Chapter 6
Background to the Winning KPI Methodology and Its Migration

Many organizations that have operated with key performance indicators (KPIs) have found the KPIs made little or no difference to performance. In many cases this was due to a fundamental misunderstanding of the issues. Organizations often begin to develop a KPI system by immediately trying to select KPIs without the preparation that is indicated in the six-stage implementation plan. Like painting the outside of the house, 50 percent of a good job is in the preparation. Establishing a sound environment in which KPIs can operate and develop is crucial. Once the organization understands the process involved and appreciates the purpose of introducing KPIs, the building phase can begin.

The Original 12-Step Process

In the first two editions of my KPI book I talked about a 12-step process that should be put into an organization with over 500 FTEs within a 16-week timeframe (see Exhibit 6.1). I also gave a shorter version with a six-week time frame for organizations with fewer than 200 FTEs where there is a motivated CEO and senior management team.

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Exhibit 6.1 Twelve-Step Implementation of 16-Week Timeline

The New Six-Stage Process

I was asked by clients to further simplify the process, and I used the pretext of the third edition to rethink the approach to make it more user-friendly. The new model incorporates the twelve steps in a six-stage process (see Exhibit 6.2).

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Exhibit 6.2 Twelve Steps Merged into a Six-Stage Process

Winning KPI Methodology and Its Migration

The implementation difficulties were first grasped by a key performance indicator (KPI) manual developed by the Australian Government Department “AusIndustries” as part of a portfolio of resources for organizations pursuing international best practices. This book has adopted many of the approaches of the KPI manual, which was first published in 1996. The KPI manual was the first book to recognize that:

  • A project needs foundation stones. There were originally four and these have now increased to seven.
  • There are 12 important steps. These were adopted in the first two editions of my book. However, under pressure from readers to further simplify them, I have thus compacted them into six stages, albeit the steps still exist in their entirety.
  • You need to sell the change through the hearts and minds. I have further developed the sales process, as many readers have found their knowledge gap too large in this area.
  • The critical success factors are the key driving force behind performance measures. This has been further refined with the branding of operational critical success factors.
  • KPIs are at the workface, operational with a large focus on the customer.
  • Readers need templates to move forward swiftly. This edition continues the tradition of endeavoring to second-guess all the main templates a project team would need.

An Overview of the Six Stages

Before readers venture into the detail, I wish to overview the six stages that are described in the following six chapters:

The Six Stages Outline
1. Getting the CEO and senior management committed to the change The senior management team must be committed to developing and driving through the organization KPIs and any balanced scorecard that includes them. In addition, timing is everything. This project has to find a suitable window where the senior management team will have time to commit to the change process. This chapter outlines the steps required in this stage and provides suggested templates to assist the KPI project team on the journey.
2. Up-skill in-house resources to manage the KPI project The success of a KPI project rests with trained home-grown staff who have been reassigned so that they are full time on the project. The chapter covers the importance of selecting an in-house person to lead the KPI team (chief measurement officer), the reasons why an external recruitment to run the KPI team is doomed to fail, the training that will be required, and the need for a “just do-it culture” in the KPI team. There are numerous templates to assist the KPI team on their journey.
3. Leading and selling the change All major project implementations are deeply affected by the success or failure in leading and selling the change. This chapter outlines John Kotter's model of leading change, emphasizes the importance of selling by emotional drivers of the intended audience, and sets out the steps required in this stage, and provides suggested templates to assist the KPI project team on the journey.
4. Finding your organization's operational critical success factors Critical success factors (CSFs) are operational issues or aspects that need to be done well day-in and day-out by the staff in the organization. This chapter looks at the differences between CSFs and external outcomes, highlights the importance of the CSF by indicating that it is a missing link in management theory, explains that an organization has typically five to eight CSFs, and shows how CSFs are the origin of all performance measures. This chapter goes on to outline the four tasks involved in identifying the operational CSFs and provides a toolkit with all the necessary exercises to help the in-house team get started.
5. Determining measures that will work in your organization Many performance measures are created from a flawed process. Numerous methodologies, including the balanced scorecard, appear to simply say the measures are a by-product of the exercise. Frequently the task of finding measures is carried out at the last minute by staff who do not have a clue about what is involved in finding a measure that will create the appropriate behavioral response. This chapter looks at common reasons why organizations get their measures radically wrong, how to design appropriate measures, the need for a performance measure database, and how you help teams select the appropriate measures. Templates are provided to assist with this process.
6. Get the measures to drive performance In order to get measures to drive performance, a reporting framework needs to be developed at all levels within the organization. This chapter describes a reporting framework, discusses the way to help the KPIs get off the ground, and shows how KPIs are refined to maintain their relevance. Checklists and exhibits are included to help get the project started.