Key Performance Indicators

Your Presenter David Guest
 Global Training Team
 Started with Action 2001
 Most Improved 2003
 Action Man Australasia 2006
 Best Client Results 2007
 Finalist Asia Pacific 2008
 Coach Of The Year
 Best Client Results
 Seminar Coach
 Marketing Coach

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Agenda for the session
 What are Key Performance Indicators
 Why are KPIs important
 KPIs: A Balanced Scorecard
 How to implement KPIs
 Sample KPI Measurements and
Reports

What are KPI ’s?
“Quantifiable measurements that reflect
critical success factors of a business.”
• Key Drivers
• A handful of numbers “at a glance
view”
finger on the pulse
hot spots
act quickly!

Why are KPIs important?
Owners…
 are overwhelmed and distracted with
day to day activities and tasks
 concentrate on the tactical decisions
and neglect the strategic ones
 must make important decisions, quickly,
with greater consequences, and often
with limited information on hand

The Dashboard
Testing &
Measuring
Debtors
Days
Resources
Overdraft
Turnover

KPIs must be Strategic: How do
we differentiate from the
competition
 Define the market to be served
 Define the customer
 Define the critical internal processes
needed to capture and satisfy
customers
 What individual
capabilities are
and organizational
required

KPIs: Four Strategic Perspectives
 Customer
 Marketing and Sales
 Internal Business Processes
 Operations
 Suppliers
 Financial
 Resources
 Vision and Leadership
 Knowledge and Skills
 Growth/Innovation

Input versus Output:Balanced
Scorecard
FINANCIAL
Net Profit, Turnover, etc.
CUSTOMERS
BUSINESS
SYSTEMS
Client Survey,
Customers Service,
Client Retention %,
Percentage of referring
Clients etc.
Costs; Timeliness; Rework
%; Returns
RESOURCES
Plant and Equipment,
Working Capital;
Employee Satisfaction;
Knowledge and Skills

KPIs should look like a Balanced Scorecard

KPIs should focus on a single strategy
 Linked to the strategy
 Consistent
 Mutually reinforcing

Some Generic KPI Measures
Financial
Customer
Internal Business
Process
Learning and Growth
Return on Capital;
Cash Flow; Revenue;
Profit
Customer
Satisfaction;
Customer Retention;
market share
Quality; timeliness;
costs; returns; rework
Employee Retention;
Employee
Satisfaction;

The Cycle Of Business

Cause and Effect: The Balanced
Scorecard

KPIs: Four Types of
Measures
 Short and Long Term
 Internal (business processes) and
External (shareholders,customers)
 Leading and Lagging
 Objective (financial) and Subjective
(non-financial)

How should KPIs be used?
 Communication
 Informing
 Diagnostic
 Learning
 NOT controlling

Diagnostic versus Strategic
 Diagnostic measurements: monitor
whether something is in control.
 Strategic measurements: define a
strategy for competitive excellence and
future success
A Balanced Scorecard is a
strategic measurement system.

Sample Balanced Scorecard
Perspective
Goals
Drivers (How)
Measurements
(KPI’s)
Customer
Improve customer
satisfaction
Decrease lead time
Average Lead Time
Deliver on time
% deliveries on time
Reduce complaints
Number of
Complaints
Average Cycle Time
Internal Business
Continuously
improve business
processes
Decrease Cycle
Time
Innovation and
Learning
Continuously
Improve Financial
Performance
Deliver new
Products and
Services
Increase Productivity
Decrease Costs
Output per employee
Average Unit costs
Increase Sales
growth
Growth Rate in
Sales
Increase Market
Share
Financial
Increase Quality
# of Defects; %
Rework
Market Share
Increase ROI
Increase sales of
new products and
services
Reduce development
time
ROI
% of sales from new
products and
services
Time from design to
implementation

KPIs: The Big Picture
Sales
Operations
Production
Suppliers
Finance
and Admin
Human
Resources
Marketing
Innovation
and
Learning
Attract and retain clients
Stakeholders
Clients
Build and maintain client relationships and loyalty
Provide services that satisfy client ’s needs and lifestyle objectives
Provision of secure employment
Team
Provision of enjoyable happy work environment, that ’s aligned with corporate values
Provide career and professional development opportunities
Provide succession and exit plan for existing shareholders
Provide capital growth in asset and return on investment through dividend streams
Shareholders

How to implement KPIs
Step 1: Define Strategic Specifics
 Define Your Strategy
 Vision, Mission, Culture and Values
reflect strategy
 Set Goals
 Most important business objectives (e.g.
improve customer satisfaction)
 What “drivers” are critical to success (e.g.
decrease lead time)
 What impacts “driver” results (leadership,
training, systems)

How to implement KPIs
Step 1: Define Strategic Specifics
(Cont)
 Clarify the strategy
 Align Team members on strategic
issues
 Identify Barriers

How to implement KPIs
Step 2: Audit Existing Measures
 Assess strategic fit
 Identify what data is available
 Review Measurement Processes
 Accuracy
 Timeliness
 Identify Gaps

How to implement KPIs
Step 3: Develop New Measures
 Bridge the gaps, examples of strategic
data often missing:
 Employee Satisfaction Survey
 Customer Satisfaction Survey
 Rework %
 On-time Delivery %

How to implement KPIs
Step 3: Develop New Measures
 Measures must reflect performance and
progress of the business
 Must be quantifiable
 Must be compared to another number
 last year
 budget/goal
 trend
 Can be acted upon

How to implement KPIs
Step 3: Develop New Measures
 KPI title: Employee Turnover
 Defined: number of employees who resign or
are terminated for any reason divided by the
number of employees at the beginning of the
year. Reductions in force excluded
 Measured: Payroll termination report by
reason
 Goal: Reduce turnover by 10% (from 16.6% to
15%); FY 2012 objective is to achieve an
employee turnover 15 %.

How to implement KPIs
Step 4: Analyze and Report
 Easy to Read
 One Page Summary
 Graphs

KPI Template
Curr Mth
Sales 1
Sales 2
Sales 3
Total Sales
Cost 1
Cost 2
Cost 3
Total COGS
Gros s Profit
Gros s Margin
Sales & Mktg.
Admnin.
Other 1
Other 2
Facilities
Total cos ts
EBITDA(Op.Inc)
Op. Margin
Interes t/Dep/Amort
Net Profit
FTE 1
FTE 2
FTE Total
Inventory
Inventory Turover
Back Orders
Accts Rec
Av Coll. Days
Quality Meas.1
Quality Meas.2
Production Meas. 1
Production Meas.2
New Custom ers
Total Custom ers
Forecas t this month
Work in Progress
Project 1
Projects Status
Budget and Delivery
Sample KPI Report
Template
Sam e M LY Com paris on % Sales
F 30 out
Mgr.
Budget Mth YTD Actual %Sale s
F 60 out
Project 2
Mgr.
Project 3
Mgr.
Project 4
Com parison
F 120 out
F 90 out
YTD LY Act % Sale s
F 150 out
Mgr.
Project 5
Mgr.
Budge t YTD

Sample KPI Trend Report

Sample Trend Report

How to implement KPIs
Step 5: Continuous Improvement
 Strategy based on set priorities
 SMART Goals
 Assign Accountability
 Track Improvement
 Set New Goals

Workshop
 Review your company ’ s Vision and
Mission
 Write down the areas in your business
that require KPI ’ s

KPIs: The Big Picture
Sales
Operations
Production
Suppliers
Finance
and Admin
Human
Resources
Marketing
Innovation
and
Learning
Attract and retain clients
Stakeholders
Clients
Build and maintain client relationships and loyalty
Provide services that satisfy client ’s needs and lifestyle objectives
Provision of secure employment
Team
Provision of enjoyable happy work environment, that ’s aligned with corporate values
Provide career and professional development opportunities
Provide succession and exit plan for existing shareholders
Provide capital growth in asset and return on investment through dividend streams
Shareholders

Sample Balanced Scorecard
Perspective
Customer
Internal Business
Financial
Innovation and
Learning

Sample Balanced Scorecard
Perspective
Goals
Customer
Improve customer
satisfaction
Internal Business
Continuously
improve business
processes
Financial
Continuously
Improve Financial
Performance
Innovation and
Learning
Deliver new
Products and
Services

Sample Balanced Scorecard
Perspective
Goals
Drivers (How)
Customer
Improve customer
satisfaction
Decrease lead time
Internal Business
Financial
Continuously
improve business
processes
Continuously
Improve Financial
Performance
Deliver on time
Reduce complaints
Decrease Cycle
Time
Increase Quality
Increase Productivity
Decrease Costs
Increase Sales
growth
Increase Market
Share
Innovation and
Learning
Deliver new
Products and
Services
Increase ROI
Increase sales of
new products and
services
Reduce development
time

Sample Balanced Scorecard
Perspective
Goals
Drivers (How)
Measurements
(KPI’s)
Customer
Improve customer
satisfaction
Decrease lead time
Average Lead Time
Deliver on time
% deliveries on time
Reduce complaints
Number of
Complaints
Average Cycle Time
Internal Business
Continuously
improve business
processes
Decrease Cycle
Time
Innovation and
Learning
Continuously
Improve Financial
Performance
Deliver new
Products and
Services
Increase Productivity
Decrease Costs
Output per employee
Average Unit costs
Increase Sales
growth
Growth Rate in
Sales
Increase Market
Share
Financial
Increase Quality
# of Defects; %
Rework
Market Share
Increase ROI
Increase sales of
new products and
services
Reduce development
time
ROI
% of sales from new
products and
services
Time from design to
implementation

Sample KPI Measures:
Marketing and Sales
 Market Share
 Profit Per Customer
 Leads by Source
 Sales by Product Line
 Number of Prospects  Number of
Transactions/Customer
 Conversion Ratio
 Customer Satisfaction
 Average Dollar Sale

Sample KPI Measures:
Marketing and Sales
 Number of new
customers
 Brand Awareness
 Value of Brand
 Sales Mix
 Customer
Profitability
 Number of Orders
 Number of
Customers
 Customer Retention
 Referrals
 Lifetime Value of a
customer
 Reasons for losses

Sample KPI Measure:
Financial
 Dividends
 Profit Margin
 Current Ratio
 Gross margin
 Quick Ratio
 Revenue/Expense Ratio
 Credit rating
 Variable vs non-variable
expenses
 Days Sales
Outstanding
 Return on Investment
 Revenue

Sample KPI Measures:
Financial
 Cash in Bank
 Inventory
 Retained Earnings
 Aged Accounts
Receivable
 Cost of Goods Sold
 Inventory Turns/Year
 Cash Flow
 Aged Accounts Payable
 Sales Per Square Foot
 EBIT
 Return on Capital
 Capital Expenditures
 Bank Overdraft
 Debt to Equity Ratio

Sample KPI Measures:
Financial
 R&D Expenditures
 Fixed Assets
 Training
Expenditures
 Current Liabilities
 Marketing
Expenditures
 Depreciation
 Interest Expense
 Bad Debts
 Discounts
Given/Taken

Sample KPI Measures:
Operations/Production
 Quality Data
 Capacity Utilization
 Timeliness
 Safety
 Response Time
 Re-work (#,%)
 # Workers Comp
Claims
 Days lost
 Cost per unit
 Environmental
 Number of
Employees
 Back orders
 Costs

Sample KPI Measures:
Operations/Production

Post Sales Service
 Warranty Claims (#,%)
 Repairs
 Returns
 Defects

Number of Complaints

Value of Customer Complaints

# orders failed before delivery

# Orders not delivered on
time
 Work in Process
 Labour Hours
 Overtime
 Cycle Time
 Downtime
 Maintenance Costs

Sample KPI Measures:
People
 Employee Turnover
 Drivers of Performance
 Employee
Satisfaction
 Drivers of Capabilities
 Learning
 Output per employee
 Skills mix
 Sales per employee
 Productivity per
employee
 Core Values
 Quality of Outputs
 Customer focus
 Innovation

Sample KPI Measures:
People
 Number of
Employees
 # of managers
 Hours or $ of
training per
employee
 Manager/employee
ratio
 Ratio direct to
overhead employees
 Absenteeism
 Cost per new hire
 # new employees
 % employees fully
trained

Sample KPI Measures:
Innovation
 Revenue from new products
 Revenue from new market segments
 Revenue from new geography
 Number of new customers
 Time to market for new products/service
 R&D expense

Sample KPI Measures:
Suppliers
Satisfaction with Suppliers
Supplier Satisfaction
 Responsiveness
 Costs compared with
competition
 Overall Satisfaction:
Opportunity for profits
while providing quality
 On-time Delivery
 Responsiveness
 Overall
Satisfaction/Value
 Payment
 Defects (#,%)
 Credit terms
 Number of Suppliers

The Top Ten Drivers of
Business Performance*
 Low levels of late
deliveries to customers
 Higher Capital
Expenditures
 Higher employee
training expenditure
 Higher R&D Expenditure
 % of workforce trained
 Higher Stock Turns
 Low absenteeism rate
 Higher Cash Balances
 Higher Marketing
Expenditures
 Lower Debt Levels (more
short term than long
term)
* Source: Cranfield School of Management, UK

Four Things Every Owner
Should Know
 The profitability of the business
depends on how well the employees
consistently perform critical activities.
 Employees perform best when they
understand how their performance
affects the bottom line, and how their
performance is measured .

Four Things Every Owner
Should Know
 Small changes in critical areas can
have a great impact on the bottom line.
 What gets measured gets done, and
what gets rewarded gets done again.

The Dashboard
Testing &
Measuring
Debtors
Days
Resources
Overdraft
Turnover

Now It ’s Time To