1. Using Key Performance
Indicators to Drive Results!
October 28, 2014
Bill Pellino – Smith & Gesteland
Heather Schommer – Profit Enhancement Solutions

2. About the Presenters
• Bill Pellino
– Bill is a partner at Smith & Gesteland and
leads the firm’s manufacturing/ distribution
business segment. In addition, Bill is a
business valuation analyst and assists
clients with valuation and
mergers/acquisition needs.
– 80/20 Practice Group
– As a leader in our 80/20 practice group
Bill has worked closely with clients to help
them improve their operations and
profitability.
– Business Valuation
Bill is a Certified Valuation Analyst (CVA)
issued by the National Association of
Certified Valuation Analysts and also
holds the ABV (Accredited in Business
Valuation) certification.

3. About the Presenters
• Heather Schommer
– Heather is a Strategic Advisor in the Profit
Enhancement Solutions group and is a key
player in analyzing products, customers,
services and divisions to guide companies in
achieving profitable market share growth.
Heather works closely with members of the
management team to employ various tools
from the 80/20 toolbox. Heather is a trusted
advisor, and companies seek her input in
monthly operations meetings to identify
processes and improvements used to drive
80/20 through organizations.
– Prior to Smith & Gesteland, Heather spent
nearly seven years in the banking industry
working closely with small to medium sized
businesses across a variety of industries, and
this experience gave her a deep
understanding of small business needs.
Heather is an expert in working with business
owners to understand their organization’s
financial and strategic goals.
3

4. What is a Key Performance Indicator?
A key performance indicator (KPI) is a type of
performance measurement. KPIs evaluate the
success of an organization or of a particular
activity in which it engages. - Wikipedia

5. Poll # 1

6. Knowing the Score
Why is this important?
• Allows management to maintain
a better pulse on the
organization.
• Promotes data driven decisions.
• Keeps the business focused on
its goals.
• Gives employees a metric to
rally around and drives
appropriate behavior.
If you don’t know where you’re
going, any road will lead you
there.

7. Where to start?
• What are the company goals?
• What is it that you want to improve?
• Measure the critical few. Don’t measure everything.
3 Year Strategic Plan
Annual Company Goals
Annual Department/
Individual Goals
KPIs

8. Poll # 2

9. What our clients say
Biggest challenges in getting started…
“Getting the entire team on board with KPIs and their
importance.”
“The process of developing KPIs and making sure
they align with the company’s vision, mission and
strategies.”
“Determining what KPIs are best for each
department.”
“It takes time to develop a culture that embraces KPIs
and what they represent.”

10. Key Performance Indicators
(KPIs)
• Helps an organization define and reach its goals.
• Can be used in all departments.
• Measure the “80s” vs “20s”.
Examples:
 On Time Delivery
 Quality (% rework, amount of scrap, etc.)
 Production rates (# of widgets per hour)
 Revenue per day
 Customer satisfaction scores

11. Revenue per Employee
• If you don’t track this, START!
• When this benchmark is trending up, generally the
operating income is as well.
Revenue / Employee
Operating Income

12. KPI Examples
Operations
– Process or machine downtime
– Scrap rate
– Rework level
Finance
– Margins
– Working capital
– Percent A/R dollars past due

13. KPI Examples
Customers
– Customer retention rates
– Customer complaints
– Customer satisfaction scores
Marketing
– Conversion rates
– Cost per lead
– Search engine rankings

14. Visual Management
• Simplification is key.
• Post metrics in high traffic areas.
• Use colors.
• Anyone should be able to quickly know whether
metrics are being hit or missed.

15. Poll # 3

16. Bowling Chart
Improvement
Measure
Jumping
# Off Point* January February March April May June July August September October November December YTD Annual
Target
1 On-time Expectation 88% 89% 90% 91% 92% 93% 94% 94% 96% 97% 99% 100% 100%
delivery 85% Actual 87% 88% 91% 91% 91% 92% 90%
2 # of 12 per Expectation 0 0 0 0 0 0 0 0 0 0 0 0 0
Recordables year Actual 0 0 1 0 0 1 2
3 Jobs with 120 per Expectation 10 9 9 8 8 7 7 6 6 5 5 4 84
Hardware Errors year Actual 8 8 7 12 7 9 51
4 Field Install 60 per Expectation 5 5 4 4 3 3 2 2 1 1 0 0 30
Errors year Actual 6 7 8 7 2 3 33
5 Scrap Costs $360K Expectation $30K $30K $30K $25K $25K $20K $20K $15K $15K $15K $10K $10K $245K
per year Actual 28,666 24,001 36,875 31,356 22,067 45,000 187,965
6 Expectation
Actual
7 Expectation
Actual
Hit
Miss
*Starting Point (where you are currently)

17. Poll # 4

18. We’re Measuring. Now What?
• Communicate, communicate, communicate!
• Review regularly
o At least monthly
o Encourage employees to take ownership
o Communicate results and actions to improve/maintain
performance
• Establish incentive / bonus programs to drive behavior
o Don’t underestimate employee engagement
o Benchmarks allow for clear targets to be set

19. What our clients say
“Morale has improved. Our employees feel like they are
a part of something.”
“KPIs have driven accountability among the
employees.”
“The biggest benefit is pulling so much data down to just
a few items.”
“Once we started measuring, we were able to easily
identify the poor performers and top grade accordingly.”

20. $10M Light Manufacturer
BEFORE
• Steep growth trajectory.
• Production was strained trying to keep up with
demand.
• General feeling of chaos in the factory.
Management team was constantly putting out fires.
• Employees were disengaged, morale was poor and
turnover was becoming an issue.
• Management was frustrated. Felt there was
nothing that could be done.

21. $10M Light Manufacturer
AFTER
• Visual KPI boards are located at each production
line.
• Employees are engaged and understand the goals.
• Morale and turnover has improved.
• Management is confident in the factory’s ability to
handle future growth.

22. Summary
• Start today!
• Aim to find the critical few metrics that will
drive the greatest results.
• Use Visual Management tools.
• Engage employees in your goals.
• Take action based on what the data is
telling you.

23. Questions?
Brief survey on exit

24. Contact Information
Bill Pellino, CPA, CVA – Partner
Smith & Gesteland
Bill.pellino@sgcpa.com
608-828-3111
Heather Schommer, Strategic Advisor
Profit Enhancement Solutions
Heather.Schommer@8020-solutions.com
608-828-3149
www.sgcpa.com
www.8020-solutions.com