This document discusses using key performance indicators (KPIs) for tracking strategy and driver-based budgeting. It outlines best practices for KPI design and implementation, including ensuring KPIs are defined and agreed upon, using both leading and lagging indicators, addressing measurability creatively, and updating KPIs as needed. The document also discusses integrating KPIs with driver-based planning and forecasting by linking KPIs to strategic objectives and cascading drivers from strategy to operations.
Menciptakan Kesuksesan Pertumbuhan Jangka Panjang- Creating Successful Long T...Yuli Eko
Adalah sebuah presentasi kelompok dalam mata kuliah Manajemen Pemasaran kami yang merujuk pada buku Kotler & Keller - Marketing Management 14th edition
An Introduction to Digital Credit: Resources to Plan a DeploymentCGAP
This is a workshop/course offering guidance in developing new digital credit products. This content is designed for a broad audience of banks, mobile operators, lenders, and fintech firms. It may also be of interest to regulators, policy makers and investors/donors.
With any comments or to request more materials (including the financial model [Excel] or original PPT presentation with detailed presenter notes), please write to cgap [@] worldbank.org.
Menciptakan Kesuksesan Pertumbuhan Jangka Panjang- Creating Successful Long T...Yuli Eko
Adalah sebuah presentasi kelompok dalam mata kuliah Manajemen Pemasaran kami yang merujuk pada buku Kotler & Keller - Marketing Management 14th edition
An Introduction to Digital Credit: Resources to Plan a DeploymentCGAP
This is a workshop/course offering guidance in developing new digital credit products. This content is designed for a broad audience of banks, mobile operators, lenders, and fintech firms. It may also be of interest to regulators, policy makers and investors/donors.
With any comments or to request more materials (including the financial model [Excel] or original PPT presentation with detailed presenter notes), please write to cgap [@] worldbank.org.
What does the EU Non-Financial Reporting Directive mean for you?FrameworkESG
The European Union recently adopted a directive that will mandate sustainability reporting starting in 2017. Under the new law, a company must report on environmental impacts, social matters, human rights, anti-corruption, and diversity if it meets certain size or classification requirements.
This infographic was originally published at:
http://framework-llc.com/eu-mandates-esg-disclosures/
To find out how your company may need to adapt with increased regulation, contact us: info@framework-llc.com.
The term “nonfinancial information” is often used to refer to data on environmental issues, but in reality it covers a much broader area. Accountants consider “Nonfinancial information to be the additional items in an annual report beyond the financial statements.” But, in the marketplace outside of accounting, the term nonfinancial information is used more broadly. Nonfinancial information involves issues related to: sustainability; corporate responsibility; environmental, social and governance (ESG); ethics; human capital; and environment, health and safety (EH&S). Although described as “nonfinancial,” the information involved is typically indirectly correlated with an organization’s financial performance and outlook, especially when assessed over time. Moreover, nonfinancial performance also impacts tangible asset value and can be tied to intangible assets, including brand reputation, intellectual capital and an organization’s market value. By 2015, the implied intangible asset market value of the S&P 500 was an average of 84% of total market value, leaving a mere 16% attributable to the physical assets of an organization, according to Ocean Tomo’s updated “Components of S&P 500 Market Value” study.
Priority Based Budgeting - City of CincinnatiChris Fabian
Confronted with the 'new normal' of flat or declining revenues, spiraling health care and pension costs, and persistent structural imbalances, the City of Cincinnati chose Priority Based Budgeting an alternative to the traditional incremental budgeting approach that automatically makes this year's budget the basis for next year's spending plan.
Council approved the administration's recommendation to hire the Center for Priority Based Budgeting (Center for PBB) to help with the intensive citizen engagement that drives the new approach. According to Council: “Priority-driven budgeting offers a common-sense, strategic alternative to conventional budgeting. It creates a fundamental change in the way resources are allocated by using a collaborative, evidence-based approach to measure services against community priorities. By bringing together community leaders and citizens to determine strategic priorities, the city can align resources with what the community values most, and create service efficiencies and innovation.”
For 2013, the City faces a projected $34.0 million budget deficit for the General Fund Operating Budget and will need to cut spending and increase revenues to fill this need.
Priority Based Budgeting - How to respond to Downturn and AusterityMalcolm Anthony
Priority Based Budgeting [PBB] is a robust, participative process that enables organisations to achieve a balanced financial plan, even in the most challenging environments.
PBB has been helping organisations achieve challenging financial and operational goals for over thirty years. Unsurprisingly it has seen a significant resurgence in interest and uptake since 2008 as organisations, around the world, have sought to manage the implications of downturn and fiscal austerity.
PBB teaches managers, at all levels in an organisation, to manage their own destiny and deliver change that they and their teams truly believe in. Change which also, collectively, results in the achievement of the organisations wider goals.
From the Harvard Business Press Case study of "Plan Operations- Sales Forecast, resource capacity and Dynamic budgets" By Prof. Kaplan and Prof. Norton. Presented as a class work in IoBM-Karachi
OKRs and driver based plans by lamorte - aug 2014 san franciscoBen Lamorte
Presented at Business Forecasting 2014 in San Francisco, August 2014. Includes 5 best practices for making driver-based plans work and focuses on Objectives and Key Results.
Sap budgeting, planning and forecasting survey jan 2014Clinton Jones
My thanks again to you for your participation in this follow on survey.
A summary of the results has been prepared and published here on slideshare for you to access
If you would like a PDF version then please just drop me an email and I will send it to you by reply mail.
Why and how to build a Balanced Scorecard for a startup companyAleksey Savkin
Startup company need to have a crystal-clear understanding of their strategy, and need to explain the idea to the potential investors.
Learn more http://www.bscdesigner.com/bsc-for-a-startup.htm
What does the EU Non-Financial Reporting Directive mean for you?FrameworkESG
The European Union recently adopted a directive that will mandate sustainability reporting starting in 2017. Under the new law, a company must report on environmental impacts, social matters, human rights, anti-corruption, and diversity if it meets certain size or classification requirements.
This infographic was originally published at:
http://framework-llc.com/eu-mandates-esg-disclosures/
To find out how your company may need to adapt with increased regulation, contact us: info@framework-llc.com.
The term “nonfinancial information” is often used to refer to data on environmental issues, but in reality it covers a much broader area. Accountants consider “Nonfinancial information to be the additional items in an annual report beyond the financial statements.” But, in the marketplace outside of accounting, the term nonfinancial information is used more broadly. Nonfinancial information involves issues related to: sustainability; corporate responsibility; environmental, social and governance (ESG); ethics; human capital; and environment, health and safety (EH&S). Although described as “nonfinancial,” the information involved is typically indirectly correlated with an organization’s financial performance and outlook, especially when assessed over time. Moreover, nonfinancial performance also impacts tangible asset value and can be tied to intangible assets, including brand reputation, intellectual capital and an organization’s market value. By 2015, the implied intangible asset market value of the S&P 500 was an average of 84% of total market value, leaving a mere 16% attributable to the physical assets of an organization, according to Ocean Tomo’s updated “Components of S&P 500 Market Value” study.
Priority Based Budgeting - City of CincinnatiChris Fabian
Confronted with the 'new normal' of flat or declining revenues, spiraling health care and pension costs, and persistent structural imbalances, the City of Cincinnati chose Priority Based Budgeting an alternative to the traditional incremental budgeting approach that automatically makes this year's budget the basis for next year's spending plan.
Council approved the administration's recommendation to hire the Center for Priority Based Budgeting (Center for PBB) to help with the intensive citizen engagement that drives the new approach. According to Council: “Priority-driven budgeting offers a common-sense, strategic alternative to conventional budgeting. It creates a fundamental change in the way resources are allocated by using a collaborative, evidence-based approach to measure services against community priorities. By bringing together community leaders and citizens to determine strategic priorities, the city can align resources with what the community values most, and create service efficiencies and innovation.”
For 2013, the City faces a projected $34.0 million budget deficit for the General Fund Operating Budget and will need to cut spending and increase revenues to fill this need.
Priority Based Budgeting - How to respond to Downturn and AusterityMalcolm Anthony
Priority Based Budgeting [PBB] is a robust, participative process that enables organisations to achieve a balanced financial plan, even in the most challenging environments.
PBB has been helping organisations achieve challenging financial and operational goals for over thirty years. Unsurprisingly it has seen a significant resurgence in interest and uptake since 2008 as organisations, around the world, have sought to manage the implications of downturn and fiscal austerity.
PBB teaches managers, at all levels in an organisation, to manage their own destiny and deliver change that they and their teams truly believe in. Change which also, collectively, results in the achievement of the organisations wider goals.
From the Harvard Business Press Case study of "Plan Operations- Sales Forecast, resource capacity and Dynamic budgets" By Prof. Kaplan and Prof. Norton. Presented as a class work in IoBM-Karachi
OKRs and driver based plans by lamorte - aug 2014 san franciscoBen Lamorte
Presented at Business Forecasting 2014 in San Francisco, August 2014. Includes 5 best practices for making driver-based plans work and focuses on Objectives and Key Results.
Sap budgeting, planning and forecasting survey jan 2014Clinton Jones
My thanks again to you for your participation in this follow on survey.
A summary of the results has been prepared and published here on slideshare for you to access
If you would like a PDF version then please just drop me an email and I will send it to you by reply mail.
Why and how to build a Balanced Scorecard for a startup companyAleksey Savkin
Startup company need to have a crystal-clear understanding of their strategy, and need to explain the idea to the potential investors.
Learn more http://www.bscdesigner.com/bsc-for-a-startup.htm
Best Practices in Implementing and Delivering Value from Your CPM SolutionsProformative, Inc.
View on Proformative: http://www.proformative.com/resources/presentation-best-practices-implementing-delivering-value-your-cpm-solutions
The CFO’s role has evolved from traditional reporting and controlling, to decision support and strategic execution. There is a growing expectation that the CFO will be a trusted adviser to the executive team, and will lead the Finance organization to embrace the role of business partner. This demanding transition has been driven by the desire to raise the bar and deliver value for investors and other key stakeholders.
In this best practice workshop, learn from seasoned Finance experts how best in class finance functions have used corporate performance management (CPM) as a foundation for driving these necessary changes, and for leading the finance organization into a new, value-added role.
In summary, in attending this workshop you will find:
* A roadmap for integrating strategic planning, operational planning, budgeting, and reporting into a complete CPM solution
* Operational readiness: How to tell if your Finance organization is up to the challenge
* How to leverage your existing CPM solution to enhance and improve finance operations processes
* Tips and traps for selecting the right CPM solution for your organization
* Bonus Material: Results of recent survey of 150+ companies experience with Rolling Forecast
Presentation delivered at ProformaTECH 2014 - http://www.proformatech.com
Workshop
Extending business performance within the organisation - The role of FinanceMehdi J. Alaoui
Finance dpt and particularly the CFO has a key role to play in the business performance implementation:
- Performance Management needs a frame: Process Management
- Momentum must be led by top management: Lead by example
- All the company need to be aligned: Integrated performance management systems rely on a comprehensive,
- Involvement and commitment of People is a key success factor
- Integrated set of Key Performance Indicators (KPIs) that manage performance throughout and across all levels of an organization
- Continuous improvement by increasing understanding of the core issues driving the performance
- Company must be leaner to be stronger and faster
What ISO Management Systems can learn from Balanced Scorecard?PECB
Balanced Scorecard is a Strategy Management System developed by Professors Kaplan and Norton. It is probably the most comprehensive system/tool in the modern world. It allows an organization balance its Strategy across 4 perspectives (Financial, Customer, Internal Process and Learning and Growth Perspectives). It further lets an organization break down each of these 4 perspectives based on 4 criteria which are Objectives, Measures, Target and Initiatives. There is a lot that ISO Implementers and Auditors need to learn from a Balanced Scorecard that will help in better delivering ISO engagements. This webinar will take a critical look at what is Balanced Scorecard and what ISO Consultants need to know to about it.
Main points covered:
• What is a Balance Scorecard?
• How Balance Scorecard allows organization to balance its Strategy across 4 perspectives (Financial, Customer, Internal Process and Learning and Growth Perspectives)
• How an organization breaks down each 4 perspective based on 4 criteria (Objectives, Measures, Target and Initiatives)
Presenter:
This webinar was presented by Orlando Olumide Odejide, who is the Chief Trainer for Training Heights Limited. Orlando is an experienced Enterprise Architect and Programme Director working on various technology solutions including SharePoint, SQL Server, Oracle, SAP, Odoo and Qlikview Technologies for clients in the Financial Services, Government and Manufacturing Sectors.
Link of the recorded session published on YouTube: https://youtu.be/XPPj9XhXl0s
Using KPIs for Tracking Strategy and Driver Based Budgeting
1. Using KPIs for Tracking Strategy and
Driver Based Budgeting
October 24, 2016
Jim Robertson
Matrix – Technology Finance
2. Agenda
• Decide how your organization will use KPIs
• KPI Design Best Practices
• Successful Implementation
• Integrating KPIs with driver-based planning and
forecasting
3. Key Performance Indicators Defined
• Performance measures organizations use to evaluate progress
towards achieving strategic objectives
• Measures: can be measured
• Organizations: all sorts
• Evaluate: reviewed periodically and forms the basis for action
• Strategic Objectives: not tactical or operational
4. KPIs Link Strategy to Targets and Performance
• Strategic management
systems provide a coherent
framework for executing strategy
• Facilitates the inclusion of
strategy maps and balanced
scorecards but other approaches
are acceptable
• Emphasizes the process of
strategic management not
performance measurement
6. KPIs Can Be Organized in Different Frameworks
1903: Dupont Powder Company’s
Pyramid of Financial Ratios
1992: Lynch and Cross
Performance Pyramid
1996: Kaplan and Norton Balanced Scorecard
6
8. Agenda
• Decide how your organization will use KPIs
• KPI Design Best Practices
• Successful Implementation
• Integrating KPIs with driver-based planning and
forecasting
9. • Financial KPIs are generally objective and the measure can be defined and
calculated the same way over time,
– Can be differences of opinion on how specific KPIs are defined and calculated.
– Revenue
• Finance - after bad debt reserves sourced from G/L
• Sales - Orders received before bad debt reserves sourced from CRM
• Accounting: GAAP/IFRS definitions
• Non-Financial KPIs can be significantly harder to define and measure
– Market Share
– Customer/Employee Satisfaction
– Strong Leadership
Reaching agreement on the specifics of each KPI may take more time than expected,
but is a necessary exercise to ensure alignment.
Principle 1: KPIs are Defined and Agreed On
10. Increased
Productivity
Skills and Training Leadership Capability
High Performing
Employees
Improved
Cycle Time
Reduced
Rework
Reduced Unit Costs Effective/Efficient
Business Processes
Satisfied Clients
Reduced Cost Per Sale
Increased Sales Improved Margins
Increased Shareholder Returns
Innovation and Learning
Perspective
Internal Business
Process Perspective
Customer
Perspective
Financial Perspective
Employee InnovationTool Usage
Customer & Market Growth
Improved Profitability & Cash Flow
leadingmeasureslaggingmeasures
Principle 2: Use Both Leading and Lagging Indicators
6
• Leading indicators (e.g. decrease in customer orders) provide an early warning system and possibly provide enough time
for action to be taken.
• Understanding the relationships between leading and lagging KPIs helps to better understand how to improve business
performance and provide an early warning system of how well the company is performing.
11. Financial KPIs
• Almost all organizations use financial KPIs, but financial performance not always the
top objective.
• GAAP/IFRS defined: absolute or change in revenue, gross margin, and operating
margin
• Asset-based measures such as ROA, ROI, ROE, EVA, economic value
• Market-based measures such as EPS, total shareholder return, CFRO
• All of these measures can also be defined as change from the prior period, or an
average growth rate over multiple periods.
• An advantage of financial KPIs is that they are easily defined and reported on.
• Can be difficult to understand the relationship between operating activities and
financial results.
12. Non-Financial KPIs
• Many Fortune 500, FTSE 100, and other equivalent index companies use
nonfinancial KPIs, reflecting the great adoption of the principles espoused by Kaplan
and Norton.
• Nonfinancial measures can be used broadly, and can include measures relating to
customers, employees, capabilities, processes, suppliers, competitors, technology,
and regulators.
13. Principle 3: Creative Measurability
• Employee satisfaction
- It is possible to start surveying employees to collect this KPI, but this may not be feasible
for a variety of reasons.
- Senior management can develop a list of criteria by which they can assess employee
satisfaction, and as a group discuss and determine this KPI on a scale of 1 to 5.
• Market share
- Market share data may not be available for your company.
- One solution is to identify a number of competitors that are publicly traded and use this
group as a surrogate measurement of the market size and growth.
- Subjective assessment of market share or change in market share is the best one
can do.
14. Principle 4: Update KPIs as Needed
• KPIs need to be regularly reviewed and updated, revised, replaced, or deleted when they
no longer accurately reflect progress towards achievement of a strategic objective.
• There are straightforward situations when a KPI should be deleted
– After a strategic objective is achieved it is no longer necessary to use a KPI to measure its
attainment.
– Efforts to obtain the KPI are no longer considered worth the effort.
• Time spent on research and use of timecards
• KPIs may also need to be replaced when they are no longer critical.
– ROA may be replaced by EVA, another asset-based measure.
– Focus of the company shifts.
• For example, RFIs replaced by new customer RFPs when the company’s focus on its
sales pipeline shifts.
• Adhere to a set of KPIs for at least a year so that performance can be evaluated
consistently.
15. Agenda
• Decide how your organization will use KPIs
• KPI Design Best Practices
• Successful Implementation
• Integrating KPIs with driver-based planning and
forecasting
16. Changing the Culture: Becoming a High
Performance Organization
• Reward people who get things done
• Face the brutal facts honestly
• Reward cooperation
• Clarify ownership and accountability
17. Encourage the Use of KPIs
• Introducing KPIs can be a new process for a company, and it
can be expected that there will be some who may resist the
change.
• KPIs can be seen as threatening, and managers need to be
reassured that using KPIs is a good thing for the business.
– KPIs should help them make better decisions, not get in the way of
them.
• Actively engage managers in the design, implementation,
planning, and execution of KPIs.
• Transfer or termination may needed if key employees don’t get
on board or become passive-aggressive.
18. Use IT to Help Implementation
• IT is critical to accessing data and staging/loading into the reporting
and analysis front-ends
• Enterprise-wide financial KPIs can be challenging to acquire:
– Multiple financial systems, currencies
– Multiple vendors
– Consolidating entries remaining at a parent level and not pushed down
– Manual consolidation using trial balances
• Nonfinancial KPIs
– No statutory reporting requirements for non-financial measures
– Multiple operational and transactional systems— in some cases in the
hundreds
– Collecting and calculating KPIs from systems with different data
structures requires strong data governance
19. Don’t Wait for Perfection, Just Start!
• Begin reporting and using KPIs
– Work out problems as you go along
– Process will identify issues you weren’t aware of before you started
– 80/20 rule and the value of perfect information
• Triage using a matrix
21. 21
D x V x S x A > Resistance to Change
• Dissatisfaction with Status Quo
– Burning issue helps
• Vision of Future State
– Somebody has to know what a better world looks like and how to move an organization there
– Right tools and processes in the right place at the right time
• Status of 1st Steps towards change
– Something has started
• Ability to Change
– Sponsor team
• Process and change management skills
• Vanguard of the revolutionary movement
– Company – how used is it to change?
– Top Mgmt support – great if it’s there, but you can structure an approach which includes
winning their confidence by demonstrating how planning helps makes better decisions.
22. Agenda
• Decide how your organization will use KPIs
• KPI Design Best Practices
• Successful Implementation
• Integrating KPIs with driver-based planning and
forecasting
23. What is Driver Based Planning?
• Method of planning/forecasting financial performance based on
what drives the business forward
– Leading KPIs as predictors – “if it’s raining the creek will rise”
– Looks forwards not backwards
– Drivers are linked to strategic objectives
• Pick the right drivers
– Selected carefully so that the organization focuses on the right
thing
– Cascade from strategy to operations
– Measurable and obtainable on a periodic basis
24. Strategy Map Forms the Basis for Driver Based Budgeting
Leading/Input
Measures
Lagging/Output
Measures
28. Building KPIs into Driver-Based Model
Operating Income
Revenue
Labor
Billed
Utilization
New
Projects
Proposal
Win Rate
Backlog
Service
Cross-sell/Up-sell
Rate
Hold
Expense
COGS
Labor
Hours
Available
Recruit Critical
SkillsG&A
29. 29
Using KPIs to Tighten Linkages between Strategy and Budgeting
• “Strategies without tracking and accountability are just hot air”
• Opportunities to improve regardless of where you are now
– Organizing KPIs
– Linking KPIs to strategy and integrating into quarterly operating reviews
– Developing budgets based on strategic KPI drivers
– Use KPIs and organizing frameworks for alignments
• Integrated processes make sure nothing (well, as little as possible) falls
between the cracks
Strategic Plan (3+ years)
Strategy Maps and KPIs (1-3 years)
Strategic Initiatives and Budget (1 year)
Quarterly Reviews and Adjusting
• Tools can help, but introducing or using a tool at the wrong time will wreak
havoc – start manually and then automate
• Start!
