional drivers. See 39-44.

What are CSFs and BSC?

CSF and BSC are short for Critical Success Factors and
Balanced Scorecards.

Would you agree that KPIs are tactical in nature and performance indicators
would be strategic in nature?

If by tactical, you mean able to be pinned down by and
individual or team, monitored daily, etc, then yes I do agree with you. Performance
indicators and result indicators can be monitored
daily, and therefore one could include these as tactical such as yesterday’s
sales, and weekly sales to key customers.

Doesn’t only measuring key customers ignore the damage a
dissatisfied customer can do to your reputation by telling others about the bad
experience?

To better understand my answer, I
suggest you listen to my webcast on bettermanagement.com. If you treat all
customers as equal, you certainly miss treating those important customers in a
way in which they expect to be treated. Harry Mills in a brilliant book, called
“Rain Maker”, talks about DROP, breaking your clients down into diamonds ( the
top 5-15 customers), rubies, opals, and pearls (those you can live without).

Do you believe that certain corporate cultures are more
metric driven than others? How do you change an organization that doesn’t care about metrics?

The key is the chief executive. If they are not interested,
then there is little hope in success. It is my belief that for many chief
executives, it is just a matter of selling KPIs to them by their emotional
drivers to switch them on. If you have done this properly, most CEOs will be motivated by the project. To fully
understand this, listen to my webcast on bettermanagement.com.

Can you talk about truly predictive KPIs? How can I make my data work to
move my organization forward?

Look more at the measures in the future. Stop measuring by
looking in the past. KPIs that are measured into the
future truly change peoples behaviour, examples in my webcast on
bettermanagement.com include: the CEO monitoring weekly the next planned
interfaces, next promotions, next social gatherings with key diamond customers
(top 5 or 15). For a full answer, listen to my webcast on bettermanagement.com

Any pointers to offer to government organizations who
are inherently bureaucratic and have many measures – most if not all are not
KPIs per your definition.

According to my 10/80/10 rule, most measures will not be
KPIs they would be performance indicators. The issue is we need to revisit what
we have done in the past with performance indicators. In the public sector,
management have been aware of the importance of measures, but unfortunately,
have followed the wrong pathway. For my full answer, listen to the webcast on
bettermanagement.com

Do you agree on using the 24/7 KPI’s as alarm
triggers?

It is certainly a call to action, so in that sense I agree
with you.

Can you give some specific KPI’s in each business area for e.g. Finance(GL, AR, AP, FA, Collections), Operations, Sales, HR,
Call center application etc

There will be few KPIs in head office operations. In other
words, it is sad to say that we are not critical to day-to-day operations,
other than of course, our systems being in operation. If we only have 10 KPIs
in an organization, the remainder are RIs and PIs, which the accounting team will
have a number of. In my Paretoís 80/20 book, there is
a scorecard for the finance team.

What are the top three risk factors to a brand new KPI set come to failure?

Firstly, not having the senior management team switched on
in the first place, especially the CEO. Secondly, Inadequate work done on the
CSFs. Thirdly an organization that does not finish what it starts, an epidemic
that is sweeping commerce today. In fact, a CSF for many organizations, “we
finish what we start”. Imagine if that was blazing across the walls of ever
Project Management team, department, and group.

David, have you ever worked with a law firm on developing KPI’s?

I am working with a law firm who are throwing out their
annual planning process. After that, it will be appropriate to look at
improving the use of performance measures. E.g., instead of looking at
productivity in the week gone by, we should be asking people for their forecast
chargeable hours in the upcoming week/month, in order to
better distribute work.

Do you feel that the role of developing a balanced scorecard and relevant
KPI / PI should rest more with the IS group or business group?

It rests with the whole organization. Everyone has to be
involved. It is a major PR exercise. Please read about the foundations stones
(page 20-25), and step five (Page 61-65) in my book.

What do you do with the Executive Board when they measure the correct KPIs
- and therefore have a good objective basis for decision-making – yet
consistently make intuitive judgements with no logical platform to support
them?

The Executive Board has to make intuitive decisions all the
time, but if the KPIs are not being used in the
decision process, then the KPIs may need to be rethought. For my full answer, listen
to my webcast “Implementing Winning KPIs” on bettermanagement.com

What is the correct time to implement, Implementing Winning KPIs?

The best time is when you have a 16-week window. I explain more
on why 16 weeks is appropriate in my book and how to go about this (page
26-36).

Because accountants have limited technical interests and because of
technical jealousies I suggest economists be used to develop and use KPIs. They
have the advantage of training in forecasting and some background often in
accounting. They are not used but represent a great potential. They are also
likely to be objective.

I believe the finance team, HR, IT, economists, etc, all
could participate in the project team, and be the team to monitor this on an
ongoing basis. It all depends on the skill level of the individuals. See Step two (page 44-49) for selecting the KPI team in my book.

Are there large companies you have converted successfully to your method
from an already implemented Harvard BSC?

My work has been out there for over 5 years. I know
organizations are using it from the calls I get. I was asked
once to fly to Melbourne to visit a company that was three-quarters of the way in
implementing my concepts. I no longer do project consultancy, as it is not my
strength. My focus is to sell the vision and offer a practical way forward in
which in-house teams can be empowered to operate. My role now is as a mentor
and facilitator and I seek to work with other facilitators who will become
certified and able to access all my intellectual property. See
www.davidparmenter.com

Should the use of KPIs be an exercise across all levels of the organization
and, if so, should the entire organization be focused ONLY on the KPIs of the total org,
or should various organization levels be focused on their OWN respective KPIs,
which in turn feed into those of the full organization?

In an organization that is in one main sector, the KPIs will
be for the whole organization. E.g., the late plane KPI is one a number of
teams will be monitoring. However, it is unlikely to be on the scorecard for
Finance, HR and IT because they will not be responsible for late planes.


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