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Training ObjectivesTraining Objectives
Participants will have the following
opportunities :
Understood the step to develop KPIs
Organizational KPI
Operational KPI
Identify Critical Success Factor for both levels
of KPIs
Learn how Process Mapping technique can be
used to identify the Operational KPIs
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What is KPI?What is KPI?
A set of measures focusing on
The aspects of organizational
performance that
are most critical for the current and
future success of the organization
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When to use KPI technique?When to use KPI technique?
You are small company.
You do not have Strategic/Business
Planning Process.
You have to many management layers
in your organization.
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2 Levels of KPIs2 Levels of KPIs
Organizational-Level KPI
Organizational alignment
Tracking Strategic Action Plan
Operational-Level KPI
Tracking Daily Operation
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Bottom Up KPIBottom Up KPI
Organizational
CSF
Process
Perspective
Organizational
KPIs
Process
CSFs
Operational
KPIs
Organizational Level Operational Level
1
3
2
A
Measure Baseline & Set Objectives
Monitor, Review, Keep Current5
4
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Purpose of Step 1Purpose of Step 1
Determine Key Strategic Perspective
To align, link, and balance all KPIs from
Organizational Levels
To ensure that all KPIs are balancing
value for all key stakeholders
Most organization use the Four
Perspectives from Balanced Scorecard
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Balanced ScorecardBalanced Scorecard
4 Perspective Grouping4 Perspective Grouping
BSC methodology groups those KBFs
into 4 Perspectives
Financial Perspective
Customer Perspective
Internal Business Process Perspective
Learning & Growth Perspective
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How to set the Perspective?How to set the Perspective?
It depends on type of your
organization.
Not-for-profit organization
Production and ship to mother company
Etc.
Set by grouping from
Key Stakeholder
Business Results
BSC methodology
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Key StakeholdersKey Stakeholders
Key Stakeholders include:
According to Baldrige Criteria and Thailand Quality
Award Criteria,
Customers
Employees,
Partners/Suppliers,
Stockholders, and
Local/Professional
Communities
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Stakeholder AnalysisStakeholder Analysis
What are the needs of business?
What are the needs of key stakeholders?
How to balance those needs?
How do business needs impact the key
stakeholders?
How do stakeholders’ needs impact our
business?
How do stakeholders’ needs impact each
other?
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Key Areas of Business ResultsKey Areas of Business Results
These business results are aligned with the
key stakeholders
1 Customer-Focused Results
2 Product and Service Results
3 Financial and Market Results
4 Human Resource Results
5 Organizational Effectiveness Results
6 Governance and Social Responsibility Results
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Four Perspectives!Four Perspectives!
Are they too few or too many?Are they too few or too many?
A template, not a must.
Depending on business circumstances &
strategy
Focus on shareholders and customers,
Employee is part of learning & growth.
If supplier relationships are part of the
strategy
should be part of internal-business-process
Environment, Laws and Regulations may be
important
but they are not the basis for competitive
advantage
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CSFCSF
Critical Success Factors
CSFs represent set of objectives or
strategies focusing on the perspectives
of organizational performance that are
most critical for the current and future
success of the organization.
“Each KPI has to align with at least one CSF”
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CSFsCSFs
Factors that provide context
Strategic Direction chosen by
Organization
Competitive Situation
Legal & Regulatory Environment
Key Customer Requirements
Stated Organizational Values
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Where can we get CSFs?Where can we get CSFs?
Identify CSF from:
Mission/Vision/Values
Situation/Market Analysis
Competitor Analysis
SWOT Analysis
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CSF and PerspectivesCSF and Perspectives
Do not forget that all CSFs have to
align with key Perspectives identified
in Step 1.
A company should not have too many
CSFs !!
Between 15-20 CSFs
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Cause & Effect of CSFsCause & Effect of CSFs
Improve Returns
Broaden Revenue
Mix
Increase Customer
Confidence in Our
Financial Advice
Understand
Customer
Segments
Develop
Strategic skills
Develop
New
Products
Cross -Sell
The Product
Line
Shift to
Appropriate
Channel
Minimize
Problems
Provide
Rapid
Response
Increase
Employee
Productivity
Align personal
Goals
Access to
Strategic Inf.
Improve Operating
Efficiency
Increase Customer
Satisfaction Through
Superior Execution
The Revenue Growth Strategy The Productivity Strategy
Improve Returns
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CSFs for Financial PerspectiveCSFs for Financial Perspective
Increased sales
New business
Higher earnings per employee
Cash flow
Improved cost performance
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CSFs for Customer PerspectiveCSFs for Customer Perspective
Improved customer satisfaction
Customer focus
Improved product and service
delivery
Increased product and service
range
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CSFs for Internal Process PerspectiveCSFs for Internal Process Perspective
Development and maintenance of strategic
competitive
Innovation advantage
Focus on continuous improvement of all
key processes
Improved product and service
performance
New products in new markets
Improved performance in key internal
processes
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CSFs for Learning/Growth PerspectiveCSFs for Learning/Growth Perspective
Achievement of a real partnership
Maximization of the potential of the
organization's employees
Creation of a world-class team
Safe and interesting work environment
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Align KPIs to the Key PerspectivesAlign KPIs to the Key Perspectives
Financial Perspective
Internal Business
Process Perspective
Learning & Growth
Perspective
Customer PerspectiveKPIs
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Why do we need Lower-Level KPIs?Why do we need Lower-Level KPIs?
Organizational KPIs (high-level) just
cover overall company health and
performance
They do not cover process and sub-
process performance
Without the Operational KPIs, front-
line operators will loss direction and
focus.
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5 Steps for developing Operational KPI5 Steps for developing Operational KPI
Step A:
Review Organizational CSFs and Organizational KPIs
Adopt related CSFs and KPIs
Step 1:
Identify Key Processes and Process Perspective
Step 2:
Determine Process CSFs for the Key Processes.
Step 3:
Analyze and Develop KPIs for the Key Processes
Step 4:
Measure Baseline & Set Objective
Step 5:
Monitor, Review, and Keep Current
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Levels of Operational KPILevels of Operational KPI
Depends on size of an organization
Department Level
Team Level
Note:
Some Organization KPIs can be used as
Operational KPIs.
Some Organizational CSFs can be used
as Operational CSFs.
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Support Processes Might IncludeSupport Processes Might Include
Support processes might include:
Finance and accounting
Facilities management
Administration
Legal
Human Resource
Project Management
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Key PerspectivesKey Perspectives
Team has to determine what
perspectives should be used with those
key processes.
Recommended perspective:
Quality
Cost
Time
Inventory
Etc..
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Identify Process CSFIdentify Process CSF
For each key process selected
Determine key objectives (CSFs)
For example:
Reduce lead time of changing
jig/fixture
Reduce WIP at machining process
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CSF vs. VOCCSF vs. VOC
Voice of Customer can be used as CSF
Every process has to have its own
customer – person or processes that
receive the output.
Identify the customers and interview
what they need may be a good point to
start.
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Step 3: Identify & Select KPIsStep 3: Identify & Select KPIs
Operational KPI
Identify by using Process Mapping
technique
Deployed from Organizational KPI
Align with Process CSFs (VOC)
Cover all key process Perspectives
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Measures for Detailed Functional MapMeasures for Detailed Functional Map
From Value & Cycle Time Analysis
Cycle Time
Rework
Reject
Scrap
Inspection
Cost
WIP
Etc..
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Example of Operational KPIExample of Operational KPI
Maintenance Process
Perspective CSF KPI
Cost Optimize the number of
spare-parts
Cost of spare-
parts
Time Improve repair process Mean Time to
Repair-MTTR
Quality Reduce machine
breakdown
% M/C
Downtime
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Measuring BaselineMeasuring Baseline
What to look for when measuring
current performance..
1. Key
2. Levels
3. Trends
4. Relevant Comparisons
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Relevant ComparisonsRelevant Comparisons
The purpose of comparisons is to help
team evaluate our performance against
norms that represent leadership
position.
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Target SettingTarget Setting
Align with business direction
Target must be better than current
status (baseline)
Short term target must be better than
this year.
Longer term target must be better than
that of competitor, best-in-class, or
industry average.
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Target Setting & ProjectionTarget Setting & Projection
1999 2000 2001 20021998 2003
+
%ROS
Best In Class
Competitor A
Industry Avg.
2004 2006
x
x