KPI Selection And

Management

Tom Raftery

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Your Presenter

Tom is the founder and director of – it’s all about people – a Human Capital Consultancy based

in Dubai. Tom has over 30 years’ international HR experience in senior line roles, mostly

recently on the divisional board of Arc International, and with such companies as British

Aerospace, Sedgwick Forbes, British Gas and the Nazer Group, based in Jeddah. In addition, he

has extensive consulting experience working for Towers Watson, Arthur Andersen and MEIRC.

He has lived and worked in the Middle East for over 18 years and has also worked across

Europe, Africa and Asia.

He has extensive experience in HR strategy, processes and systems, organisational redesign,

performance, compensation and benefits, change management and leadership development.

Value of Performance Measurement

A higher percent of measurement managed companies were identified as industry leaders:

Source: American Management Association

74% 83%

97%

44% 52% 55%

0%

20%

40%

60%

80%

100%

Me

asu

re o

f S

ucce

ss

Measurement-Managed Organizations

Non-Measurement- Managed Organizations

Perceived as an Industry Leader Over the Past Three Years

Reported to be Financially Ranked in the Top Third of Their Industry

Last Major Cultural or Operational Change Judged to be Very or

Moderately Successful

Measuring Performance

• A key tool to link strategy with implementation

• It ensures the business is delivering

• It helps in decision making and review

• Need to invest money & resources into measuring

company performance

• Strategic performance management systems will

deliver the strategy through:

• Objectives

• KPIs

• Targets

• Incentives

Setting & Managing Objectives & KPIs

• Fewer are better: concentrate of key aspects

• Should be linked to key business drivers

• Should be based around the needs of customers,

shareholders and other key stakeholders

• Should start at the top and flow down

• Multiple indices can be combined into a single index

• Objectives and measures may need to change or

adjusted as environment and strategy changes

• Measures needs to have targets based on research

rather than arbitrary numbers Brown M G (1996) Keeping Score

Linking Business Strategy with

Employees

"A mere 7% of employees today fully

understand their company's business strategies

and what's expected of them in order to help

achieve company goals.“

Robert S. Kaplan and David P. Norton, "The Strategy-Focused Organization,"

Harvard Business School Press, 2001

Performance Measurement in the

Middle East • Not consistent in development and application

• More interested in doing than planning

• No real culture of performance measurement

• Not experienced in establishing objectives and KPIs

• Objectives and KPIs are often vague

• Little follow up in terms of weekly or monthly meetings

• Use them as checks rather than to manage the

business

Middle East Management Style

Management style has a big impact of how strategies

are implemented:

• Leadership: authoritarian

• Organisations: bureaucratic & centralised

• Decision making: slow, risk averse and made at

the top

• Performance evaluation: lack of objectivity, lack of

measurement

• Relationships: very important not linked to

performance

Management By Objectives

Six Sigma

Kaplan & Norton 1996

Structure of Performance Management

A culture of

responsibility,

authority, and

accountability

An integrated,

continuous cycle rather

than a one-time event

Alignment of

people, processes

and technology

with strategy Performance

Management

Culture

Performance

Management

Cycle

Performance

Management

Infrastructure

Vision Mission

Drivers

Market

Differentiators

Strategic

Goals

Department

Objectives

To become a leading regional industry

and related national services supplier; the

preferred choice for total customer

solutions; and the shareholders’ choice

for long-term growth and investment

value

Positive company

image

Continuous improvement

in operations

Highest standards of business

conduct and community

service

Provide competitively priced, high quality

products and services in the areas of sales

and service, delivery, supply, service, and

an expanding range of regulated and non-

regulated supplemental services related to

our core business

Improve customer loyalty through

increased customer satisfaction, brand

awareness and reputation

Deliver high quality, profitable solutions at competitive prices

Motivate and enable employees

to achieve superior performance

Enhance Shareholder Value by improving credit

worthiness, minimizing stranded investments,

and realizing savings

Seek alliances that will achieve superior customer solutions to meet current and

future market needs

Enhance SVA long term by growing the business

Comprehensive solution

provider

Superior customer

service

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2................

3................

1................

2................

3................

1................

2................

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2................

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KPIs

Strategy Articulation Map

Performance Management Cycle

Set Measures

and Targets

Reward and

Coach

Plan and

Execute

Monitor and

Evaluate

Strategy “What do we want to achieve?”

“How do we set the direction?”

“What is getting

in our way?”

“How much progress

are we making?”

“Are we

encouraging the

right behavior?”

S

M

A

R

T

pecific

easurable

chievable

ealistic

ime bound

Types of Objectives Related :-

To progress

To change

To personal development

Setting Objectives

Objectives Setting

• Clarify the corporate\departments strategy in terms of

what it wants to achieve

• Identify key objectives to deliver the departments

strategy

• Take time and reflect

• Look for causal links

• Test objective by defining the outcome

• Limit the number of objectives to 3-5

• 2-3 related to projects or key department deliverables

• 1-2 relate to new initiatives, projects or work that will stretch

the department as a whole

• Prioritise objectives & get agreement

• Use SMART test

Objectives Setting: Tips

• Don’t put an objective that is a task or input

Look at an objective in terms of what you want to

achieve

Establish your objective

Then define what the outcome is for the objective

If the required output is the same as the objective – great

If not reframe the objective around the outcome

Challenge the objective:

Is it delivering on the corporate objectives

Can you see an ‘audit trail’ to the corporate

objectives\strategy

Test it by sharing with a colleague

Setting KPIs

• Define what you need to measure to ensure you

deliver on the objective

• Identify the KEY performance indicators not ones that

are nice to have

• Limit them ideally to 2-3 per objective

• Make them very specific with timescales

• Have a tangible target, ideally numeric\percentage

• Review progress regularly (monthly)

• Have an action section to define what you will do

• Carry out a ‘reality check’ to make sure they will

achieve the objective

KPIs & Targets

• KPIs MUST have a target

• Targets can be set as:

• Absolute, such as increase by seven

• Percentage, such as an increase by 4%

• Targets should be defined

• Relative to internal benchmarks: surpass last years

results by ‘x’

• Relative to external targets: surpass competitor ‘x’ by

‘y’

• Relative to global best practice: become as good as ‘x’

by ‘y’

• KPI outlines what to measure and the target is the

amount

What to the Right KPIs

Asking the following questions will ensure that you

apply a rigorous thought process to all potential KPIs:

• Will the KPI help to deliver the (strategic) objective?

• Does the KPI help to answer specific, important unanswered

questions that help the business?

• Will the KPI enable you to make a specific decision?

• Check what the existing data and data collection there is?

• Can you get the right quality of data at the right time?

• Does the data answer the key performance question?

• Does the data help you to make decisions?

• Is the target of the KPI too easy?

• Are the cost and effort justified

Use of Traffic Signals to Manage

Progress

Major problem that objective\KPI will not

be met & needs urgent action

Some concern that objective\KPI will not

be met & should be monitored

Everything going to plan and it looks that

objective\KPI will be met

Regular review & measurement is essential

Setting Objectives & KPIs for Employees

• Define objectives (3-5) for an employee: this could be

a KPI form one of the department objectives

• Define KPIs for each objective that will be a good

measure to ensure objectives achieved

• Of the Objectives and\or KPIs:

• Have 1-3 related to critical parts of the job

• Have 1-2 that will stretch the person beyond the boundaries

of his\her job

• Don’t have KPIs that cover the day to day outputs of a

job

• Only have KPIs on job outputs that are KEY to

achieving the department\Job objectives

Good Feedback

• Be honest and open and provide support in helping to address development issues

• Be factual and specific

• Be constructive

• Agree what needs to be done to address the action, with your support

• Follow up to ensure the employee is addressing the issue

Questions?