Finding your organization's critical Finding your organization's critical success factorssuccess factors

Presented by David Parmenter

waymark solutions limited

November 2009

Website: www.davidparmenter.com

Email: parmenter@waymark.co.nz

CSF StoriesCSF Stories

freight forwarding company airline

The hierarchy of success factorsThe hierarchy of success factors

Timely Timely arrival arrival

and and departure departure of planesof planes

Critical Critical success success factorsfactors

Success Success factorsfactors

The hierarchy of success factorsThe hierarchy of success factors

trucks trucks leaving leaving on time on time as close as close to 100% to 100% capacity capacity as can beas can be

Critical Critical success success factorsfactors

Success Success factorsfactors

This workshop is an This workshop is an extract from my white extract from my white paper that can be paper that can be acquired from acquired from www.davidparmenter.comwww.davidparmenter.com

This presentation is part of a series of This presentation is part of a series of webcasts on ‘winning KPIs’ webcasts on ‘winning KPIs’

www.bettermanagement.comwww.bettermanagement.com1. Introduction to winning KPIs (Aug 09)2. Implementing KPIs - A 12-Step Process 3. Implementing KPIs in Smaller Orgs (<200 Staff) 4. Finding your organization’s critical success factors5. Balanced scorecard in 16 weeks not 16 months 6. Getting started or restarted with winning KPIs 7. Revitalizing a floundering balanced scorecard with winning KPIs 8. ‘Winning KPIs’ - a question and answer session9. ‘Winning KPIs’ - a question and answer session10. “Sorting the wheat from the chaff” – finding your wining KPIs

Why does performance measurement Why does performance measurement fail in so many companies?fail in so many companies?

do not apply enough rigor in our measures – hospital example

lack of a process – invented in a spare afternoon little or no tie in to the organization’s critical

success factors observed well after the ‘horse has bolted’ lack of clarity about who should see what too many and all treated the same lack of attention by the senior management team

Linkage of strategy to KPIs and BSCLinkage of strategy to KPIs and BSCLinkage of Linkage of strategy to strategy to

measurementmeasurementLearning& Growth

Customer satisfaction

FinancialResults

InternalProcesses

Strategies (issues & Initiatives)

Mission / Vision / Values

Critical Success Factors

Key Result Indicators (max 10)

Performance Indicators & Result Indicators (80 or so)

Key Performance Indicators (max 10)

Staff satisfaction

Community& environment

Learning& Growth

Customer satisfaction

FinancialResults

InternalProcesses

Staff satisfaction

Community& environment

KPIs & PIs in a balanced scorecard and KRIs in a dashboard

Changing thisChanging thisTeam Team directiondirection Strategic Strategic

directiondirection

To thisTo this

Teams in alignment with strategy

4 types of performance measures4 types of performance measures

PIs&RIs

KRIs

peel to the core to find the KPIs

KPIs

peel the skin tofind the PIs

The 10/80/10 ruleThe 10/80/10 rule

Key result indicators 10Tells you how you have done in a perspective

Performance indicators ) Tells you what to do) 80

Result indicators ) Tells you what you have done

Key performance indicators 10

Tells you what to do to increase performance dramatically

Critical success factorsCritical success factors “a list of issues or aspects of organizational

performance that determine ongoing health, vitality and well-being” source AusIndustry

out of the 30-40 success factors only 5 to 8 will be the critical ones

the missing link to making your performance

measures work

How well known are the critical success How well known are the critical success factors in your organization?factors in your organization?

24% - there is a list which I have as do other staff

25% - there may be a list but I am not aware of it

51% - no formal list but management refer to them in papers and discussions

Source: survey March 08 www.bettermanagement.com over 450 attendees

Has an exercise been undertaken to Has an exercise been undertaken to ascertain your organizations critical ascertain your organizations critical

success factors within the last 5 years?success factors within the last 5 years?

32% - yes

48% - not to my knowledge

20% - do not know

Source: survey March 08 www.bettermanagement.com over 450 attendees

With 40 or so success factors there is With 40 or so success factors there is confusion and a lack of focusconfusion and a lack of focus

too many measures strategic plans with too many diverse and

contradictory initiatives lack of communication and direction to

operational and support staff

Most organizations know their success Most organizations know their success factors - however few organisations factors - however few organisations

have:have:

worded their success factors appropriately segregated out success factors from their

strategic objectives sifted through them to find their critical ones

– their CSFs communicated the CSFs to staff

Importance of getting the SFs rightImportance of getting the SFs right

wording of the SFs is critical• retention of staff becomes retention of key staff

• increase repeat business becomes increase repeat business from core customers

measures become more specific • daily sales becomes daily sales made to key

customers

• planned calls becomes planned calls to key customers

• deliveries made on time becomes deliveries to key customers made on time

Finding your critical success factors Finding your critical success factors (step 6) is a three phase process(step 6) is a three phase process

1. finding out the SFs that have been mentioned over the last ten years or so

2. holding a two day workshop

3. presentation to the SMT and Board to obtain agreement on the CSFs

The Goal: to find your 5 to 8 The Goal: to find your 5 to 8 organization-wide CSFsorganization-wide CSFs

5 to 8 regardless of size CSFs will largely be industry specific e.g.

the CSFs for an airline are different to a retail record chain store

a conglomerate organization would have 5 to 8 CSFs for each different industry

a very subjective exercise - highly dependent on the analytical skill of those involved

Please talk to the person next to you about Please talk to the person next to you about what I have saidwhat I have said

does it make sense? is it relevant to you? any areas of confusion

Phase 1: Researching the existing SFsPhase 1: Researching the existing SFs

finding out the SFs that have been mentioned over the last ten years or so

developing a list of these and grouping similar ones together

consult stakeholders (board members, key customers, key suppliers, unions etc.) and employees

interview some of the SMT and Board members (especially those who have known the organization for a long time)

The SF matrixThe SF matrix

Success factor Finance Resources

SF environment & community

Positive public perception of organization Y Y

Be seen in the community as an employer of ‘first choice’ Y Y

Supporting minorities through employment

Minimizing pollution and waste Y

Supporting educational institutions (share knowledge via organization’s website)

Encouraging voluntary assistance by staff to the local community Y

A CSF case study A CSF case study (NZ Maori Arts & Crafts Institute, Rotorua)(NZ Maori Arts & Crafts Institute, Rotorua)

BackgroundBackground

Rotorua geysers, mud pools and Maori arts & crafts

56 staff 600,000 tourists

• foreign independent travellers

• tours (many from Asia)

• domestic

revenue generated from entrance fees, retail shop, evening concerts

geyser is the main draw card

Financial SFsFinancial SFs

balance of experiences, products and services increased in overall spend by FIT increased repeat domestic business optimal utilisation of assets and resources optimisation of working capital understanding of the geothermal valley continued fiscal responsible management maximise off-season potential

Customer satisfaction SFsCustomer satisfaction SFs

seamless service to inbound operators modern, well maintained assets for visitors introduction of new services to enhance

experience (one to one, information stations, interactive computer displays)

quality guided tours, intimacy with Maori culture

Internal Process SFs Internal Process SFs

increased linkages with key suppliers (millennium hotel etc)

timely maintenance of assets effective relationships with key players in

tourism, and other stakeholders optimising technology (extranet for

inbound information, intranet etc) successful completion of projects increased innovation

Learning & growth SFsLearning & growth SFs

increase in adaptability and flexibility increase in productivity through increase in skills,

motivation, etc increase in empowerment (delegated decision

making) foreign language capability (Korean etc) increase in technology savvy develop knowledge database increase guide skills, cultural sensitivity &

storytelling

Employee satisfaction SFsEmployee satisfaction SFs

increase in employee satisfaction retention of key staff provide opportunities to grow establish good life and work balance appropriate reward and recognition for all increased recognition (celebrating success) a pleasant physical work environment for all active and well supported social club

Environment, community SFsEnvironment, community SFs

good working relationships with key community organisations (IWI, whaka village, all neighbours)

demonstrate leadership in the community adoption of green globe 21 linking sponsorship with staff community

work supporting local businesses favourable reputation in the community

Workshop #1 revisiting the success factors of Workshop #1 revisiting the success factors of organizations in your sector (see hardcopy)organizations in your sector (see hardcopy)

Please read and follow instructions

Phase 2: Phase 2: Holding a two day workshopHolding a two day workshop

1. planning the workshop inviting the right people appropriate location making sure all attend (invite from the CEO)

2. use the agenda in the manual run the 6 workshops check that proposed CSFs address all the six BSC

perspectives

3. day and half for all, 2 days for the KPI team4. utilize material I have put on

www.bettermanagement.com

Suggested attendeesSuggested attendees

20 to 40 people experienced and knowledgeable staff from all around the organization (operators, administrators, sales staff, production)

selection of management from head office including one or two from the SMT

all KPI project staff external project facilitator, if you have one if a couple of pilots are to be run, invite a team from

the relevant business units

Short listing the CSFs – by relationship Short listing the CSFs – by relationship mappingmapping

Increased recognition

Increase repeat businessRetention

of key staff

4 OUT 4 OUT

Example of Example of relationship relationship

mappingmapping

All teams work with same SF list

Arrows draw in the direction of the relationship

A subjective area, so you cannot be wrong

Compare results

Another example of relationship mappingAnother example of relationship mapping

Workshop 2: Airline success factorsWorkshop 2: Airline success factors

Feedback of ranking from teamsFeedback of ranking from teams

Team 1 Team 2 Team 3

Positive public perception of organization

Be seen in the community as an employer of ‘first choice’

5 4

Supporting minorities through employmentEnvironmentally friendly culture and reputation ( use of environmentally friendly materials)Delivery in full on time, all the time to our key customers

1 3 1

Finding better ways to do the things we do everyday

5

Optimizing technology that matters 2

Table for short-listing CSFs Table for short-listing CSFs

Critical success factor Financial Customersatisfaction

Staffsatisfaction

learning &growth

Internalprocess

Environment& community

1. e.g. timely arrival anddeparture of planes

possible

2. e.g. delivery in full andon time

possible

3. xxxxxxxxxxxxxxxx 4. xxxxxxxxxxxxxxxxxxx

Testing that your top 5-8 CSFs link to Testing that your top 5-8 CSFs link to your strategic objectives your strategic objectives

Strategic Objectives

Critical success factor SO#1 SO#2 SO#3 SO#4 SO#5 SO#6

e.g. timely arrival and departure of planes

possible

e.g. delivery in full and on time to key customers

possible

1. xxxxx

2. xxx

3. xxxxx

4. xxx

5. xxxxx

6. xxxx

7. xxxx

No linkage to strategic objective #4

Phase 3: Phase 3: Presentation to the SMT and Presentation to the SMT and Board to obtain agreement on the CSFs Board to obtain agreement on the CSFs

prepare with PR help – using emotional drivers present the top 5 to 8 CSFs explain the ramifications on measurement list the 24/7, daily, weekly measures, if any,

that are currently being collected in this area discuss requirement to communicate to

employee representatives and staff ask for permission to proceed to next stage,

( team and organizational measures)

Please talk to the person next to you about Please talk to the person next to you about what I have saidwhat I have said

does it make sense? is it relevant to you? any areas of confusion

Brainstorming performance measures using Brainstorming performance measures using one of the CSFsone of the CSFs

CSF:

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Implementing KPIs - a 12 step Implementing KPIs - a 12 step processprocess

Project week pre 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 post1 SMT commitment 2 Establishing a "winning KPI" project team3 Establishing a "just do it" culture and process4 Setting-up a holistic KPI development strategy5 Marketing KPI system to all employees6 Identifying organisation-wide critical success factors7 Recording of performance measures in a database8 Selecting team performance measures9 Selecting organisational winning KPIs10 Developing the reporting frameworks at all levels11 Facilitating the use of winning KPIs12 Refining KPIs to maintain their relevance

What we have learntWhat we have learnt

gain an in-depth understanding of the characteristics of KPIs

understand the significance of critical success factors

understand how KRIs,PIs,RIs & KPIs fit together

how to brainstorm measures from a critical success factor

CSFs help reporting measures inCSFs help reporting measures in

the board dashboard – the KRIs daily / weekly KPI reporting team scorecard reporting organizational scorecards reporting progress to staff the staffs’ own performance agreements

see other ‘better management’ presentations I have delivered for examples of these

read my paper on www.bettermanagement.com – it is free to access

acquire the book “Key Performance Indicators – developing, implementing and using winning KPIs”

ban further development of measures until the CSFs have been agreed

hold the two day CSFs workshop (may need a facilitator)

listen to my other web casts attend my KPI master class if you are to be in the

KPI project team (see www.davidparmenter.com)

Suggested next stepsSuggested next steps

These books came out in 07These books came out in 07

www.waymark.co.nz to order, see link to www.amazon.com

Thank you for investing the Thank you for investing the timetime

Amazon link on www.davidparmenter.com

John Wiley & Sons have published