SMART KPIs
Characteristics of good KPIs
1.
2.
3.
4.
5.
6.
7.
8.
Simple
Practical
Specific
Measurable
Attainable
Relevant
Time-bounded
Dynamic
2
“Simple”
easily understandable and not sophisticated
“Practical”
easily workable and get to the point
“Specific”
‘Reduce expense’ is definitely not specific KPIs should
detail what expense specifically to be reduced, electric
or traveling expense or….etc.
“Measurable”
From previous example KPIs must also be specified the target of the reduction, such as
reduce electric bills down10%.
“Attainable”
KPIs must be attainable and also challenging. If target is set too low or too high staff
may be de-motivated.
“Relevant”
KPIs must be relevant to Organization targets so everyone is heading to the same target
same direction
“Time-Bounded”
Indicate when the target should be reached so staff know how much time they have.
“Dynamic”
change overtime and benchmarking
3
Classification of KPIs
1.
2.
3.
4.
Efficiency / Effectiveness
Common / Corporate / Functional
Positive / Negative
Balanced Scorecard
4.1 Lag indicator / Lead indicator
4.2 Financial Perspective / Customer Perspective/
Internal perspective / Learning Perspective /
Growth Perspective
5. Value Chain
6. Strategic /Non-Strategic
(Technical or Administrative)
4
The Generic Value Chain
FIRM INFRASTRUCTURE
Support
activities
M
HUMAN RESOURCE MANAGEMENT
A
TECHNOLOGY DEVELOPMENT
PROCUREMENT
R
G
INBOUND OPERATIONS OUTBOUND
LOGISTICS
LOGISTICS
MAKETING
AND SALES
SERVICE
I
N
PRIMARY ACTIVITIES
5
Productivity
• Efficiency
• QualityUniqueness
6
Strategic Positioning
Cost
Differentiation
7
Relationship
- KPI
- Target
- Benchmarking
8
Benchmarking
1.
2.
3.
4.
Competitive
Non Competitive
Internal
Generic (best practice)
9
Strategic Planning and KPIs
10
VISION
SWOT
MISSION
SWOT
Objective
Strategy
Action Plan
SWOT
11
SWOT
MISSION
SWOT
Objective
Strategy
Action Plan
SWOT
12
Cases in Vision and Mission
Case 1 : New Port News Shipbuilding’s
Mission Statement
“ We shall build good ships here – at the profit if we can
– at the loss if we must – but always good ships. ”
13
Case 2 : Maytag Corporation’s Mission
“ To improve the quality of home life by
designing, building, marketing, and servicing
the best appliances in the world.”
14
Case 3 :
Harley Davidson’s Vision and Mission
Vision
“Harley Davidson,Inc. is an action-oriented,international
company, a leader in its commitment to continuously improve
our mutually beneficial relationships with stakeholders
[ customers, suppliers,employees, shareholders, governments
and society ]
We believe the key to success is to balance stakeholders’
interests through the empowerment of all employees to focus
on value-added activities.”
15
Case 4 : วิสัยทัศน์ และพันธกิจของปตท.
VISION
The leading petroleum exploration and production
company with operational excellence, international
best practices, and world-class competitive strengths
MISSION
To conduct our core business by operating and
investing in petroleum exploration, development,
production, and strategic related business in
Thailand and overseas
16
Case 5
:Starbucks’ Mission Statement
“ Establish Starbucks as the premier purveyor of
the finest coffee in the world while maintaining
our uncompromising principle while we grow ”
Six Guiding Principles :
1. Provide a great work environment and treat each
other with respect and dignity
2. Embrace diversity as an essential component in
the way we do business.
17
Case 6 : Vermont Teddy Bear’s
Mission Statement
“The Vermont Teddy Bear provides our customers
with a tangible expression of their best feelings for their
family, friends, and associates. We facilitate,
communicate,and therefore participate in caring events
and special occasion that celebrate and enrich our
customers’ life experience.
Our products will represent unmatchable
craftsmanship balanced with optimal quality and value.
We will strive to wholesomely entertain our guests
while consistently exceeding our external and internal
customer service expectations.
18
Harley Davidson
“ More Than A Motorcycle ”
“ Fulfilling Dreams ”
Vermont Teddy Bear
“ A Lifetime Emotional Symbol of Love and Care”
Starbuck
“ Third Home ”
Carnival
“ Funship”
19
Maytag Company
1. Mission
- Developed in 1989 for the Maytag Company : “ To
provide our customers with products of unsurpassed
performance that last longer,need fever repairs , and
are produced at the lowest possible cost.”
- Updated in 1991 : “Our collective mission is world
class quality.” Expands Maytag’s belief in product
quality to all aspects of operations.
20
2. Objectives
-“To be profitability leader in industry for every
product line Maytag’s manufactures.”
Selected profitability rather than market share.
-“To be number one in total customer
satisfaction.”
-“To grow the North American appliance
business and become the third largest
appliance manufacturer (in unit sales) in
North America.”
21
-To increase profitable market share growth in
North American appliance and floor care
business, 6.5% return on sales, 10% return on
assets, 20% return on equity, beat competition
in satisfying customers, dealer, builder and
endorser, move into third place in totals units
shipped per year.
22
3. Strategies
- Global growth through acquisition and alliance
with Bosch Siemens.
- Differentiate brand names for competitive
advantage.
- Create synergy between companies, product
improvement, investment in plant and equipment.
23
4. Policies
- Cost reduction is secondary to high quality.
- Promotion from within.
- Slow, but sure R&D: Maytag slow to respond to
changes in market
24
Case in KPI
25
KPI -Objective
Target
objective
KPI
1
2
3
1. Increase
Efficiency
%
Cost per
unit
10 %
6%
4%
2.Enhance
ISO
9002
14,000
18,000
Hr/year/
employee
training
10 hrs
11hrs
12 hrs
Responsible
Quality
3.Improve
Personnel
26
KPI – Strategy
Objective : Increase Efficiency
Target
KPI
1
2
3
% waste
0%
0%
0%
2.Inventory
Management
Efficiency
Inventory
Turnover
6 days
5 days
5 days
3.Purchasing
% per unit
decrease
10 %
8%
6%
Strategy
1. Production
Responsible
Efficiency
27
KPI – Strategy
Objective : Enhance Quality
Target
KPI
1
2
3
1. Hiring
Consultant
Timing
Within
Jan
Within
Jan
Within
Jan
2.Training
Duration
Feb-Jun
Feb-Jun
Feb-Jun
3.Implementing
Duration
July-Dec
July-Dec
July-Dec
Strategy
Responsible
28
KPI – Action Plan
Strategy :Hiring Consultants
Action Plan
KPI
1q
1. Listing
Potential
Consultants
Timing
First
week
of Jan
2.Selecting
Timing
Within
second
week
of Jan
3.Employing
Timing
Within
Jan
2q
3q
4q
Responsible
29
KPI and Balanced Scorecard
30
Strategic Objective :
“Develop the competencies needed to support the sales process”
Strategic Outcome
Measure
Performance
Driver
(Lag indicator)
•Revenue per Employee
or
•Sales per Salesperson
(Lead indicator)
•Strategic Job Coverage
Ratio
Strategic Initiative
•Redesign the Staff
Development Process
1. Identify strategic jobs
2. Build competency
profiles
3. Assess current staff
4. Forecast requirements
5. Identify gap
6. Build staff development
plan
31
Strategic Measurements
Strategic Objectives
Financial
F1 – Improve Returns
F2 – Broaden Revenue Mix
F3 – Reduce Cost Structure
Customer
C1 – Increase Customer Satisfaction With Our
Products and People
C2 – Increase Satisfaction “After the Sale”
Internal
I1 – Understand Our Customers
I2 – Create Innovation Products
I3 – Cross-Sell Products
I4 – Shift Customers to Cost – Effective Channels
I5 – Minimize Operational Problems
I6 – Responsive Service
Learning
L1 – Develop Strategic Skills
L2 – Provide Strategic Information
L3 – Align Personal Goals
(Lag Indicators)
(Lead Indicators)
Return-on-Investment
Revenue Growth
Revenue Mix
Deposit Service Cost Change
Share of Segment
Depth of Relationship
Customer Retention
Satisfaction Survey
New Product Revenue
Cross-Sell Ratio
Channel Mix Change
Service Error Rate
Request Fulfillment Time
Product Development Cycle
Hours with Customers
Employee Satisfaction
Revenue per Employee
Strategic Job Coverage Ratio
Strategic Information Availability Ratio
Personal Goals Alignment (%)
32
Financial Perspective
Strategic Themes
Revenue Growth and Mix
Cost Reduction/Productivity
Improvement
Sales growth rate by segment
Percentage revenue from new
product, services, and customers
Revenue/Employee
Share of targeted customers and
accounts
Cross-selling
Percentage revemues from new
applications
Customer and product line
profitability
Customer and product line
profitability
Percentage unprofitable customers
Cost versus competitors’
Cost reduction rates
Indirect expenses
(percentage of sales)
Unit costs ( per unit of output,
per transaction)
Asset Utilization
Investment (percentage
of sales)
R&D (percentage of
sales)
Working capital ratios
(cash-to-cash cycle)
ROCE by key asset
categories
Asset utilization rates
Payback
Throughput
33
The Customer Perspective - Core Measures
Market Share
Customer Acquisition
Customer Profitability
Customer Retention
Customer Satisfaction
Reflects the proportion of business in a given market ( in terms of number of
customers, dollars spent, or unit volume sold) that a business unit sells.
Customer Acquisition Measures, in absolute or relative terms, the rate at which a business unit attracts or
wins new customers or business.
Customer Retention Tracks, in absolute or relative terms, the rate at which a business unit retains or
maintains ongoing relationships with its customers.
Customer Satisfaction Assesses the satisfaction level of customers along specific performance criteria within
the value proposition.
Customer Profitability Measures the net profit of a customer, or a segment, after allowing for the unique
expenses required to support that customer.
Market Share
34
The Customer Value Proposition
Generic Model
Value
=
Product/Service Attributes
Functionality
Quality
+
Price
Image
+
Relationship
Time
Example : Retail Banking
Value Proposition
Product / Service Attributes
Breadth of
Offering
Error
Free
Seamless
Services
Image
Knowledgeable
Relationship
Convenient
Personal
Advisor
Responsive
Strategic Measures
* Service
Failure
Index
* Request
Fulfillment
Time
35
The Customer Value Proposition (Tier I) - Rockwater
Product / Service Attributes
Functionality
* Safety
* Engineering
Service
Quality
Price
* Minimum
Revision of
Submitted
Procedures
* Quality and
Awareness of
Performance
* Standard of
Equipment
Provided
* Quality of
Personnel
* Production
Quality
* Hours
Worked
* Value for
Money
Timeliness
* Meeting Schedule
* Timely Submission
of Procedures
* Innovativeness
to Reduce Cost
Image
Relationship
Professional
Management
Relationship
* Honesty and Openness
of Contractor
* Flexibility
* Contractual
Responsiveness
* Team Rapport/
Spirit
36
The Internal - Business - Process Perspective The Generic Value Chain Model
Innovation Process
Customer
Need
Identified
Identified
the
Market
Create the
Product/Service
Offering
Operations Process
Build the Deliver the
Products/ Products/
Services Services
Postsale
Service
Process
Service
the
Customer
Customer
Need
Satisfied
The Internal - Business - Process Perspective The Innovation Process
Innovation Process
Customer
Need
Identified
Identified
the
Market
Create the
Product/Service
Offering
Operations Process
Build the Deliver the
Products/ Products/
Services Services
Postsale Service Process
Service
the
Customer
Customer
Need
Satisfied
37
The Learning and Growth Measurement Framework
Core Measurements
Results
Employee Productivity
Employee Retention
Employee Satisfaction
Enablers
Staff Competencies
Technology
Infrastructure
Climate for Action
38