Transcript 50 ways - David Parmenter

A ‘top ten’
performance
management book on
www.amazon.com for
over one year
www.waymark.co.nz to order, see link to www.amazon.com
Revitalizing a floundering balanced
scorecard with winning KPIs
Presented by David Parmenter
waymark solutions limited
October 2008
Website: www.waymark.co.nz
Blog: www.davidparmenter.com
Email: [email protected]
How is your balanced scorecard (BSC)
performing?
1.Do not have one
2.Our BSC is working well
3.Our BSC is failing/has failed
4.Have got a balanced scorecard but it needs
a revamp
5.Have a BSC but too early to judge
Webcast is 7th in a series on winning KPIs
1. Introduction to winning KPIs
2. Implementing KPIs - A 12-Step Process
3. Implementing KPIs in Smaller Organizations
(<200 Staff)
4. Finding your organization’s critical success
factors
5. Balanced scorecard in 16 weeks not 16 months
– the implementation lessons
6. Getting Started or restarted with winning KPIs
7. Revitalizing a floundering balanced scorecard
with winning KPIs
How familiar are you with the “winning
KPIs” methodology?
1. This is my first web seminar I have attended on
winning KPIs
2. Am familiar with the work but have not used it yet
3. Not only familiar but have started the process to use
winning KPIs in our organization
The common problem – fallen off the
radar screen
 The BSC is no longer on the CEO’s radar
screen
 Senior management team never supported
concept in the first place
 Staff not involved and do not understand the
concept
The common problem – design was flawed
 Consultants and application designers have made the
BSC far too complex
• features to attract the uninformed buyer – 100s KPIs
• designed without a grey hair in sight – cause &
effect relationships, lead / lag measures
• lots of documentation, lots of measurement
• others systems too e.g. the G/L
 Wedded to a complexity to justify their methodology
their involvement and their fees
 If your workforce cannot understand it your SMT
probably cannot as well
Flawed strategy map
Application mayhem
The common problem – implementation
process was flawed
 Critical success factors were not determined first
 Many large projects have failed in the past -70%
failure rate for large projects is not uncommon
 The selling of change was through logic not the
emotion drivers of SMT, management / staff
 Implemented by a ‘bus load of freshly minted
MBAs’ working with mid management & staff
 Staff were not taught how to derive measures
 Staff were not involved in working out their team
scorecards
The common problem – the measures were flawed
 Lack of understanding about performance measures
• Nearly all measures are ‘past’ measures
• All measures are called KPIs
• Nearly all measures being reported monthly
• Not tied to CSFs
• Little or no intellectual rigor when coming up with the measures
e.g. customer complaints, deliveries on time
 Time consuming measurement rife throughout the
organization
 Measures promoting dysfunctional behavior – waiting
time in accident & emergency, deliveries on time
The common problem – lack of ownership
 Implemented by external consultants
 Measures are in a matrix and they tumble
down to individuals
 Lack of in-house know-how
The common problem – Budget supremacy
 Financial performance measures given weightings
as high as 70%
 Remuneration tied around a fixed annual
performance agreement
 Bonus schemes leading to manipulation of results
/ wrong actions – e.g. purchase manager
 Organization wedded to a four month flawed
process
The fix – fallen off the radar screen
 Need to better understand the CEO’s
emotional drivers
 The previous sale of the BSC was not good
enough
 Must work closely with the CEO’s second in
command or closest person to the CEO – you
must convince them
 The road show / rollout workshop for staff
would need to happen again – this change
cannot be done by memo
The Fix – design was flawed
 Recognize that for the BSC to be successful it needs
to be designed in-house
 Filling in forms does not create change - phone calls
from the CEO and SMT do
 Throw out all complex measurement processes
• Review all features of the BSC software you use
• Simplify all processes
• Maximize use of the intranet for the daily / 24/7
measures
• Develop screen flashes and a 9am update
• Radically reduce all monthly reporting – it will not
change anything
The Fix – design was flawed #2
 Reduce the myriad of critical success factors to
less than eight
• Need to run the critical success factor workshop
• One day workshop would be enough – see template
on website
• The resulting critical success factors need to ratified
by the senior management team and Board
• Teams will need to revisit their measures in light of
these new CSFs
Short listing the CSFs – by relationship
mapping
Increase repeat
business
Retention
of key staff
Increased
recognition
4 OUT
Workshop
example
 Success factors
(SF) already exist
 Success factors
appear in any place
 All teams work
with same SF list
 Compare results
The Fix – design was flawed #3
 Keep the BSC application
• There will never be a perfect fit - all built on flawed
logic
• Better understand the BSC application capabilities
• Train at least 4 in-house experts on it
• Use only what will work for you and ‘winning KPIs’
• Marriage required between – SMT, HR, Finance, IT,
Public Relations, Operations
The fix – implementation process was flawed
 Ensure all staff know about the CSFs – road show
 Ensure all time consuming measurement is beneficial
– introduce estimation, sample weeks, statistical
samples
 Sell change through the emotional drivers
 Ensure measures are now discussed and tested before
implementation
 Throw out all matrix or tumble down reporting of
measures – it is based on flawed logic
Mission / Vision / Values
Linkage
of
Relationship between strategy / CSFs and
PMs
strategy to
Strategies (issues & Initiatives)
measurement
Financial
Results
Customer
satisfaction
Learning
& Growth
Internal
Processes
Staff
satisfaction
Community
& environment
Critical Success Factors
Key Result Indicators (max 10)
Performance and Result Indicators (80 or so)
Key Performance Indicators (max 10)
Financial
Results
Customer
satisfaction
Learning
& Growth
Internal
Processes
Staff
satisfaction
Community
& environment
KPIs & PIs in a balanced scorecard and KRIs in a dashboard
Selling through the emotional drivers
 Car sales person analogy
 Emotional drivers differ:
• SMT - looking a fool in front of the Board, impact
on their bonus, short term focus
• management - not invented by me, will behave
based on their perception, skeptical for good
reason
• staff – job security, impact on existing workload,
perception of what management will do with the
information
The Fix – the measures were flawed
 Intensive training for project staff so they understand
what winning KPIs are
 Through a roll-out of workshops sell the concept to
staff and teach staff how to brainstorm measures
• Achieving a balance between ‘past’, ‘current’ and ‘future’
measures
• All team’s to have a scorecard
• Introduce the concept of the four type of measures
• KPIs are for the org, not the team or individual
 Adopt the 10/80/10 rule to reduce the number of
measures
 Adopt the seven characteristics of winning KPIs
Importance of measuring current and
future actions
 Past measures: e.g. number of late planes last week/ last
month
 Current measures : e.g. planes over 2 hours late (updated
continuously)
 Future measure: e.g. number of initiatives to be
commenced in the next month / two months to target
areas which are causing late planes
 KRIs and RIs by definition are past measures
 KPIs and PIs can be past, current, or future measures
There are four types of performance
measures
KRIs
peel the skin to
find the PIs
PIs&RIs
peel to the core
to find the KPIs
KPIs
Bottom-up starting point is best
2nd*
Organisational
performance
measures
Level 1
Org PIs
All
Div PIs
e Divisional
m
o
S
5 - 10 Org
wide KPIs
Level 3
Some
3rd*
Department
On
ly r
e
lev
ant
K
Level 4
PIs
1st* = start process here
Team
Dept PIs
1st*
Team PIs
80 PIs spread over
3rd*
Level 2
The 10/80/10 rule
Key result indicators
Performance indicators
Result indicators
Key performance indicators
10
)
) 80
)
10
Tells you how you
have done in a
perspective
Tells you what to do
Tells you what you
have done
Tells you what to do
to increase
performance
dramatically
The characteristics of winning KPIs
 Non financial (not expressed in Pds, $s, Euros
etc)
 Measured frequently e.g. daily or 24 by 7
 Acted upon by CEO and senior management team
 All staff understand the measure and what
corrective action is required
 Responsibility can be tied down to the individual
or team
 Significant impact e.g. it impacts most of the core
CSFs and more than one BSC perspective
 Has a positive impact e.g. affects all other
Introduce the daily/ weekly KPIs
 Brainstorm the critical success factors and see
which performance measures are winning
KPIs
 Test them against the characteristics of
winning KPIs
 Discuss with staff / unions to ensure the action
taken to fix will be beneficial e.g. Hospital
story
The fix- the budget supremacy
 All organizations with an annual planning process will
under perform
• takes months to get it wrong - impossible to get right
• monthly targets from the AP was always stupid
• misallocation of resources
 Separate remuneration from BSC until it works well
 Review the logic of fixing remuneration on a fixed
annual performance agreement - Jeremy Hope’s work
 Hold a focus group workshop on quarterly rolling
planning - see workshop instructions & web cast
www.bettermanagement.com
The fix – lack of in-house ownership
 This is seldom the external consultants fault
 Find an external facilitator to help with this process –
maybe one of the consultants used with the previous
BSC
 We need a full time team to run this re-modeling
 Lack of in-house know-how
The fix – lack of in-house ownership
 Make a commitment that this time it will run inhouse
 You will have gained a lot from the BSC
implementation
 Celebrate the successes to date and select a
team to run the project
 The previous in-house team may need to be
refreshed
• tainted by the previous scorecard
• brainwashed by the consultants' methodology
Revitalizing – next steps # 1
 Recognize it will be a difficult task - patience
will be thin on the ground
 Hold a focus group workshop of interested
parties to brainstorm the future ‘new look’ BSC
process
•
•
•
•
sell the need for change
build a case for change
design the new approach
ask for their advice and help
Revitalizing – next steps # 2
 Understand all the resources I have provided you
•
•
•
•
webcasts and articles on www.bettermanagement.com
whitepapers and templates on www.davidparmenter.com
my KPI book
the workshop outlines
 Find an external facilitator to help you with the
workshops
 See my web casts
• Getting started or restarted with winning KPIs
• Balanced scorecard in 16 weeks not 16 months
Workshop agenda ( see diagram)








Invite the
Agreement over the reasons for failure
Revisit the CSFs
Brainstorm performance measures
Redesign and simplify the process
Build a case of a revamp
Agree on a pilot on the new winning KPIs
Ask attendees is it ‘red, amber or green’
Prepare the sales pitch for change
 Explain the magic of knowing the CSFs
 If staff know the CSFs they will start aligning
their daily activities to the organization’s strategy
 Emphasize the learning that has already occurred
through the BSC process
 Explain why this approach is different
 Emphasize the tasks and how the implementation
will avoid the pitfalls of the existing BSC project
 Ask ‘can we afford not to undertake this task’
An appeal to BSC consultants
 You have an important role
 Leadership is required - do not blindly follow a
methodology that does not make sense
 Using Pareto’s 80/20 - removing complexity
 Be a facilitator of change – selling by
emotional drivers
 Saying ‘no’ more often
 Developing more ‘how to do it guides’ in
articles and papers – sharing IP with readers
These books came out in 07
www.waymark.co.nz to order, see link to www.amazon.com
Thank you for participating in this
web seminar
Please keep in touch about your relaunch
see www.davidparmenter.com for
my speaking engagement, white
papers etc
John Wiley & Sons have published
Amazon link on www.davidparmenter.com