over ten years now as to why so many balanced scorecard implementations fail to deliver when the concept of implementing strategy and having a balanced performance is surely a given with most of us.
I address, for the first time, the main differences between the “winning KPIs” and the balanced scorecard methodologies. I will also discuss my reasoning for the balanced scorecard failure rate and argue that the balanced scorecard fraternity needs to update their methodology (see Chapter 18).
Changes in Winning KPI Methodology
There have been some significant advancements in the methodology and these, I hope, will increase the momentum within enterprises to adopt KPIs that will help them flourish.
More Emphasis on Ascertaining the Critical Success Factors
I was first introduced to critical success factors (CSFs) by the talented people who wrote the KPI manual for AusIndustry (an Australian government department). They defined critical success factors as the “list of issues or aspects of organizational performance that determine ongoing health, vitality, and well-being.” In Chapter 2, the common myth that performance measures are mainly used to help manage implementation of strategic initiatives was highlighted. Instead, I believe, the main purpose of performance measures is to ensure that staff members spend their working hours focused primarily on the organization's CSFs. Not knowing your organization's CSFs is like going to soccer's World Cup without a goalkeeper, or at best, an incompetent one. You can do it but you will not succeed.
In Chapter 11 I discuss the revised process to ascertain an enterprises' CSFs.
More Examples to Aid with Finding Your Critical Success Factors
Through working on in-house workshops with clients I have been able to observe the issues in the KPI methodology that may have initially been confusing. In client workshops, I have been able to observe where clients have modified the methodology to make it work in-house. I am grateful for this opportunity to learn and share their wisdom, in this new edition.
Critical Success Factors Are Operationally Focused
Recently I have realized the importance of emphasizing that critical success factors are operationally focused. A board of a charity rightly pointed out that the CSFs tabled to them were too internally focused. They wanted to see, understandably the external picture, the external CSFs. The board was naturally looking from outside-in. The board needed the external CSFs expressed as outcomes and impacts they want to see. “We want the organization to deliver ____________, deliver _________. We will then know that the organization's strategy has been implemented successfully.” These statements, while commendable, must be separated from the CSFs. Their success will be a direct result of staff delivering day-in day-out on the operational critical success factors.
This recent clarification has fixed an issue I have noted in a number of in-house workshops I have run where there was a mix of operational CSFs and outcomes/impacts. This distinction is important, and while at first, an added complication, it is worth the effort to understand and execute. See Chapter 11 for more detail.
A Simplified Six-Stage Stage Methodology which Incorporates the Original Twelve Steps
In the first two editions of my KPI book I talked about a 12-step process that should be put into an organization with over 500 full-time employees within a 16 week time frame (see Exhibit P.5). I also gave a shorter version with a six-week timeframe for organizations with less than 200 FTEs where there is a motivated CEO and senior management team.
Exhibit P.5 Twelve-Step Implementation 16 Week Timeline
I was asked by clients to further simplify the process and I used the pretext of the third edition to rethink the approach to make it more user-friendly. The new model incorporates the twelve-steps in a six-stage process (see Exhibit P.6).
Exhibit P.6 The 12 Steps Merged into a Six-Stage Process
Substantial Change to the Foundation Stones of a KPI Project
There are a number of foundation stones that need to be laid before we can commence a KPI project and give it a chance of success. Success is determined by the presence and state of these seven foundation stones underpinning the KPI stages (see Exhibit P.7).
Exhibit P.7 The Seven Foundation Stones Underpinning the Six-Stage Process
“Abandon Processes That Do Not Deliver.”
The need for this foundation stone came about as a result of fervently reading Peter Drucker's work. I knew if I really understood his work I would be able to improve my understanding of performance management.
Of all his legendary insights, “abandonment” stands head and shoulders above them all. Drucker saw abandonment as the vital source, the fountain of innovation. Abandonment is a sign that management is recognizing that some initiatives will never work as intended and it is better to face this reality sooner than later. It is essential that the organization has freed up enough time to give the KPI project team and the attendant balance scorecard the time and commitment they deserve.
Appoint an In-house Chief Measurement Officer
There needs to be a new approach to measurement – one that is done by staff who have been suitably trained, an approach that is consultative, promotes partnership between staff and management, and finally achieves behavioral alignment to the organization's critical success factors and strategic direction.
I have been working with performance measures for many years and have spent untold hours endeavoring to unlock their secrets. Over the years one thing has become abundantly clear that you need a measurement expert in-house. Dean Spitzer6 called this the chief measurement officer.
I have now emphasized the significance of this position by making it a non-negotiable foundation stone and I have explained why this person needs to be an in-house appointee (see Chapters 7 and 9).
“Organization-wide understanding of winning KPIs definition.”
After working over 20 years on what makes KPIs work, I have realized that unless the organization embraces the new definition of what a KPI is and what it is not, the progress will be limited very quickly.
I have found repeatedly that, once an organization has held the two-day critical success-factor workshop, staff who have gone back to their offices soon start to call all measures KPIs again.
It is vital that the senior management team, led by the CEO, communicate the new meaning of a KPI and that all breaches of the term KPI are quickly picked up and staff and managers corrected.
Chief Measurement Officer's Toolkit
With all my books there is a heavy focus on implementation. My role, as I
