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More About This Title Key Performance Indicators (KPI) Third Edition: Developing, Implementing, and Using Winning KPIs
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Streamline KPIs to craft a simpler, more effective system of performance measurement
Key Performance Indicators provides an in-depth look at how KPIs can be most effectively used to assess and drive organizational performance. Now in its third edition, this bestselling guide provides a model for simplifying KPIs and avoiding the pitfalls ready to trap the unprepared organization. New information includes guidance toward defining critical success factors, project leader essentials, new tools including worksheets and questionnaires, and real-world case studies that illustrate the practical application of the strategies presented. The book includes a variety of templates, checklists, and performance measures to help streamline processes, and is fully supported by the author’s website to provide even more in-depth information.
Key Performance Indicators are a set of measures that focus on the factors most critical to an organization’s success. Most companies have too many, rendering the strategy ineffective due to overwhelming complexity. Key Performance Indicators guides readers toward simplification, paring down to the most fundamental issues to better define and measure progress toward goals. Readers will learn to:
- separate out performance measures between those that can be tied to a team and result in a follow-up phone call (performance measures) and those that are a summation of a number of teams working together (result indicators)
- look for and eradicate those measures that have a damaging unintended consequence, a major darkside
- Sell a KPI project to the Board, the CEO, and the senior management team using best practice leading change techniques
- Develop and use KPIs effectively with a simple five stage model
- Ascertain essential performance measures, and develop a reporting strategy
- Learn the things that a KPI project leader needs to know
English
DAVID PARMENTER is an international presenter known for his thought-provoking and lively sessions, which have led to substantial change in many organizations. He is a leading expert in the development of winning KPIs, replacing the annual planning process with quarterly rolling planning and lean finance team practices. Parmenter's work on KPIs is recognized internationally as a breakthrough in understanding how to make performance measures work. He has delivered workshops to thousands of attendees in 30 countries around the world. Parmenter has worked for Ernst & Young, BP Oil Ltd, Arthur Andersen, and PricewaterhouseCoopers, and is a fellow of the Institute of Chartered Accountants in England and Wales. He is a regular writer for professional and business journals. He is also the author of Winning CFOs: Implementing and Applying Better Practices, Key Performance Indicators for Government and Non Profit Agencies: Implementing Winning KPIs, and The Leading-Edge Manager's Guide to Success(all from Wiley). He can be contacted via parmenter@waymark.co.nz. His website, www.davidparmenter.com, contains many white papers, articles, and freeware that will be useful to readers.
The reader can access, free of charge, a PDF of the suggested worksheets, checklists, and templates from www.kpi.davidparmenter.com/thirdedition
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About the Author xiii
Preface xv
Acknowledgments xxxi
PART I: Setting the Scene 1
CHAPTER 1 The Great KPI Misunderstanding 3
Key Result Indicators 4
Result Indicators 5
Performance Indicators 7
Key Performance Indicators 7
Seven Characteristics of KPIs 11
Difference between KRIs and KPIs and RIs and PIs 14
Lead and Lag Confusion 15
Number of Measures Required—The 10/80/10 Rule 19
Importance of Timely Measurement 21
Where Are You in Your Journey with Performance Measures? 22
Notes 23
CHAPTER 2 The Myths of Performance Measurement 25
Myth #1: Most Measures Lead to Better Performance 26
Myth #2: All Measures Can Work Successfully in Any Organization, At Any Time 26
Myth #3: All Performance Measures Are KPIs 27
Myth #4: By Tying KPIs to Remuneration You Will Increase Performance 28
Myth #5: We Can Set Relevant Year-End Targets 28
Myth #6: Measuring Performance Is Relatively Simple and the Appropriate Measures Are Obvious 30
Myth #7: KPIs Are Financial and Nonfinancial Indicators 31
Myth #8: You Can Delegate a Performance Management Project to a Consulting Firm 31
The Myths Around the Balanced Scorecard 32
Notes 42
CHAPTER 3 Unintended Consequence: The Dark Side of Measures 43
Example: City Train Service 44
Example: Accident and Emergency Department 44
Examples from Dean Spitzer’s Book 45
Performance-Related Pay 46
Dysfunctional Performance Measures Checklist 47
Notes 48
CHAPTER 4 Revitalizing Performance 49
Five Foundation Stones 51
The Many Facets of Performance Management 73
Notes 85
CHAPTER 5 Strategy and Its Relevance to Performance Measures 87
Articulate Your Organization’s Mission, Vision, Values, and Lean Management Principles 89
Create a Strategy That Is Understood by Staff 90
Ensure That Your Strategy Is Balanced 92
Monitor Implementation of Your Strategy 94
Creating the Future 96
Notes 97
PART II: Winning KPI Methodology 99
CHAPTER 6 Background to the Winning KPI Methodology and Its Migration 101
The Original 12-Step Process 101
The New Six-Stage Process 103
Winning KPI Methodology and Its Migration 103
An Overview of the Six Stages 105
CHAPTER 7 Foundation Stones for Implementing Key Performance Indicators 107
“Partnership with the Staff, Unions, and Third Parties” Foundation Stone 109
“Transfer of Power to the Front Line” Foundation Stone 110
“Measure and Report Only What Matters” Foundation Stone 111
“Source KPIs from the Critical Success Factors” Foundation Stone 113
“Abandon Processes That Do Not Deliver” Foundation Stone 114
“Appointment of a Home-Grown Chief Measurement Officer” Foundation Stone 116
“Organization-Wide Understanding of the Winning KPIs Definition” Foundation Stone 118
Notes 119
CHAPTER 8 Getting the CEO and Senior Management Committed to the Change (Stage 1) 121
Obtaining Senior Management Team Commitment 122
Agree on Timing, Resources, and Approach 126
Benefits of This Stage 131
Templates and Checklists 132
Notes 132
CHAPTER 9 Up-Skill In-House Resources to Manage the KPI Project (Stage 2) 133
Establish a Winning KPI Team Working Full Time on the Project 133
Establish a Just-Do-It Culture and Process 139
Benefits of This Stage 144
Templates and Checklists 144
Notes 144
CHAPTER 10 Leading and Selling the Change (Stage 3) 145
Leading Change by John Kotter 146
Learn to Sell by Appreciating the Emotional Drivers of the Buyer 147
Sales Pitches You Will Need to Make to Get the Go-Ahead 149
Selling the Winning KPIs to the Organization’s Staff 156
Benefits of This Stage 160
Templates and Checklists 160
Notes 160
CHAPTER 11 Finding Your Organization’s Operational Critical Success Factors (Stage 4) 161
Operational Critical Success Factors versus External Outcomes 162
Operational Critical Success Factors—The Missing Link 163
Rules For Ascertaining the Operational Critical Success Factors 165
Characteristics of Critical Success Factors 170
Four Tasks for Identifying Operational Critical Success Factors 170
Alternative Methodologies 185
Benefits of This Stage 187
Templates and Checklists 188
Notes 188
CHAPTER 12 Determining Measures That Will Work in Your Organization (Stage 5) 189
How to Derive Measures: An Overview 190
Ascertain the Team Performance Measures 191
Recording Performance Measures in a Database 199
Sorting the Wheat from the Chaff 202
Find the KRIs That Need to Be Reported to the Board 203
Find the Winning KPIs 205
Measures Gallery 206
Benefits of This Stage 208
Templates and Checklists 208
Notes 208
CHAPTER 13 Get the Measures to Drive Performance (Stage 6) 209
Develop the Reporting Framework at All Levels 209
Facilitate the Use of Winning KPIs 213
Refine KPIs to Maintain Their Relevance 217
Benefits of This Stage 218
Templates and Checklists 219
Notes 219
CHAPTER 14 Reporting Performance Measures 221
The Work of Stephen Few in Data Visualization 222
Reporting the KPIs to Management and Staff 223
Reporting Performance Measures to Management 228
Reporting Performance Measures to Staff 231
Reporting Performance Measures to the Board 231
Reporting Team Performance Measures 241
How the Reporting of Performance Measures Fits Together 243
Designing Reports Around Current Technology 244
Notes 245
PART III: Chief Measurement Officer’s Toolkit 247
CHAPTER 15 Resources for the Chief Measurement Officer 249
The CMO Needs a Cluster of Mentors 249
Guidelines for the External KPI Facilitator 250
Remember the Fundamentals 252
Resources 253
Running Workshops 256
Implementation Lessons 257
Templates and Checklists 268
Notes 269
CHAPTER 16 Case Studies on the Critical Success Factor Workshops271
Private Sector Case Study # 1: An Asian Conglomerate 271
Private Sector Case Study #2: Medical Company 274
Private Sector Case Study #3: Forestry Company 276
Private Sector Case Study #4: Car Manufacturer 277
Private Sector Case Study #5: Timber Merchant 278
Private Sector Case Study #6: Investment Bank 278
Nonprofit Membership Organization Case Study #1: Golf Club 279
Nonprofit Membership Organization Case Study #2: Surf Life Saving 281
Government Department Case Study #1 284
Government Department Case Study #2 286
Professional Accounting Body Case Study 287
Charity Case Study 287
CHAPTER 17 Common Critical Success Factors and Their Likely Measures 289
CHAPTER 18 Comparison to Other Methodologies 299
Main Differences Between the Balanced-Scorecard and Winning-KPIs Methodologies 299
Stacey Barr’s PuMP 304
Paul Niven’s Balanced Scorecard Work 307
Notes 309
CHAPTER 19 CEO Toolkit 311
Letter to You, the Chief Executive Officer 311
Measurement Leadership Has to Come from the Chief Executive Officer 314
Note 316
APPENDIX A Foundation Stones of Performance-Related Pay Schemes 317
The Billion-Dollar Giveaway 317
The Foundation Stones 318
Notes 333
APPENDIX B Draft Job Description for the Chief Measurement Officer 335
Outline 335
Duties/Responsibilities of the Chief Measurement Officer 336
Skills and Experience 337
APPENDIX C Delivering Bulletproof Presentations 339
APPENDIX D Presentation Templates 347
APPENDIX E Performance Measures Database 349
Index 399
