How to measure performance and improvement?

©ChangeDirector UK Ltd 2002-2017
Andrew Hudson
APM Midlands Branch Event
“How to measure performance
and improvement”

©ChangeDirector UK Ltd 2002-2017Page 2
Agenda
Introduction
The productivity challenge
Connected strategy, operations & change
– Strategy management
– Process management
– Measurement
– Improvement
Conclusions

The UK Productivity Gap

Is Poor Productivity a factor in low Unemployment?
+85%
-13%

“Better productivity could be extremely
valuable adding as much as £130bn in GVA
to the UK economy each year”
Charlie Mayfield - John Lewis Chairman

Connecting Strategy with Operations and Change

results
performance measures
Process
Initiative
EXECUTION
performance measures
results
1
3
5
6
Strategic Plan
• Strategy Map
• Balanced Scorecard
• Stratex
Operating Plan
• Sales Forecast
• Resource Requirements
• Dashboards
• Budgets
2
• Key process improvement
• Sales planning
• Resource capacity plan
• Budgeting
PLAN OPERATIONS
4
• Business Units
• Support Units
• Employees
ALIGN THE ORGANIZATION
• Strategy Reviews
• Operating Reviews
MONITOR & LEARN
• Profitability Analysis
• Strategy Correlations
• Emerging Strategies
TEST & ADAPT
• Strategy Map / Themes
• Measures / Targets
• Initiative Portfolios
• Funding / Stratex
TRANSLATE THE STRATEGY
• Mission, Values, Vision
• Strategic Analysis
• Strategy Formulation
DEVELOP THE STRATEGY
The Balanced Scorecard – Strategic Management Process

• …
Personal
Planning
Q1 Q2 Q3 Q4
STRATEGY
MANAGEMENT
PROCESS
Strategy
Development
Organization
Alignment
Link to
Planning &
Budgeting
Management
Control &
Learning
Change Portfolio Management
Strategy Reviews
Best Practice Sharing
Q1 Q2
Next Year
Strategy
Update
Strategy Development
• Clarify Vision
• Update Strategy
Planning/Budgeting
• Budgets
• Change Portfolio
Scorecard Management
Design & Update
Organizational Alignment
• Corporate role updated
• Corporate-SBU aligned
• SBU support unit aligned
• Board of Directors aligned
Human Capital Alignment
• Personal goals
• Incentives
• Personal development
This Year
Strategy Communication
SMO drives SMO drives / supports
CFO HR
CTO CCO
HRO
Focus
EOY EOYQ1 Q2 Q3 Q1
Strategic Management Lifecycle

Financial
Perspective
Customer
Perspective
Internal
Perspective
Learning
Perspective
F1 Grow
financial base
& margins F3 Increase
productivity
F2 Grow
targeted patient
base
C1 Provide
personalized
care
C2 Provide
easy access
L4 Understand
and deliver on
the strategy
L1 Hire and
develop the
best
L3 Provide
technology
and resources
P1 Deliver a
personal
experience
P2 Keep
patients
informed
P3 Streamline
processes
L2 Reward our
team
How?
•By providing personal care to our targeted
population and providing easy access to our
services
What will the internal focus be?
•Deliver a personal experience that focuses
on the individual and his/her needs
•Keep patients informed throughout the
process & streamline inefficient clinical and
administrative processes
Will our people be prepared to do that?
•Yes, if we hire and develop people that focus
on customer service
•Yes, if we reward the team for focusing on
customer service and the strategy
•Yes, if we provide all employees with the
information and tools they need to do their
job well
Mission: To provide top tier healthcare to our community.
What will drive margins?
•Managed growth in high-margin services

Clear Articulation of Strategy - Themes & Objectives

 Eg Jointly define and manage
upstream application service
expectations
 Eg Jointly define and manage
service expectations (from the
Technology strategic objectives)
CFO
CIO
Director,
Upstream IS
Team Leader
Applic. Specialist
 Build new revenue (Corporate
financial objective)
 Eg Implement Service Request System
(SRS)
 Eg Jointly define and manage Production
Support application service expectations
Objectives & Measures Cascade

Driving engagement and discretionary effort
• “Who We Are” — The organisation’s objectives and
strategy, how the organisation operates, and what
senior leadership hopes to achieve
• “Why We Exist” — The organisation’s mission and
vision and why the organisation’s strategy and goals
matter.
• “How You Help Us Succeed” — How the employee’s
role helps achieve the mission for which the
organisation exists.
New performance management practices
• 10% of Fortune 500 companies have done away with
the annual review
• Aligning leadership behaviours to performance
objectives
• OKR (Objectives & Key Results) approach is gaining
momentum with continuous performance reviews &
appraisal
• Tools emerging e.g. BetterWorks, Perdoo, Weekdone,
7Geese etc
Objectives – Leading Practices

Measurement in Elite Sports….
“You make your own luck by training b***** hard in the week,” Dylan said.
“It was not luck. I’d like to abolish luck. Our numbers show that: metres per
minute, accelerations per minute, have doubled. Time getting off the floor,
too. That is not luck. We have had to earn every victory.”

Measurement Effectiveness Survey Summary
Only 20% of respondents agreed that they were using the right measures to drive performance improvement
with 52% disagreeing and 28% neutral
>60% of respondents didn't agree that i) measures were valued by their team; ii) that there was a process to
manage and control measures; iii) that they were effective at using measurement to improve performance; and
iv) that dashboards and reports were effective and reliable.
94% of respondents agreed that measurement should be treated with more priority.
89% of respondents agreed that it should be a core competency
More than 75% of respondents felt that better measurement could lead to productivity gains of more than
10%. Even a 5% improvement is a huge opportunity relative to the effort and investment.
0%
1%
24%
50%
25%
0% 10% 20% 30% 40% 50% 60%
Negligible impact
Low impact <5%
Moderate impact 5%+
High impact 10%+
Transformational impact 20%+
What productivity impact could better
measurement have in your organization?

Measurement should be a core competency & discipline

Threatening
Controlling
Intangible
Irrelevant
Reporting
Inspiring
Empowering
Tangible
Meaningful
Insights & Actions
Immature v Mature
Measures need to be applied in the right way

Process & measurement decomposition

Top Down Process Alignment with Measures
 Inventory Location Accuracy
 Average dock-to-stock time for receiving
 % of accuracy in physical stock against
system stock
 % of Inventory incorrectly located
 % of inventory with incorrect stock
balances
 Floor space utilization
 Stored items per employee
 %Warehouse space utilization
 % of warehouse shrinkage
 Inbound Volume Received
 Receiving errors
 % of unfinished received items
 % of filled warehouse locations
Sample measures

EBITDA
Total
Revenue
OPEX
Total
revenue from
Sales
CAPEX
Net Debt CAPEX v
Revenue
Net Debt /
EBITDA
Churn
Net
Additions
(Gross-
Disconnections
)
Average
Subscribers
ARPU
Violations
cited by
government
Customer
Satisfaction
Index (CSI)
% successful
projects
Number of
customer
complaints
% of report
accuracy
Employee
satisfaction
First Call
Resolution
Stocking
Levels
% of staff
under PMS
Call Quality
Ensure
availability of
skills metric
Finance
Customer Sales/Marketing
Technical
Customer
service
Stakeholder /
Regulatory
Learning & Growth
(performance)
Network
Capacity /
Availability
Service Level
(cust. Serv.)
Operations
Customer
Loyalty
(NPS)
Savings vs.
standard
costs/prices
Fraud/
leakage
discovered
Network
Coverage
HV & MV
Revenue
Contribution New products
and services
introduced
Active Users
(90 days act.)
% attrition of
key staff
Legal /
audit
Rate of
achieving set
targets
Order
Processing
Turnaround
100% audit
coverage of biz
processes
Compliance,
fraud
discovered
Marketing cost
optimisation
metric
3G Coverage
Cost of Sales
Loss rate
Net Cash?
Measurement Cause & Effect Mapping

Measurement Process
Identify Request Plan Build Operational Stopped
Analyst Measure Ops Measure Ops BI/IT Ops Measure Ops Measure Ops

• Teams collaborate to design the measures that matter to them
• Measures are explicit and meaningful - aligned with objectives and processes
• Measurement deployed as a process and core competency
• Measures are governed - cull the ones that are not being used
• Measures are designed not brainstormed
• outcomes and results not tasks
• dependencies and drivers are understood
• Measurement success recognised, poor performance resolved supportively
Measurement Leading Practices

Measurement also drives Value…
Value = Benefits – Costs = ROI
Value is financial or non-financial and
can always be measured

Maximising Value and Return on Investment
Better
measurement
and strategic
alignment
Better alignment
between delivery
and outcomes
Greater
ownership &
accountability for
realisation
Value i.e.
Return on
Investment
Time
Better & more
timely investment
decisions
Huge
Potential
Gains
TPV = Total Portfolio Value
Huge
Potential
Losses
More effective risk
management with
better estimation

Fortune 500
companies are
looking to save
$300bn / annum

Beneficiaries need to forecast & manage benefits –
it shouldn’t be the project’s responsibility…
Spend
Target
$450m
Project A
Project B
Project C
Project D
GAP
$9m
Savings
Target
$36m
Benefit forecasts are unclear
and we don’t know what we’ve
committed to
Planned changes to achieve
targets aren’t synchronized
with project capability delivery
Projects are de-scoping to hit
deadlines without confirming
the benefit impact
Projects don’t
deliver value
Beneficiaries
aren’t in control
Overall targets
aren’t achieved
Beneficiary
The same
approach
applies to
non financial
benefits

Use Operational Measures to Drive Value Creation
Beneficiaries aren’t
always using the
right measures to
drive value creation
and performance
improvement
Inaccurate benefit
estimation
Measures aren’t driving
improvement
Benefits not tracked or
realized
Significant amount of
uncertainty on whether
benefits are achievable.
Increased risk of doing
the wrong things
%Assumption Based
Value Driver Based
Poor transparency
about how capabilities
and changes translate
into measurable
benefits & outcomes

What information is stored and how is it structured?
Strategy
Theme
Outcome
Objective
Measure
Project
Program
Savings &
Benefits
Cost
Organization
Level2
Structure
Level1
Structure
Level3
Structure
• Division
• Mega Process
• Unit
• Process
• Sub Division
• Major Process
Deliverable
Or Product
Organization Level
Engagement Level
Structural Levels
Content Level
Profile Level
Scenarios
Risks
Issues
Actions
Comments
Generic
Content
Person /
User
Strategy &
Value Maps
Measure Profile
Values (Y, Q, M)
Benefit Values
(Y, Q, M)
Cost Profile
Values (Y, Q, M)

CEO Failures – the $10bn+ club
Kwon Oh-Hyun, Martin Winterkorn, Tony Hayward, Akio Toyada,
“Our problem is not about
the strategy itself, but about
our execution of it”

• Brexit uncertainty
• Economic threats
• Markets & currency
• Political threats
• Automation
• Digital disruption
• Cyber crime
• Global debt
• Protectionism
• Other threats…
Strategic Threats
- Enough to keep the CEO up at night

LikelihoodConsequence
>20% Opex
<0.1% Opex
<0.5% Opex
<5% Opex
<20% Opex
X
Almost
Certain
50/50
Likely
1 in 6
Possible
1 in 36
Unlikely
1 in 100
Rare
1 in 1000
Catastrophic
Major
Moderate
Minor
Insignificant
= Criticality
Risk Management – Assessing Criticality

Governance & Management of Risk

Sample: Procurement Value Realisation Dashboard

Case Study: Operation Quest Measurement Framework

Case Study: Etihad Airways

Closing thoughts
Getting measurement right, has a profound and
transformational effect, on performance and
improvement
Measurement needs to be treated with more priority -
as a process, core competency & skill
Benefits need to be owned and managed by the
beneficiaries - the project’s customers – with their own
improvement plans across all projects.

Summary
Survey
Slides
ANDREW HUDSON
ahudson@changedirector.com
+44 7776 145009

How to measure performance and improvement?

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