Key Performance Indicators. Parmenter David

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      David Parmenter

      Key Performance Indicators

      Key Performance Indicators

       Developing, Implementing, and Using Winning KPIs

      Third Edition

      DAVID PARMENTER

      Cover image: © Boris Lyubner / Getty Images

      Cover design: Wiley

      Copyright © 2015 by David Parmenter. All rights reserved.

      Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

      The Second Edition was published by John Wiley & Sons, Inc. in 2010.

      Published simultaneously in Canada.

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       Library of Congress Cataloging-in-Publication Data

      Parmenter, David.

      Key performance indicators: developing, implementing, and using winning KPIs / David Parmenter. – Third edition.

      1 online resource.

      Includes index.

      ISBN 978-1-119-01984-8 (pdf) – ISBN 978-1-119-01983-1 (epub) – ISBN 978-1-118-92510-2 (hardback) 1. Performance technology. 2. Performance standards. 3. Organizational effectiveness. I. Title.

      HF5549.5.P37

      658.4′013–dc23

      2014044306

      About the Author

      DAVID PARMENTER is an international presenter known for his thought-provoking and lively sessions, which have led to substantial change in many organizations. He is a leading expert in the development of winning KPIs, replacing the annual planning process with quarterly rolling planning, and lean finance team practices. His work on KPIs is recognized internationally as a breakthrough in understanding how to make performance measures work. He has delivered workshops to thousands of attendees in 30 countries around the world. Parmenter has worked for Ernst & Young, BP Oil Ltd, Arthur Andersen, and PricewaterhouseCoopers, and is a fellow of the Institute of Chartered Accountants in England and Wales. He is a regular writer for professional and business journals.

      He is also the author of Winning CFOs: Implementing and Applying Better Practices, Key Performance Indicators for Government and Non Profit Agencies: Implementing Winning KPIs, and The Leading-Edge Manager's Guide to Success (all from Wiley).

      He can be contacted via [email protected]. His website, www.davidparmenter.com, contains many white papers, articles, and freeware that will be useful to readers

      Preface

      Why This Book Should Interest You

      Performance measurement is failing organizations worldwide, whether they are multinationals, government departments, or non-profit agencies. The measures that have been adopted were dreamed up without any linkage to the critical success factors of the organizations. Often these measures are monthly or quarterly. Management reviews them and says, “That was a good quarter” or “That was a bad month.”

      Performance measures should help your organization align daily activities to the organization's strategic objectives. This book has been written to assist organization's with developing, implementing, and using winning key performance indicators (KPIs) – those performance measures that will make a profound difference.

      Major Benefits of Getting KPIs to Work

      The major benefits of performance measures can be grouped and discussed under these three headings:

      1. The alignment and linking daily actions to the critical success factors of the organization.

      2. Improving performance.

      3. Creating wider ownership, empowerment, and fulfillment.

      Alignment and Linking Daily Actions to the Critical Success Factors of the Organization

As Exhibit P.1 shows, even though an organization has a strategy, teams are often working in directions very different from the intended course. Performance measures should have been carefully developed from the organization's critical success factors. The critical success factors will help staff align their daily activities with the organization's critical success factors as shown in Exhibit P.2. This behavioral alignment is often the missing link between good and great organizations.

Exhibit P.1 Discord with Strategy

Exhibit P.2 Alignment with Strategy

In his book, Transforming Performance Measurement,1 Dean Spitzer points out that one of the most important roles of management is to communicate expectations to the workforce. He goes on to say people will do what management inspects (measures), not necessarily what management expects. Thus, we need to put in place the right measures. KPIs are the only things that truly link day-to-day performance in the workplace to the organization's critical success factors. Some people think that because the annual planning process comes from a medium-term view (called the development plan in Exhibit P.3), which in turn is linked to the strategic plan, strategy is linked to day-to-day activities. It looks good on paper but never works in practice. Strategy is broad and wide ranging, whereas annual-planning is a dysfunctional silo-based process.