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How to measure performance and improvement?


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Presentation given by Andrew Hudson on 8 May 2017 to the APM Midlands branch in Northampton.

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How to measure performance and improvement?

  1. 1. ©ChangeDirector UK Ltd 2002-2017 Andrew Hudson APM Midlands Branch Event “How to measure performance and improvement”
  2. 2. ©ChangeDirector UK Ltd 2002-2017Page 2 Agenda Introduction The productivity challenge Connected strategy, operations & change – Strategy management – Process management – Measurement – Improvement Conclusions
  3. 3. ©ChangeDirector UK Ltd 2002-2017Page 3 The UK Productivity Gap
  4. 4. ©ChangeDirector UK Ltd 2002-2017Page 4 Is Poor Productivity a factor in low Unemployment? +85% -13%
  5. 5. ©ChangeDirector UK Ltd 2002-2017Page 5 “Better productivity could be extremely valuable adding as much as £130bn in GVA to the UK economy each year” Charlie Mayfield - John Lewis Chairman
  6. 6. ©ChangeDirector UK Ltd 2002-2017Page 6
  7. 7. ©ChangeDirector UK Ltd 2002-2017Page 7 Connecting Strategy with Operations and Change
  8. 8. ©ChangeDirector UK Ltd 2002-2017Page 8 results performance measures Process Initiative EXECUTION performance measures results 1 3 5 6 Strategic Plan • Strategy Map • Balanced Scorecard • Stratex Operating Plan • Sales Forecast • Resource Requirements • Dashboards • Budgets 2 • Key process improvement • Sales planning • Resource capacity plan • Budgeting PLAN OPERATIONS 4 • Business Units • Support Units • Employees ALIGN THE ORGANIZATION • Strategy Reviews • Operating Reviews MONITOR & LEARN • Profitability Analysis • Strategy Correlations • Emerging Strategies TEST & ADAPT • Strategy Map / Themes • Measures / Targets • Initiative Portfolios • Funding / Stratex TRANSLATE THE STRATEGY • Mission, Values, Vision • Strategic Analysis • Strategy Formulation DEVELOP THE STRATEGY The Balanced Scorecard – Strategic Management Process
  9. 9. ©ChangeDirector UK Ltd 2002-2017Page 9 • … Personal Planning Q1 Q2 Q3 Q4 STRATEGY MANAGEMENT PROCESS Strategy Development Organization Alignment Link to Planning & Budgeting Management Control & Learning Change Portfolio Management Strategy Reviews Best Practice Sharing Q1 Q2 Next Year Strategy Update Strategy Development • Clarify Vision • Update Strategy Planning/Budgeting • Budgets • Change Portfolio Scorecard Management Design & Update Organizational Alignment • Corporate role updated • Corporate-SBU aligned • SBU support unit aligned • Board of Directors aligned Human Capital Alignment • Personal goals • Incentives • Personal development This Year Strategy Communication SMO drives SMO drives / supports CFO HR CTO CCO HRO Focus EOY EOYQ1 Q2 Q3 Q1 Strategic Management Lifecycle
  10. 10. ©ChangeDirector UK Ltd 2002-2017Page 10 Financial Perspective Customer Perspective Internal Perspective Learning Perspective F1 Grow financial base & margins F3 Increase productivity F2 Grow targeted patient base C1 Provide personalized care C2 Provide easy access L4 Understand and deliver on the strategy L1 Hire and develop the best L3 Provide technology and resources P1 Deliver a personal experience P2 Keep patients informed P3 Streamline processes L2 Reward our team How? •By providing personal care to our targeted population and providing easy access to our services What will the internal focus be? •Deliver a personal experience that focuses on the individual and his/her needs •Keep patients informed throughout the process & streamline inefficient clinical and administrative processes Will our people be prepared to do that? •Yes, if we hire and develop people that focus on customer service •Yes, if we reward the team for focusing on customer service and the strategy •Yes, if we provide all employees with the information and tools they need to do their job well Mission: To provide top tier healthcare to our community. What will drive margins? •Managed growth in high-margin services
  11. 11. ©ChangeDirector UK Ltd 2002-2017Page 11 Clear Articulation of Strategy - Themes & Objectives
  12. 12. ©ChangeDirector UK Ltd 2002-2017Page 12  Eg Jointly define and manage upstream application service expectations  Eg Jointly define and manage service expectations (from the Technology strategic objectives) CFO CIO Director, Upstream IS Team Leader Applic. Specialist  Build new revenue (Corporate financial objective)  Eg Implement Service Request System (SRS)  Eg Jointly define and manage Production Support application service expectations Objectives & Measures Cascade
  13. 13. ©ChangeDirector UK Ltd 2002-2017Page 13 Driving engagement and discretionary effort • “Who We Are” — The organisation’s objectives and strategy, how the organisation operates, and what senior leadership hopes to achieve • “Why We Exist” — The organisation’s mission and vision and why the organisation’s strategy and goals matter. • “How You Help Us Succeed” — How the employee’s role helps achieve the mission for which the organisation exists. New performance management practices • 10% of Fortune 500 companies have done away with the annual review • Aligning leadership behaviours to performance objectives • OKR (Objectives & Key Results) approach is gaining momentum with continuous performance reviews & appraisal • Tools emerging e.g. BetterWorks, Perdoo, Weekdone, 7Geese etc Objectives – Leading Practices
  14. 14. ©ChangeDirector UK Ltd 2002-2017Page 14 Measurement in Elite Sports…. “You make your own luck by training b***** hard in the week,” Dylan said. “It was not luck. I’d like to abolish luck. Our numbers show that: metres per minute, accelerations per minute, have doubled. Time getting off the floor, too. That is not luck. We have had to earn every victory.”
  15. 15. ©ChangeDirector UK Ltd 2002-2017Page 15 Measurement Effectiveness Survey Summary Only 20% of respondents agreed that they were using the right measures to drive performance improvement with 52% disagreeing and 28% neutral >60% of respondents didn't agree that i) measures were valued by their team; ii) that there was a process to manage and control measures; iii) that they were effective at using measurement to improve performance; and iv) that dashboards and reports were effective and reliable. 94% of respondents agreed that measurement should be treated with more priority. 89% of respondents agreed that it should be a core competency More than 75% of respondents felt that better measurement could lead to productivity gains of more than 10%. Even a 5% improvement is a huge opportunity relative to the effort and investment. 0% 1% 24% 50% 25% 0% 10% 20% 30% 40% 50% 60% Negligible impact Low impact <5% Moderate impact 5%+ High impact 10%+ Transformational impact 20%+ What productivity impact could better measurement have in your organization?
  16. 16. ©ChangeDirector UK Ltd 2002-2017Page 16 Measurement should be a core competency & discipline
  17. 17. ©ChangeDirector UK Ltd 2002-2017Page 17 Threatening Controlling Intangible Irrelevant Reporting Inspiring Empowering Tangible Meaningful Insights & Actions Immature v Mature Measures need to be applied in the right way
  18. 18. ©ChangeDirector UK Ltd 2002-2017Page 18 Process & measurement decomposition
  19. 19. ©ChangeDirector UK Ltd 2002-2017Page 19 Top Down Process Alignment with Measures  Inventory Location Accuracy  Average dock-to-stock time for receiving  % of accuracy in physical stock against system stock  % of Inventory incorrectly located  % of inventory with incorrect stock balances  Floor space utilization  Stored items per employee  %Warehouse space utilization  % of warehouse shrinkage  Inbound Volume Received  Receiving errors  % of unfinished received items  % of filled warehouse locations Sample measures
  20. 20. ©ChangeDirector UK Ltd 2002-2017Page 20 EBITDA Total Revenue OPEX Total revenue from Sales CAPEX Net Debt CAPEX v Revenue Net Debt / EBITDA Churn Net Additions (Gross- Disconnections ) Average Subscribers ARPU Violations cited by government Customer Satisfaction Index (CSI) % successful projects Number of customer complaints % of report accuracy Employee satisfaction First Call Resolution Stocking Levels % of staff under PMS Call Quality Ensure availability of skills metric Finance Customer Sales/Marketing Technical Customer service Stakeholder / Regulatory Learning & Growth (performance) Network Capacity / Availability Service Level (cust. Serv.) Operations Customer Loyalty (NPS) Savings vs. standard costs/prices Fraud/ leakage discovered Network Coverage HV & MV Revenue Contribution New products and services introduced Active Users (90 days act.) % attrition of key staff Legal / audit Rate of achieving set targets Order Processing Turnaround 100% audit coverage of biz processes Compliance, fraud discovered Marketing cost optimisation metric 3G Coverage Cost of Sales Loss rate Net Cash? Measurement Cause & Effect Mapping
  21. 21. ©ChangeDirector UK Ltd 2002-2017Page 21 Measurement Process Identify Request Plan Build Operational Stopped Analyst Measure Ops Measure Ops BI/IT Ops Measure Ops Measure Ops
  22. 22. ©ChangeDirector UK Ltd 2002-2017Page 22 • Teams collaborate to design the measures that matter to them • Measures are explicit and meaningful - aligned with objectives and processes • Measurement deployed as a process and core competency • Measures are governed - cull the ones that are not being used • Measures are designed not brainstormed • outcomes and results not tasks • dependencies and drivers are understood • Measurement success recognised, poor performance resolved supportively Measurement Leading Practices
  23. 23. ©ChangeDirector UK Ltd 2002-2017Page 23 Measurement also drives Value… Value = Benefits – Costs = ROI Value is financial or non-financial and can always be measured
  24. 24. ©ChangeDirector UK Ltd 2002-2017Page 24 Maximising Value and Return on Investment Better measurement and strategic alignment Better alignment between delivery and outcomes Greater ownership & accountability for realisation Value i.e. Return on Investment Time Better & more timely investment decisions Huge Potential Gains TPV = Total Portfolio Value Huge Potential Losses More effective risk management with better estimation
  25. 25. ©ChangeDirector UK Ltd 2002-2017Page 25 Fortune 500 companies are looking to save $300bn / annum
  26. 26. ©ChangeDirector UK Ltd 2002-2017Page 26 Beneficiaries need to forecast & manage benefits – it shouldn’t be the project’s responsibility… Spend Target $450m Project A Project B Project C Project D GAP $9m Savings Target $36m Benefit forecasts are unclear and we don’t know what we’ve committed to Planned changes to achieve targets aren’t synchronized with project capability delivery Projects are de-scoping to hit deadlines without confirming the benefit impact Projects don’t deliver value Beneficiaries aren’t in control Overall targets aren’t achieved Beneficiary The same approach applies to non financial benefits
  27. 27. ©ChangeDirector UK Ltd 2002-2017Page 27 Use Operational Measures to Drive Value Creation Beneficiaries aren’t always using the right measures to drive value creation and performance improvement Inaccurate benefit estimation Measures aren’t driving improvement Benefits not tracked or realized Significant amount of uncertainty on whether benefits are achievable. Increased risk of doing the wrong things %Assumption Based Value Driver Based Poor transparency about how capabilities and changes translate into measurable benefits & outcomes
  28. 28. ©ChangeDirector UK Ltd 2002-2017Page 28 What information is stored and how is it structured? Strategy Theme Outcome Objective Measure Project Program Savings & Benefits Cost Organization Level2 Structure Level1 Structure Level3 Structure • Division • Mega Process • Unit • Process • Sub Division • Major Process Deliverable Or Product Organization Level Engagement Level Structural Levels Content Level Profile Level Scenarios Risks Issues Actions Comments Generic Content Person / User Strategy & Value Maps Measure Profile Values (Y, Q, M) Benefit Values (Y, Q, M) Cost Profile Values (Y, Q, M)
  29. 29. ©ChangeDirector UK Ltd 2002-2017Page 29
  30. 30. ©ChangeDirector UK Ltd 2002-2017Page 30 CEO Failures – the $10bn+ club Kwon Oh-Hyun, Martin Winterkorn, Tony Hayward, Akio Toyada, “Our problem is not about the strategy itself, but about our execution of it”
  31. 31. ©ChangeDirector UK Ltd 2002-2017Page 31 • Brexit uncertainty • Economic threats • Markets & currency • Political threats • Automation • Digital disruption • Cyber crime • Global debt • Protectionism • Other threats… Strategic Threats - Enough to keep the CEO up at night
  32. 32. ©ChangeDirector UK Ltd 2002-2017Page 32 LikelihoodConsequence >20% Opex <0.1% Opex <0.5% Opex <5% Opex <20% Opex X Almost Certain 50/50 Likely 1 in 6 Possible 1 in 36 Unlikely 1 in 100 Rare 1 in 1000 Catastrophic Major Moderate Minor Insignificant = Criticality Risk Management – Assessing Criticality
  33. 33. ©ChangeDirector UK Ltd 2002-2017Page 33 Governance & Management of Risk
  34. 34. ©ChangeDirector UK Ltd 2002-2017Page 34 Sample: Procurement Value Realisation Dashboard
  35. 35. ©ChangeDirector UK Ltd 2002-2017Page 35 Case Study: Operation Quest Measurement Framework
  36. 36. ©ChangeDirector UK Ltd 2002-2017Page 36 Case Study: Etihad Airways
  37. 37. ©ChangeDirector UK Ltd 2002-2017Page 37 Closing thoughts Getting measurement right, has a profound and transformational effect, on performance and improvement Measurement needs to be treated with more priority - as a process, core competency & skill Benefits need to be owned and managed by the beneficiaries - the project’s customers – with their own improvement plans across all projects.
  38. 38. ©ChangeDirector UK Ltd 2002-2017Page 38 Summary Survey Slides ANDREW HUDSON +44 7776 145009