Session III-A

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Session III-A

• Performance Based Measurement-Metrics

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7 Steps for Implementation Success

• Prepare strategic objectives
• Identify critical success factors (CSF)
• Determine units of measurement
• Quantity, quality, time or cost
• Set performance standards
• Benchmarking
• Collect data
• Evaluate and make revisions
• Reward achievement

3
Success Stories

• Lucent Technologies--PBM doesnt guarantee
  success
• Bar-S Foods Company
• Bal Seal Engineering Company, Inc.
• Knight-Ridder Inc.

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Lucent Technologies Murray Hill, NJ

• Uses a proprietary Dashboard
• Financial operational information visual
  interface
• Reduced 200 pages of data to 16 metrics
• Graphical gauge presentation
• Color coded
• Drill-down capability
• Total training time10 minutes
• Demonstrates finances knowledge of the business
  and willingness to meet operating needs

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Lucent Technologies, cont.

• User access is monitored
• Usage is up 600
• Developed in-house using off-the-shelf software
• Distributed on Lucents security-protected
  intranet

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Bar-S Foods Company Phoenix, AZ

• On-line executive information system
• Similar to Lucents dashboard
• Drill-down capability
• Individual profiles for each user
• Information can be tailored
• System is working
• In 5 years, on-time shipments increased from 92
  to 99.4
• Finance can serve rather than number-crunch

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Bal Seal Engineering Company, Inc. Foothill
Ranch, CA

• Company was suffering operationally
• Adapted Goldratts The Goal
• One of the companys constraints was bad
  information
• Finance did not easily embrace the change
• Improvements were memorable
• Lead time fell from 8 to 2 weeks
• On-time delivery went from 60 to 98
• Shift from accounting-managed to economic-value
  managed information

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Knight-Ridder Inc. Miami, FL

• Uses performance metrics to assess management
  processes
• Performance measurement linked with balanced
  scorecard to ensure alignment with strategic
  direction
• Each shared services team developed its own KPIs
  (key performance indicators)
• Facilitated broad acceptance
• Drives continuous improvement

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Critical Success Factors

• Required for Strategic Objective Attainment
• Identify one CSF for each objective
• Identification process can be difficult
• Some CSF Examples

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Typical Critical Success Factors

• Sales department measures
• of orders taken
• of new customers
• of potential customer contacts
• of return orders
• Shipping department measures
• of orders shipped
• of shipping errors
• Innovation measures
• of new inventions
• of patents
• of strategic business acquisitions

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Whos Measuring What?

• Time Warner
• of network upgraded
• of subscribers served
• Eli Lilly and Co.
• of new product launches
• of sales from new products
• Dell Computer Corp.
• New plant construction
• Days supply in inventory
• ATT
• of calls on network
• of new networks

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CSF Measurement Factors

• Non-financial Measures
• Operational Focus
• Consider the Ease of Data Collection

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Benchmarking

• Formal benchmarking involves the activities of
  world-class companies
• World-class standards can frustrate normal
  organizations
• Settle for a stretch rather than an impossible
  dream
• Consider best-in-class standards

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Evaluation and Revision

• Remember the ease of collection
• Use meaningful measures
• Monitor at least weeklyeven daily
• Make real-time adjustments
• Invite participation in the solution process

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Reward System Integration

• Include CSF attainment in the reward system
• Avoid sub-optimizing rewards

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Performance Based Measurement Graphic
PBM
SP
Drives
Supports
Generates
Action
P
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Session III-B

• Performance Based Measurement-Reporting and
  Implementation

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Performance Measurement Reporting
Measurement Identification
Measurement Data
Managements Discussion and Analysis
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Performance MeasurementTickler
Strategic Objective
Critical Success Factor(s)
Measurement Identification
Detailed Plan? Y or N
Funded in P? Y or N
Date Target Actual
Variance Comments
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PBM Related Software

• Ergometrics Ireland Ltd.
• KPI Dashboard
• Comshare
• Decision Overview
• CorVu
• Performance Management Solutions
• Gentia Software
• Renaissance Balanced Scorecard
• AICPA
• Performance Views

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Yard by yard, life is hard but inch by inch,
its a cinch. Robert Schuller