How to use KPI's to run your business

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  • 3 States going in Trusting exciting Engaged,
    Bob Dataplex activity quota trusting
    Working at the footy exciting
    Learning to fly Engaged
    Landing realised I can do this addicted
    Decision to leave
    Proved myself Motivated to act
    Coming out motivated to act, Decisive, Determined
  • Above and below the line.
    Blame, do pointing exercise.
    Excuses, how many have kids that are experts at this … where did they learn it from ?
    Denial … book titled, Denial is not a river in Egypt … Polite way of saying you’re lying to yourself.
    Above, point out OWN SHIP
    Accountable for Results
    Responsible for Actions
    IMPORTANT … Get agreement that everyone is willing to play above the line for today …
    Below the line are the REASONS
    Above the line is RESULTS
    95% of Business Owners and their teams play BELOW THE LINE!
    Total 5 Mins
  • Learn to walk by falling down. Get agreement that everyone is willing to play 100% today at least
    Let’s try a little group participation – Hand Exercise
    Participation – as long as you participate you are getting a result – sometimes it is not the result that you want, but if it is a result, then you have learned something – and you now have the opportunity to use that knowledge to do better in the future –those with the right knowledge and the skills to apply it will be the winners of the future
    Remember the turtle – in order to move forward you have to stick your neck out – so stick your neck out, take a risk, participate and learn and move forward
  • Get it called out with a SMILE … 1 Min
  • Anyone with teenage kids … experts at this … Yeah I Know Mom …
    When older do it a little more politely … cross arms and say it to yourself … “Yeah, I know…”
    But, this approach KILLS the possibility that maybe you can learn something from this conversation.
    Get agreement everyone will treat today as a totally new experience
    Introduce ISN’T THAT INTERESTING … ?
    Always keep an open mind to the possibilities
  • Anyone with teenage kids … experts at this … Yeah I Know Mom …
    When older do it a little more politely … cross arms and say it to yourself … “Yeah, I know…”
    But, this approach KILLS the possibility that maybe you can learn something from this conversation.
    Get agreement everyone will treat today as a totally new experience
    Introduce ISN’T THAT INTERESTING … ?
    Always keep an open mind to the possibilities
  • Explain the BFO is the “aha” moment – and our role is to help stimulate some of these for the audience.
  • Make sure to target them to work and the business … Give 3 minutes to do the exercise but them them run as long as it takes.
    List 11 things … Start background music that has no words whilst doing writing.
    Introduce to changing pen colors and CHEATING – Market research.
    Get everyone in the room to call out one each to start and then get any extra’s.
    Total 8 Mins.
  • Quantifiable measurements that reflect critical success factors of a business.
    Key Drivers that have a major impact on the performance of the business
    A handful of numbers that give the owner an “at a glance” view of the business
    Keep their finger on the pulse of the business
    Identify hot spots that need attention
    Act quickly to drive the business forward
  • KPI’s are very strategic. Before one can set KPI’s, the strategy of the business has to be clearly defined and understood. For a desired outcome, the things that get measured may not be obvious. Take the example of sales people. Most sales people are measured on turnover but the business objective is to make profit.
    Eg sales rep: calls vs, # of sales, vs turnover, vs profit,
  • Can’t say “want more profit” and then say “make the sale whatever it takes”
    If the strategy is to get more “A” customers, then the KPI can’t just be the number of orders, irrespective of the type of customer
    Customer satisfaction/number of orders despatched on time/# of customer complaints
  • So cutting staff training, staff amenities and reducing the number of staff may make the business a less compelling place to work, a less compelling place to shop (as staff morale drops) and a less compelling place to invest.
  • Leading: test & Measure, forecasting
    Lagging: Financials
    Objective: figures eg no of call made
    Subjective: forecast of % that will convert
  • Diagnostic = the number of calls made by the salesman in a week
    Strategic = the quality of the calls made by the salesman
  • Break into pairs and role-play the positioning PPT with presentation folders.
  • How to use KPI's to run your business

    1. 1. Key Performance Indicators
    2. 2. 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
    3. 3. Are you Above or Below the Line? Ownership Accountable Responsible Blame Excuses Denial
    4. 4. The ONLY Is the Failure to Participate! Give 100% and… You will get 100% ... ...
    5. 5. To Make Sure You Get the Most Out of Your Learning ... You Must Be Willing to Have Some ...
    6. 6. To make sure you get the most out of your learning… I KNOW!
    7. 7. To make sure you get the most out of your learning… “ Isn't that interesting?”
    8. 8. What you can expect from this seminar? BFO’s … Blinding Flashes of the Obvious…
    9. 9. What do I want from this workshop? Be as specific as YOU can ...
    10. 10. 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
    11. 11. 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!
    12. 12. 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
    13. 13. The Dashboard Testing & Measuring Debtors Days Resources Overdraft Turnover
    14. 14. 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
    15. 15. KPIs: Four Strategic Perspectives  Customer  Marketing and Sales  Internal Business Processes  Operations  Suppliers  Financial  Resources  Vision and Leadership  Knowledge and Skills  Growth/Innovation
    16. 16. 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
    17. 17. KPIs should look like a Balanced Scorecard
    18. 18. KPIs should focus on a single strategy  Linked to the strategy  Consistent  Mutually reinforcing
    19. 19. 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;
    20. 20. The Cycle Of Business
    21. 21. Cause and Effect: The Balanced Scorecard
    22. 22. 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)
    23. 23. How should KPIs be used?  Communication  Informing  Diagnostic  Learning  NOT controlling
    24. 24. 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.
    25. 25. 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
    26. 26. 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
    27. 27. 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)
    28. 28. How to implement KPIs Step 1: Define Strategic Specifics (Cont)  Clarify the strategy  Align Team members on strategic issues  Identify Barriers
    29. 29. How to implement KPIs Step 2: Audit Existing Measures  Assess strategic fit  Identify what data is available  Review Measurement Processes  Accuracy  Timeliness  Identify Gaps
    30. 30. 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 %
    31. 31. 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
    32. 32. 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 %.
    33. 33. How to implement KPIs Step 4: Analyze and Report  Easy to Read  One Page Summary  Graphs
    34. 34. 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
    35. 35. Sample KPI Trend Report
    36. 36. Sample Trend Report
    37. 37. How to implement KPIs Step 5: Continuous Improvement  Strategy based on set priorities  SMART Goals  Assign Accountability  Track Improvement  Set New Goals
    38. 38. Workshop  Review your company ’ s Vision and Mission  Write down the areas in your business that require KPI ’ s
    39. 39. 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
    40. 40. Sample Balanced Scorecard Perspective Customer Internal Business Financial Innovation and Learning
    41. 41. 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
    42. 42. 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
    43. 43. 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
    44. 44. 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
    45. 45. 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
    46. 46. 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
    47. 47. 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
    48. 48. Sample KPI Measures: Financial  R&D Expenditures  Fixed Assets  Training Expenditures  Current Liabilities  Marketing Expenditures  Depreciation  Interest Expense  Bad Debts  Discounts Given/Taken
    49. 49. 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
    50. 50. 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
    51. 51. 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
    52. 52. 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
    53. 53. 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
    54. 54. 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
    55. 55. 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
    56. 56. 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 .
    57. 57. 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.
    58. 58. The Dashboard Testing & Measuring Debtors Days Resources Overdraft Turnover
    59. 59. Now It ’s Time To

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