Key Performance Indicators (KPI): Developing, Implementing, and Using Winning KPIs

322 Pages·2010·6.04 MB·English

by  David Parmenter

(continued from front fl ap) P $49.95 USA/$59.95 CAN
A Second
Praise for RM K E Y
By exploring measures that have transformed
businesses, this proactive guide has developed KEY PERFORMANCE INDICATORS, EN Edition KEY PERFORMANCE INDICATORS
a methodology that is breathtaking in its sim- T
E
plicity and yet profound in its impact. Written Second Edition R Developing, Implementing,
by KPI expert David Parmenter, it has been said and Using Winning KPIs
that this book is the missing link between the
balanced scorecard work of Robert Kaplan and ““David Parmenter has a knack of getting to the heart of the issue, a Second Edition
K
David Norton and the reality of implementing ggood trait for a KPI consultant. His book is no different: David minces P E R F O R M A N C E
performance measurement in an organization. ffew words about what a key performance indicator is and isn’t and E Key performance indicators (KPIs), while used
hhow true KPIs can dramatically impact business performance. This Y commonly around the world, have never
DAVID PARMENTER is ppragmatic guide is chock-full of useful forms and tips that will enable until now been clearly defi ned. Management
an international present- aany burgeoning performance manager to succeed in creating effec- P personnel have identifi ed measures as KPIs
ttive KPIs.” E
er who is known for his though these measures have never been KPIs.
Photo: L tlihvoeluyg shests-ipornosv, owkhiinchg haanvde — WTDaWynI eR Eecsekearrscohn, Director RFO Tmheea sularceks ohfa su nldeedr stamnodsitn g moof nipteorrfionrgm aanncde
ance Law lined m taon syu obrsgtaannitziaatli ocnhsa.n Hgee “aDrtiacvlieds , haansd d wonheit eit paagpaeinrs— ohne phearfso hrmaravnesctee dm tehaes ubreesmt eidneta, sa nfrdo mcr atfhteed w tihdeem ar irnayto o af bsionogkles,, RM I N D I C A T O R S roefpteonr tibnege no ft hmee absaularensc etod fsaciol.r eTchaer dc,a sau balrtiyll ihanast
son is a leading expert in the easy to understand ‘how-to’ book. Not only does he support every concept with the original A tool that can only work if the appropriate
development of winning thought-leader’s ideas, case studies, and solid examples, but he also weaves them into an measures are in it.
N
KPIs, replacing the annual planning process overall best-practice KPI approach. This book is more than a ‘must-read’ . . . it is a ‘must-do’
C Fully revised and updated, Key Performance
with quarterly rolling planning, quick month- for every performance measurement practitioner.” E Indicators: Developing, Implementing, and Using
end processes, and converting reporting to a —B rett Knowles, Founder Winning KPIs, Second Edition represents a
decision-based tool. Parmenter’s work on KPIs pm2 - Performance Measurement & Management IN signifi cant shift in the way KPIs are developed
is recognized internationally as a breakthrough D and used, with an abundance of implementation
in understanding how to make performance Praise for the first edition I tools. This Second Edition includes new features
C
measures work. He has delivered workshops to
“Developing the right KPIs is a problem for most organizations. David Parmenter’s insight- A to assist you with their implementation:
thousands of attendees in many cities around
ful approach offers a practical guide that will help managers to overcome these problems T
the world including Sydney, Melbourne, Kuala Developing, (cid:127) A letter to the CEO
and turn concepts into reality in a timely way.” O
Lumpur, Singapore, Tehran, Johannesburg, —J eremy Hope, Cofounder and Director R (cid:127) A 12-step model for developing and using
Dublin, London, Manchester, Edinburgh, and Beyond Budgeting Roundtable and author of S KPIs with revised guidelines
Prague. Parmenter has worked for Ernst & Reinventing the CFO Implementing,
(cid:127) I mplementation guidelines for small to
Young, BP Oil Ltd, Arthur Andersen, and Price-
“This is a must-read book for all senior managers. The correct selection and deployment EdSe medium enterprises and not-for-profit orga-
wtWuaattelee orsh.f HoCuehs iaesCr atoe rroeepgdue rAlasc,r c awonruditn eitsra afno ftres lp liornow Efe nosfsg itloahnnead Iln aasnntidd- oamcf ehpaieesruvfironersgm. bTauhnsicisne i esms sae sasttsrruaatrieeggsh yit sf. oe. rs.w saenanrdtd iy aaeln tt doso pe mnrasacuntriyec aotlhr bgaaotn oaiklzl a trtheiosaotn ucsr lsceeealsre lcaytn etdhx pee lfwafoirnortsn awgr eph eafortf co‘kuremsyeda pn oecrne- itioncond and Using (cid:127) nHiozwat itoon bsrainstorm performance measures
business journals. He is also the author of Pare- formance indicators’ are and how they should be used as part of an integrated performance a D (cid:127) A kit to help you find your organization’s
to’s 80/20 Rule for Corporate Accountants (Wiley). improvement strategy.” nd ev critical success factors
Dmaavrkid.c oca.nnz .b He icso wnetbacsitteed w vwiaw p.daarvmidepnatremr@ewntaeyr-. —DC er.n Rtoreb ifno rM Oarngna, nDisiraetciotonra l Excellence Research, Using elopin Winning KPIs (cid:127) New examples and illustrations
com contains many white papers, articles, and Massey University & BPIR.com Ltd, New Zealand W g (cid:127) W orksheets, workshop programs, and ques-
freeware that will be useful to the reader. “With this book, David Parmenter has clearly established himself as the King of KPIs. Every- in , Im tionnaires
n p
thing you need to master and implement a KPI-driven strategy is here.” in le (cid:127) Over 300 performance measures
Jacket Image: © Getty Images —H arry Mills, author g K me (cid:127) U pdated templates for reporting perfor-
The Rainmaker’s Toolkit P n
I t mance measures
s in
g, (cid:127) A facilitator’s (consultant) resource kit
DAV I D PA R M E N T E R (cid:127) R eferences to “free” and “for fee” electronic
media to help save you time
(continued on back fl ap)
P1: OTA/XYZ P2: ABC
fm JWBT214-Parmenter December 20, 2009 7:53 Printer Name: Yet to Come
(continued from front fl ap) P $49.95 USA/$59.95 CAN
A
Praise for R
M
By exploring measures that have transformed
businesses, this proactive guide has developed KEY PERFORMANCE INDICATORS, EN KEY PERFORMANCE INDICATORS
a methodology that is breathtaking in its sim- T
E
plicity and yet profound in its impact. Written Second Edition R Developing, Implementing,
by KPI expert David Parmenter, it has been said and Using Winning KPIs
that this book is the missing link between the
balanced scorecard work of Robert Kaplan and ““David Parmenter has a knack of getting to the heart of the issue, a Second Edition
David Norton and the reality of implementing ggood trait for a KPI consultant. His book is no different: David minces
performance measurement in an organization. ffew words about what a key performance indicator is and isn’t and Key performance indicators (KPIs), while used
hhow true KPIs can dramatically impact business performance. This commonly around the world, have never
DAVID PARMENTER is ppragmatic guide is chock-full of useful forms and tips that will enable until now been clearly defi ned. Management
aany burgeoning performance manager to succeed in creating effec-
an international present- personnel have identifi ed measures as KPIs
ttive KPIs.”
er who is known for his though these measures have never been KPIs.
Ph thought-provoking and — Wayne Eckerson, Director The lack of understanding of performance
oto: L lively sessions, which have TDWI Research measures has led most monitoring and
an led to substantial change “David has done it again—he has harvested the best ideas from the wide array of books, reporting of measures to fail. The casualty has
ce La in many organizations. He articles, and white papers on performance measurement, and crafted them into a single, often been the balanced scorecard, a brilliant
w
son is a leading expert in the easy to understand ‘how-to’ book. Not only does he support every concept with the original tool that can only work if the appropriate
development of winning thought-leader’s ideas, case studies, and solid examples, but he also weaves them into an measures are in it.
KPIs, replacing the annual planning process overall best-practice KPI approach. This book is more than a ‘must-read’ . . . it is a ‘must-do’
Fully revised and updated, Key Performance
with quarterly rolling planning, quick month- for every performance measurement practitioner.”
Indicators: Developing, Implementing, and Using
end processes, and converting reporting to a —B rett Knowles, Founder
Winning KPIs, Second Edition represents a
decision-based tool. Parmenter’s work on KPIs pm2 - Performance Measurement & Management
signifi cant shift in the way KPIs are developed
is recognized internationally as a breakthrough
and used, with an abundance of implementation
in understanding how to make performance Praise for the first edition
tools. This Second Edition includes new features
measures work. He has delivered workshops to
“Developing the right KPIs is a problem for most organizations. David Parmenter’s insight- to assist you with their implementation:
thousands of attendees in many cities around
ful approach offers a practical guide that will help managers to overcome these problems
the world including Sydney, Melbourne, Kuala (cid:127) A letter to the CEO
and turn concepts into reality in a timely way.”
Lumpur, Singapore, Tehran, Johannesburg, (cid:127) A 12-step model for developing and using
—J eremy Hope, Cofounder and Director
Dublin, London, Manchester, Edinburgh, and Beyond Budgeting Roundtable and author of KPIs with revised guidelines
Prague. Parmenter has worked for Ernst & Reinventing the CFO
(cid:127) I mplementation guidelines for small to
Young, BP Oil Ltd, Arthur Andersen, and Price-
“This is a must-read book for all senior managers. The correct selection and deployment EdSe medium enterprises and not-for-profit orga-
wtuattee orhf oCuhsaeCrtoeroepde rAsc, caonudn itsa an ftesl lionw E nofg tlahned In asntid- oacf hpieervfionrgm baunscine emsse satsruatreegs yi s. e. s. saenndt iyael tt oso e mnsaunrye othrgaatn ailzla rteiosonusr sceelse catn tdh ee fwforortn agr ep eforfcourmsedan ocne itioncond nizations
Wales. He is a regular writer for professional and measures. This is a straightforward and practical book that clearly explains what ‘key per- (cid:127) How to brainstorm performance measures
business journals. He is also the author of Pare- formance indicators’ are and how they should be used as part of an integrated performance (cid:127) A kit to help you find your organization’s
to’s 80/20 Rule for Corporate Accountants (Wiley). improvement strategy.” critical success factors
David can be contacted via parmenter@way- —D r. Robin Mann, Director
(cid:127) New examples and illustrations
mark.co.nz. His website www.davidparmenter. Centre for Organisational Excellence Research,
com contains many white papers, articles, and Massey University & BPIR.com Ltd, New Zealand (cid:127) W orksheets, workshop programs, and ques-
freeware that will be useful to the reader. “With this book, David Parmenter has clearly established himself as the King of KPIs. Every- tionnaires
thing you need to master and implement a KPI-driven strategy is here.” (cid:127) Over 300 performance measures
Jacket Image: © Getty Images —H arry Mills, author (cid:127) U pdated templates for reporting perfor-
The Rainmaker’s Toolkit
mance measures
(cid:127) A facilitator’s (consultant) resource kit
(cid:127) R eferences to “free” and “for fee” electronic
media to help save you time
(continued on back fl ap)
ii
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fm JWBT214-Parmenter December 20, 2009 7:53 Printer Name: Yet to Come
Key Performance
Indicators
i
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Key Performance
Indicators
Developing, Implementing,
and Using Winning KPIs
Second Edition
DAVID PARMENTER
JohnWiley&Sons,Inc.
iii
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Copyright(cid:1)C 2010byDavidParmenter.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
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LibraryofCongressCataloging-in-PublicationData:
Parmenter,David.
Keyperformanceindicators:developing,implementing,andusingwinning
KPIs/DavidParmenter.
p.cm.
Includesindex.
ISBN978-0-470-54515-7(cloth)
1.Performancetechnology. 2.Performancestandards. 3.Organizational
effectiveness. I.Title.
HF5549.5.P37P372010
658.4(cid:2)013–dc22
2009035911
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
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Contents
Preface ix
Acknowledgments xix
CHAPTER1 Introduction 1
Key Result Indicators 2
Performance and Result Indicators 3
Key Performance Indicators 4
Management Models that Have a Profound
Impact on KPIs 16
Definitions 24
Notes 27
CHAPTER2 Foundation Stones for Implementing Key
Performance Indicators 29
Four Foundation Stones Guiding the
Development and Use of KPIs 29
Defining Vision, Mission, and Strategy 37
Note 39
CHAPTER3 Developing and Using KPIs: A 12-Step Model 41
Step 1: Senior Management Team Commitment 41
Step 2: Establishing a Winning KPI
Project Team 51
Step 3: Establishing a “Just Do It” Culture
and Process 55
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Contents
Step 4: Setting Up a Holistic KPI
Development Strategy 62
Step 5: Marketing the KPI System to
All Employees 67
Step 6: Identifying Organization-Wide
Critical Success Factors 74
Step 7: Recording Performance Measures
in a Database 74
Step 8: Selecting Team-Level Performance
Measures 77
Step 9: Selecting Organizational
Winning KPIs 86
Step 10: Developing the Reporting
Framework at All Levels 88
Step 11: Facilitating the Use of
Winning KPIs 96
Step 12: Refining KPIs to Maintain Their
Relevance 101
Notes 105
CHAPTER4 KPI Team Resource Kit 107
Using This Resource Kit 107
Step 1 Worksheet: Senior Management
Team Commitment 108
Step 2 Worksheet: Establishing a Winning
KPI Team 115
Step 3 Worksheet: Establish a “Just Do It”
Culture and Process for This Project 119
Step 4 Worksheet: Setting Up a Holistic
KPI Development Strategy 122
Step 5 Worksheet: Marketing the KPI
System to All Employees 125
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Contents
Step 6 Worksheet: Identifying
Organization-wide CSFs 132
Step 7 Worksheet: Comprehensive Recording
of Measures within the Database 132
Step 8 Worksheet: Selecting Team
Performance Measures 133
Step 9 Worksheet: Selecting
Organization-wide Winning KPIs 141
Step 10 Worksheet: Developing Display,
Reporting, and Review Frameworks
at All Levels 143
Step 11 Worksheet: Facilitating the Use
of KPIs 146
Step 12 Worksheet: Refining KPIs to
Maintain Their Relevance 146
CHAPTER5 Templates for Reporting Performance
Measures 155
Reporting Key Result Indicators in a
Dashboard to the Board 155
Reporting Performance Measures
to Management 163
Reporting Performance Measures to Staff 169
Graph Format Examples 172
Notes 184
CHAPTER6 Facilitator’s Resource Kit 185
Remember the Fundamentals 185
KPI Typical Questions and Answers 187
CHAPTER7 Critical Success Factors Kit 199
Benefits of Understanding Your
Organization’s CSFs 200
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Contents
Relevant Success Factors 204
Step 6: Identifying Organization-wide Critical
Success Factors 205
Finding the CSFs through a Relationship
Mapping Process 212
How I Organize the Critical Success Factor
Workshop 213
Note 222
Appendix 7A: Where to Look for Your
Success Factors 222
Appendix 7B: Letter Invite from the CEO 224
Appendix 7C: Success Factors Workshop
Planning Checklist 225
Appendix 7D: Workshop Instructions 227
Appendix 7E: Success Factor Matrix 233
CHAPTER8 Brainstorming Performance Measures 241
CHAPTER9 Implementation Variations for
Small-to-Medium Enterprises and
Not-for-Profit Organizations 243
Small-to-Medium Enterprises 243
Not-for-Profit Organizations 246
CHAPTER10 Implementation Lessons 253
How to Implement Winning KPIs
in 16 Weeks 253
Notes 265
Epilogue:ElectronicMediaAvailabletoYou 267
Appendix:PerformanceMeasuresDatabase 269
Index 295
viii