Foundation Stones for Implementing Key Performance Indicators

1. Foundation Stones for ImplementingKey Performance Indicators Yale Consultancy SdnBhd info@yaleconsultant.com 03- 2021 0577 Yale Consultancy Sdn Bhd

2. Four foundation stones • 1. Partnership with the staff, unions, key suppliers, and key customers • 2. Transfer of power to the front line • 3. Integration of measurement, reporting, and improvement of performance • 4. Linkage of performance measures to strategy Yale Consultancy Sdn Bhd

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4. Partnership Foundation Stone • Recognition by all stakeholders that significant organizational and cultural change requires a mutual understanding and acceptance of the need for change and how it is to be implemented • Commitmentto the establishment and maintenance of effective consultative arrangements with unions, employee representatives, and employees • Joint development of a strategy for the introduction of best practice and KPIs • Extensionof the notion of partnership to include and involve the organization’s key customers and key suppliers Yale Consultancy Sdn Bhd

5. Transfer of Power to the Frontline Foundation Stone • Successful performance improvement requires empowerment of the organization’s employees, particularly those in the operational “front line.” • Steps involved: • The operation of effective top-down and bottom-up communication, including significant access to strategic organizational information • The empowerment of employees to take immediate action to rectify situations that are negatively impacting KPIs (e.g., able to authorize doubling up of cleaning staff in order to speed up turnaround time for an anticipated late plane) • Devolving responsibility to the teams to develop and select their own performance measures • Provision of training on: empowerment, KPIs, the organization’s critical success factors, and process improvement methods • Additional support for those employees with literacy, numeracy, or other learning-related difficulties Yale Consultancy Sdn Bhd

6. Integration of Measurement, Reporting, and Improvement of Performance Foundation Stone • Integrated framework so that performance is measured and reported in a way that results in action. • Organizations should be reporting events on a daily/weekly/monthly basis, depending on their significance, and these reports should cover the critical success factors (CSFs). • The human resources (HR) team has an important role to ensure that the workforce perceives performance measurement in a positive way Yale Consultancy Sdn Bhd

7. Integration of Measurement, Reporting, and Improvement of Performance Foundation Stone • Implications of the measurement, reporting, and improvement of performance foundation stone include: • The development of performance-improvement strategies and performance measures becomes an iterative process in time. That is, the direction and context for change progressively become modified and informed as teams are increasingly empowered and develop innovative solutions and ideas. • There needs to be a major revamp of reporting so that it is more concise, timely, efficient to produce, and focused on decision making. • Organizational performance measures will be modified in response to the performance measures developed at team level. Yale Consultancy Sdn Bhd

8. Linking Performance Measures toStrategy Foundation Stone • Performance measures are meaningless unless they are linked to the organization’s current CSFs, the balanced scorecard (BSC) perspectives, and the organization’s strategic objectives. • It is important that an organization has a well-considered and well-constructed strategy. These strategies need to link back to the six BSC perspectives. • You may find when you cross-check your strategies to these perspectives that some perspectives might not be covered, in which case a revisit to the strategies may be required. Yale Consultancy Sdn Bhd

9. Implications of the linking of performance measures • CSFs have to be determined in advance of the performance measures. • Balanced scorecard methodology must be clearly understood. • The KPIs, performance indicators (PIs), and key result indicators (KRIs) that an organization is using should be linked. • There should be an apparent common thread that is documented and reported to management via a report and to staff via a notice board and intranet page. Yale Consultancy Sdn Bhd

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11. Conceptual Framework • Ascertaining an organization’s CSFs is a major exercise, and one that is often only obliquely tackled. • CSFs identify the issues that determine an organization’s health and vitality. When you first investigate CSFs, you may come up with 30 or so issues that can be argued are critical for the continued health of the organization. • The second phase of thinning them down is easy, as the more important CSFs have a broader influence cutting across a number of BSC perspectives. • Better practice suggests that there should be only between five and eight CSFs. Once you have the right CSFs, finding the KPIs is much easier, as they will reside within these CSFs. Yale Consultancy Sdn Bhd

12. Mission, Vision, Value and Strategy • Mission – What do we do? Why do we exist? • It should be short and inspiring • Vision – What do we want to be? (Notice that this is not about doing. It is about being in the future. ) What we are now? • What they will be in future, nor about what the organisation will do to get there. • Timeframe depends on speed of change in industry • Usually 3-5 years. • Values – What do we believe in? How do we act? • It shows their leadership values • It should be promoted by the leaders. Yale Consultancy Sdn Bhd

13. Balanced Scorecard 1. Financial—the strategy for growth, profitability, and risk viewed from the perspective of the shareholder. 2. Customer—the strategy for creating value and differentiation from the perspective of the customer. 3. Internal Business Processes—the strategic priorities for various business processes that create customer and shareholder satisfaction. 4. Learning and Growth—the priorities to create a climate that supports organizational change, innovation, and growth. Yale Consultancy Sdn Bhd

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16. Six-Perspective Balanced Scorecard Yale Consultancy Sdn Bhd

17. Financial Perspective • The typical destination for profit-seeking enterprises is a significant increase in shareholder value. • Two basic approaches • Revenue growth • Productivity • A revenue growth strategy generally has two components: • build the franchise with revenue from new markets, new products, and new customers; • increase sales to existing customers by deepening relationships with them, including cross-selling multiple products and services, and offering complete solutions. • A productivity strategy also generally has two components: • improve the cost structure by lowering direct and indirect expenses; • utilize assets more efficiently by reducing the working and fixed capital needed to support a given level of business. Yale Consultancy Sdn Bhd

18. Customer Perspective • The unique mix of product, price, service, relationship, and image that a company offers. • It defines how the organization differentiates itself from competitors to attract, retain, and deepen relationships with targeted customers. • It helps an organization connect its internal processes to improved outcomes with its customers • Identifies the intended outcomes from delivering a differentiated value proposition. Yale Consultancy Sdn Bhd

19. Companies Differentiation • Operational excellence • excel at competitive pricing, product quality, product selection, lead time, and on-time delivery • Customer intimacy • stress the quality of its relationships with customers, including exceptional service, and the completeness and suitability of the solutions it offers individual customers. • Product leadership • concentrate on the functionality, features, and performance of their products and services Yale Consultancy Sdn Bhd

20. Internal Process Perspective • captures these critical organizational activities, which fall into four high-level processes: • 1. Build the franchise by spurring innovation to develop new products and services and to penetrate new markets and customer segments. • 2. Increase customer value by expanding and deepening relationships with existing customers. • 3. Achieve operational excellence by improving supply-chain management, internal processes, asset utilization, resource-capacity management, and other processes. • 4. Become a good corporate citizen by establishing effective relationships with external stakeholders. Yale Consultancy Sdn Bhd

21. Learning and Growth Perspective • The foundation of any strategy • Managers define the employee capabilities and skills, technology, and corporate climate needed to support a strategy. • These objectives enable a company to align its human resources and information technology with the strategic requirements from its critical internal business processes, differentiated value proposition, and customer relationships. • After addressing the learning and growth perspective, companies have a complete strategy map with linkages across the four major perspectives. Yale Consultancy Sdn Bhd

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23. Examples Yale Consultancy Sdn Bhd

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