Executive program

Strategic Leadership
1. Strategic performance management
Strategic Leadership EP 2. Tools for strategic analysis
4. Performance Monitoring 3. Strategic frameworks
4. The magic pen game
5. Performance Monitoring
25 - 29 March 2024
Leo A. F. M. Kerklaan
Consultant, Lecturer and Author on Strategy 25 - 29 March 2024
Leo A. F. M. Kerklaan
Consultant, Lecturer and Author on Strategy
© Leo Kerklaan, 2024. All rights reserved. © Leo Kerklaan, 2024. All rights reserved.

Day 4 - Performance Monitoring The big picture

In this module you will learn how to decompose strategic objectives
into exactly measurable Key Performance Indicators
1.Good KPIs are 'SMART'
Mission Strategy Management
2.KPI - link between objective and action dashboard
Norma ve Strategic Key Performance
3.Examples of KPIs - template statements statements Indicators

4.Assignment
The insights gained by
Strategy House modeling are used to build the
-> nd objectives BSC (KPI’s)

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 Why KPI’s ?
 smart selected KPI’s show
the need for action
 help employees to
contribute to the strategy
 control:
not just steering
When you want to reach the top;
based on intuition you need chart and compass

Not too many KPI’s. We are actually It is not…

looking for the vital few KPI's. These A check, inspection
have a maximum of informatie value or veri cation

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Driving along to Las Vegas … The same applies in business …

Strategy Strategy Strategic
objectives
(broad, far away)

Key
Check points:
Forecast here you Performance
want to go Forecast Indicators
(speci c, short term)

Performance
At present Dashboard
At present (collection of KPI's)
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 Challenges you will face on your KPI journey Good KPI's are smart

How do I start?

What do I really How to involve my

want to know? team?

What is a good In 1981, George T. Doran, former director of corporate planning for Washington Water Power
Company, published a paper called, “There’s a S.M.A.R.T. Way to Write Management’s Goals and
Indicator? How many indicators? Objectives.” He introduces S.M.A.R.T. goals as a tool to create criteria (-> KPI's) to help improve the
chances of succeeding in accomplishing a goal.
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Some simple examples

What does "SMART" mean?
Answer 'what, who, when, where and why' question.
•Customers
Look carefully to these examples.
Avoid any confusion. •Customer satisfaction Are the KPI's smart?
Use the form, of quiz Charesa?
Provide a quantitative scale of assessment. •Revenue Are KPI's comparable to
Measure the degree of success.
Stay within the grasp of those for whom it is assigned.
•Cost thermometers?

It must be reachable goal or target. •Delivery time

Determine the link with the mission and the strategy. •Quality
Only is strong link is relevant.
•MENTION ONE YOUR SELF
Give a timeframe to achieve the target.
The KPI should allow reasonable time to adjust.
From these KPI's we like to see the growth or decline (the trend).
So we have to make them measurable (numbers, percentages)

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 Key performance indicator (KPI)
Key performance indicators are representative for the status of a
Day 4 - Performance Monitoring critical success factor (CSF). KPI’s don't fall out of the blue, but result
from the KPI trajectory. Accurate informa on about the status of

1.Good KPIs are 'SMART'

a performance driver
Objective
2.KPI - link between objective and action
3.Examples of KPIs - template CSF

4.Assignment KPI Choose action to

performance metric undertake!

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KPI’s: link between objective and action

KPI’s: link between objective and action Example: web shop with customer support
- example: consulting agency Objective CSF KPI Target-value Actions

What do we In what we should How do we How much progress How to achieve

want to achieve? excel? measure progress ? we need? this? Prompt answering % answered incoming 1
Accessibility 100% 2
incoming calls calls in 30sec
3
Guarantee Hours downtime / ..
4
Critical Success Actions, projects, access website wk (web) Here it is all about!
Objective KPI Target Because this is the
Factor (CSF) initiatives % Availability in
99,9% way to achieve
prime time (web)
So we speak the same language! your objectives

Increase Productivity gain Adapt Objectives Explanation KPI's that are applicable here (description)
Bill rate 70%
productivity consultants bonus structure
Better If accessibility by phone is flawless we are able to help • We take incoming calls within ..a certain..time
accessibility via our customers fast bracket
Skip ‘Friday,
the phone • We answer the question also within ..a
Office day'
Better certain..time
The better the website is accessible the easier it is for • Web bracket
shop is accessible within a …certain …time
accessibility via potential customers to place orders. Downtime must for placing orders
our website be minimal and site maintenance must take place • Max. downtime is determined on a …certain
during the night number..of hours per week
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The KPI trajectory Make KPI's actionable
Questions Answers

What do we want to
The trajectory between goal and action # Strategic objective Actionable KPI
Objective
achieve? could be guided nicely by a number of
questions. 1 Become a low cost producer Cost price difference with competitor
In what we should Critical Success Cost price difference with previous year
excel? Factor (CSF)
In daily life the KPI-designer works with the 2 Improve pro tability Net pro t
answers on these questions. Key Performance
Gross pro t
How do we
measure progress ? Indicator (KPI) Margin, per product category
So he/she is working his/her way from
3 Improve quality control Deviations from product speci cation
How much progress objective to action. Target (value)
we need? Mean time between failure

However, while designing you always have to 4 Putting the customer in the middle Customer satisfaction score
How to achieve
this? keep the relevant question in mind! Initiatives, action Repeat visits to the store

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Coffee shop ‘decomposition’ Result-KPI

Day 4 - Performance Monitoring illustration KPI-principle 1 Key Performance Indicator 1

Result - CSF SATISFACTION

score

1.Good KPIs are 'SMART' Lagging

measure
2.KPI - link between objective and action Key Performance Indicator 2

SATISFIED CUSTOMER BASE

3.Examples of KPIs - template CUSTOMERS

4.Assignment
QUALITATIVE Key Performance Indicator 3

REPEAT VISITS
Question 1 for analysis:
What will be the result when we have achieved
QUANTITATIVE
our objective?
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 Coffee shop ‘decomposition’ Driver-KPI Example Industrial producer
illustration KPI-principle 2 Key Performance Indicator
Key Performance Indicator 1 Strategic Analysis
1 Result-KPI
objective
Driver-CSF GOOD QUALITY
To become a low Result-CSF
COFFEE 1. Cost price difference with
cost producer Low cost price competitor
Leading
measure 1. What will be the result when we have 2. Reduction in cost price
Key Performance Indicator
2 related to last year
achieved the objective?
GOOD
CUSTOMER FAIR PRICE
EXPERIENCE Raise key performance
questions (1) and (2) Driver-KPI’s
Driver-CSF
Key Performance Indicator
QUALITATIVE 3 1. Staff output
Exploitation of the resources
2. Staff productivity
FRIENDLY SERVICE
3. Machine up time
Question 2 for Analysis: 2. What will drive the result we want
to achieve? 4. Machine productivity
What will drive the result we want to achieve? QUANTITATIVE

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Example ICT consultancy Assignment - What is the difference?

Analysis
Strategic
objec ve
Result-KPI Good KPI Bad KPI
Result-CSF
1. Consulting hours (billable)
Enhance 2. Training hours (billable) 1
More billable hours
productivity of 3. Billable hours vs. Total hours (%)
consultants 1. What will be the result when we
have achieved the objective? 2
Raise key performance
questions (1) and (2) Driver-KPI’s
Driver-CSF 3
1. Time spent on acquisition
Way consultants choose to work
2. Time spent on personal
2. What will drive the result we want development 4
to achieve? 3. Other, time not billable

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 Assignment - What is the difference? Example Software development
Good KPI Bad KPI Strategic Analysis Result KPI
Objec ve
Straight forward measurable on a Not measurable at all; or dif cult to Result CSF 1.% software development
Increase software
1 vacancies lled
regular base measure development capability More competent sw-developers 2.# sw-developers matching 85%
at work in the company competences (as described in
Is not a yardstick but an activity, a pro le)
2 Time bound - t in a time frame 1. What will be the result when we have
procedure or an decision achieved the objective?

Should contribute to speci c A project de ned to achieve an Raise key performance Driver KPI’s
3
objective 1:1 objective questions (1) and (2)
Your job is to de ne 1,
Driver CSF preferably 2, driver KPI's
User should be able to in uence User has in uence but PI itself is Internal training & Recruitment
4 KPI 1……
the score not a KEY PI 2. What will drive the result we want
to achieve? KPI 2……

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Example Transport company

Strategic Analysis
objective Result-KPI
Result-CSF
Enhanced Your job is to de ne 1,
pro tability Better balance revenue - cost preferably 2, result KPI's
KPI 1…….
1. What will be the result when we KPI 2…….
have achieved the objective?

Raise key performance

ques ons (1) and (2) Driver-KPI’s
Driver-CSF
1. Truck capacity use
Exploitation of resources 2. Freight departures - to late
2. What will drive the result we want
3. Freight arrivals - to late
to achieve? 4. Trucks - not operational deployable

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 Assignment: apply what you learn.
De ne the 2 x 2 KPI’s for your organization!
Key performance indicator 1:
Strategic Objective:
Skill gap ?
HR-Development Result CSF:
Quali ed workforce Key performance indicator 2:
1. What will be the result when we Gap of competent people?
have achieved the objective?

Raise key performance

questions (1) and (2) Key performance indicator 3:
Training gap?
Driver CSF:
Training workforce
Key performance indicator 4:
2. What will drive the result we want to Schedule gap?
achieve?

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Examples of KPI’s for your organization! The KPI ‘recipe’

Key performance indicator 1:
Analysis
Strategic Objective: Policy
Result KPI
Objective
HR-Development Result CSF: % staff fully quali ed Result CSF
Make people
Quali ed workforce 1.Growth in actively sporting people
Key performance indicator 2: healthier More people sporting on a regular basis
by stimulating them 2.Reduction in absenteeism (days/
% staff having
1. What will be the result when we have to year)compared with previous years
minimal quali cations 1. What will be the result as we have achieved
achieved the objective? spend more time on
the objective?
sport
Raise key performance
questions (1) and (2) Key performance indicator 3:
Raise key Driving CSF Driving KPI’s
Driver CSF: % training schedule executed performance
Establishing stimulating conditions 1.Improved infrastructure
Training workforce questions
Key performance indicator 4: 2.Professional trainers
2. What will drive the result we want to achieve? 3.PR / Communications
2. What will drive the result we want to % training activities per staf
achieve? member realized 4.Legal incentives

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 Template for KPI-development
© Leo Kerklaan, 2020. All rights reserved Sample partial KPI Definition Table
Strategic Analysis
Result KPI's Strategic objective: Enhance employee satisfaction
Objective
Result CSF Objective owner: mr. S. UCCES / VP HRM
1. ................................................
...................................
.................................. ................................... 2. ................................................ KPI Data source Units of Formula Collection & Baseline Targets next Designated
.................................. ................................... measure frequency period & owner
3. ................................................

1. What will be the result when we have thresholds

achieved the objective?
M 1: Employee % # satis ed Random 65% 75% HRM,
Employee survey or even every head
Raise key performance satisfaction better / quarter 1. >70% employee
questions (1) and (2) Driver KPI’s # respon- 2 60-70 relations
Driver CSF
dents 3 < 60
...................................
................................... 1. ................................................
2. ................................................
2. What will drive the result we want to
achieve? 3. ................................................

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Summary: Result KPI’s & Driver KPI’s Questions?

Result-KPI -> linked to an Organization or to a department (e.g. HR )
May be…
e.g: improve pro tability
What will be the result when we have achieved our objective?
Critical success factor: an improved pro tability • There is piece of theory that isn't completely
KPI’s: 10% increase of pro t, 5% return on investment, >15% pro tability of top 10 customers clear

Driver-KPI -> affect an Organization or to a department (e.g. HR ) • The application of the theory isn't so easy in
e.g.: improved returns, new customers, orders booked your speci c situation
What (‘engine’) will drive the result we want to achieve?
Critical success factor: realized growth of turnover, omzetgroet, customer base Tell me as precise as possible what you don't
KPI’s: 5% sales growth,, # new customers, # orders booked, customer win rate understand or what you problem is; I'll try to give
Contact Leo Kerklaan you an answer
Note: Critical Success Factor: performance area that affects the continuity of the organization, or -in a [email protected]
department- the process stability T. +31(0)654396073

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