SMART KPIs

Characteristics of good KPIs

1. Simple2. Practical3. Specific4. Measurable5. Attainable6. Relevant7. Time-bounded8. Dynamic 2

“Simple” easily understandable and not sophisticated“Practical” easily workable and get to the point“Specific” ‘Reduce expense’ is definitely not specific KPIs should detail what expense specifically to be reduced, electric or traveling expense or….etc.“Measurable” From previous example KPIs must also be specified the target of the reduction, such as

reduce electric bills down10%.“Attainable” KPIs must be attainable and also challenging. If target is set too low or too high staff

may be de-motivated.“Relevant” KPIs must be relevant to Organization targets so everyone is heading to the same target

same direction“Time-Bounded” Indicate when the target should be reached so staff know how much time they have.“Dynamic” change overtime and benchmarking

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Classification of KPIs

1. Efficiency / Effectiveness2. Common / Corporate / Functional3. Positive / Negative4. Balanced Scorecard 4.1 Lag indicator / Lead indicator 4.2 Financial Perspective / Customer Perspective/ Internal perspective / Learning Perspective / Growth Perspective5. Value Chain6. Strategic /Non-Strategic (Technical or Administrative)

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FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUNDLOGISTICS

OPERATIONSOUTBOUNDLOGISTICS

MAKETINGAND SALES

SERVICE

M

A

R

G

I

N

PRIMARY ACTIVITIES

The Generic Value ChainThe Generic Value Chain

Support activities

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Productivity

• Efficiency

• Quality-Uniqueness

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Strategic Positioning

Cost

Differentiation

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Relationship

- KPI- Target- Benchmarking

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Benchmarking

1. Competitive2. Non Competitive3. Internal4. Generic (best practice)

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Strategic Planning and KPIs

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VISION

MISSION

Objective

SWOTSWOT

SWOT

Action Plan

Strategy

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MISSION

Objective

SWOTSWOT

SWOT

Action Plan

Strategy

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Cases in Vision and Mission

Case 1 : New Port News Shipbuilding’s Mission Statement

“ We shall build good ships here – at the profit if we can – at the loss if we must – but always good ships. ”

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“ To improve the quality of home life by designing, building, marketing, and servicing

the best appliances in the world.”

Case 2 : Maytag Corporation’s Mission

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Case 3 : Harley Davidson’s Vision and Mission

Vision “Harley Davidson,Inc. is an action-oriented,internationalcompany, a leader in its commitment to continuously improveour mutually beneficial relationships with stakeholders [ customers, suppliers,employees, shareholders, governmentsand society ]

We believe the key to success is to balance stakeholders’interests through the empowerment of all employees to focus on value-added activities.”

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Case 4 : วิ�สั�ยทั�ศน์และพั�น์ธกิ�จของปตทั.

VISION The leading petroleum exploration and production company with operational excellence, international best practices, and world-class competitive strengths

MISSIONTo conduct our core business by operating and investing in petroleum exploration, development, production, and strategic related business in Thailand and overseas

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Case 5 :Starbucks’ Mission Statement

“ Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principle while we grow ”

Six Guiding Principles :

1. Provide a great work environment and treat each other with respect and dignity

2. Embrace diversity as an essential component in the way we do business.

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Case 6 : Vermont Teddy Bear’s Mission Statement

“The Vermont Teddy Bear provides our customers with a tangible expression of their best feelings for their

family, friends, and associates. We facilitate, communicate,and therefore participate in caring events

and special occasion that celebrate and enrich our customers’ life experience.

Our products will represent unmatchable craftsmanship balanced with optimal quality and value.

We will strive to wholesomely entertain our guests while consistently exceeding our external and internal

customer service expectations. 18

Harley Davidson

“ More Than A Motorcycle ”

“ Fulfilling Dreams ”

Vermont Teddy Bear

“ A Lifetime Emotional Symbol of Love and Care”

Starbuck

“ Third Home ”

Carnival

“ Funship”19

Maytag Company

1. Mission

- Developed in 1989 for the Maytag Company : “ To provide our customers with products of unsurpassed performance that last longer,need fever repairs , and are produced at the lowest possible cost.”

- Updated in 1991 : “Our collective mission is world class quality.” Expands Maytag’s belief in product quality to all aspects of operations. 20

2. Objectives

-“To be profitability leader in industry for every product line Maytag’s manufactures.” Selected profitability rather than market share.

-“To be number one in total customer satisfaction.”

-“To grow the North American appliance business and become the third largest appliance manufacturer (in unit sales) in North America.”

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-To increase profitable market share growth in North American appliance and floor care business, 6.5% return on sales, 10% return on assets, 20% return on equity, beat competition in satisfying customers, dealer, builder and endorser, move into third place in totals units shipped per year.

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3. Strategies

- Global growth through acquisition and alliance with Bosch Siemens.

- Differentiate brand names for competitiveadvantage.

- Create synergy between companies, productimprovement, investment in plant and equipment.

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4. Policies

- Cost reduction is secondary to high quality.

- Promotion from within.

- Slow, but sure R&D: Maytag slow to respond to

changes in market

Case in KPI

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Targetobjective KPI 1 2 3 Responsible

1. Increase Efficiency

%

Cost per unit

10 % 6 % 4 %

2.Enhance Quality

ISO 9002 14,000 18,000

3.Improve Personnel

Hr/year/

employee training

10 hrs 11hrs 12 hrs

KPI -Objective

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KPI – Strategy

Objective : Increase Efficiency

Target

Strategy KPI 1 2 3 Responsible

1. Production

Efficiency

% waste 0 % 0 % 0 %

2.Inventory Management

Efficiency

Inventory Turnover

6 days 5 days 5 days

3.Purchasing % per unit decrease

10 % 8 % 6 %

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KPI – Strategy Objective : Enhance Quality

Target

Strategy KPI 1 2 3 Responsible

1. Hiring Consultant

Timing Within Jan

Within Jan

Within Jan

2.Training Duration Feb-Jun Feb-Jun Feb-Jun

3.Implementing Duration July-Dec July-Dec July-Dec

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KPI – Action PlanStrategy :Hiring Consultants

Action Plan KPI 1 q 2q 3q 4q Responsible

1. Listing Potential

Consultants

Timing First week of Jan

2.Selecting Timing Within second week of Jan

3.Employing Timing Within Jan

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KPI and Balanced Scorecard

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Strategic Objective :“Develop the competencies needed to support the sales process”

Strategic OutcomeMeasure(Lag indicator)•Revenue per Employeeor•Sales per Salesperson

Performance Driver(Lead indicator)•Strategic Job Coverage Ratio

Strategic Initiative•Redesign the Staff Development Process1. Identify strategic jobs2. Build competency profiles3. Assess current staff4. Forecast requirements5. Identify gap6. Build staff development plan

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Strategic Measurements Strategic Objectives (Lag Indicators) (Lead Indicators)

Financial F1 – Improve Returns F2 – Broaden Revenue Mix F3 – Reduce Cost Structure

Return-on-Investment Revenue Growth Deposit Service Cost Change

Revenue Mix

Customer C1 – Increase Customer Satisfaction With Our Products and People C2 – Increase Satisfaction “After the Sale”

Share of Segment Customer Retention

Depth of Relationship Satisfaction Survey

Internal I1 – Understand Our Customers I2 – Create Innovation Products I3 – Cross-Sell Products I4 – Shift Customers to Cost – Effective Channels I5 – Minimize Operational Problems I6 – Responsive Service

New Product Revenue Cross-Sell Ratio Channel Mix Change Service Error Rate Request Fulfillment Time

Product Development Cycle Hours with Customers

Learning L1 – Develop Strategic Skills L2 – Provide Strategic Information L3 – Align Personal Goals

Employee Satisfaction Revenue per Employee

Strategic Job Coverage Ratio Strategic Information Availability Ratio Personal Goals Alignment (%)

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Revenue Growth and MixCost Reduction/Productivity

Improvement Asset Utilization

Sales growth rate by segmentPercentage revenue from newproduct, services, and customers

Revenue/Employee Investment (percentageof sales)R&D (percentage ofsales)

Share of targeted customers andaccountsCross-sellingPercentage revemues from newapplicationsCustomer and product lineprofitability

Cost versus competitors’Cost reduction ratesIndirect expenses(percentage of sales)

Working capital ratios(cash-to-cash cycle)ROCE by key assetcategoriesAsset utilization rates

Customer and product lineprofitabilityPercentage unprofitable customers

Unit costs ( per unit of output,per transaction)

PaybackThroughput

Strategic ThemesG

r ow

thS

usta

inH

arv

est

Bu

sin

ess

Un

it

Str

ate

gy

Financial Perspective

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The Customer Perspective - Core MeasuresThe Customer Perspective - Core Measures

Market Share

Customer Profitability

Customer Satisfaction

Customer Acquisition Customer Retention

Market Share Reflects the proportion of business in a given market ( in terms of number ofcustomers, dollars spent, or unit volume sold) that a business unit sells.

Customer Acquisition Measures, in absolute or relative terms, the rate at which a business unit attracts orwins new customers or business.

Customer Retention Tracks, in absolute or relative terms, the rate at which a business unit retains ormaintains ongoing relationships with its customers.

Customer Satisfaction Assesses the satisfaction level of customers along specific performance criteria withinthe value proposition.

Customer Profitability Measures the net profit of a customer, or a segment, after allowing for the uniqueexpenses required to support that customer. 34

The Customer Value PropositionThe Customer Value Proposition

ResponsivePersonalAdvisor

ConvenientKnowledgeableSeamlessServices

ErrorFree

Breadth ofOffering

ValueProduct/Service Attributes

PriceFunctionalityQuality

Image Relationship

Time

Generic Model= + +

Example : Retail Banking Value Proposition

Product / Service AttributesImage Relationship

Strategic Measures* Service * Request Failure Fulfillment

Index Time35

The Customer Value The Customer Value Proposition (Tier I) - Proposition (Tier I) -

RockwaterRockwater

RelationshipProfessionalManagement

TimelinessQualityFunctionality Price

Product / Service Attributes Image Relationship

* Safety * Minimum * Hours * Meeting Schedule * Honesty and Openness Revision of Worked of Contractor * Engineering Submitted * Timely Submission Service Procedures * Value for of Procedures * Flexibility * Quality and Money

Awareness of * Contractual Performance * Innovativeness

Responsiveness * Standard of to Reduce Cost Equipment * Team

Rapport/ Provided Spirit * Quality of Personnel * Production Quality

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The Internal - Business - The Internal - Business - Process Perspective - Process Perspective -

The Generic Value Chain ModelThe Generic Value Chain Model

CustomerNeed

Identified

CustomerNeed

Satisfied

Identified the

Market

Create the Product/Service

Offering

Build the Products/

Services

Innovation Process

Deliver the Products/

Services

Service the

Customer

Operations Process

Postsale ServiceProcess

The Internal - The Internal - BusinessBusiness - Process - Process Perspective - Perspective -

The Innovation ProcessThe Innovation ProcessCustomer

NeedIdentified

Identified the

Market

Create the Product/Service

Offering

Innovation Process

Build the Products/

Services

Deliver the Products/

Services

Operations ProcessPostsale Service

Process Customer

NeedSatisfied

Service the

Customer

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The Learning and Growth Measurement FrameworkThe Learning and Growth Measurement Framework

Results

Employee Satisfaction

Climate for ActionTechnology

InfrastructureStaff Competencies

Employee Retention Employee Productivity

Enablers

Core Measurements

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