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© 2004 Accenture All Rights Reserved. All rights reservedE-Mail: [email protected] | Phone: 858-695-1745 | Website: www.cfo-network.com

Measuring Performance using Meaningful and Effective Metrics

High Performance Organizations:

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Agenda

END GOALACTIONPRIORITIZEASSESS

Using categories of

metrics to assess

performance

Metrics Tools and Options to

monitor performance

So much to work on,

where should we focus?

Stable operations

Or •Business

growth

Implements effective tools to win the race

A business with high performance


Metrics should be a best practice that produces higher business performance…

Hackett Defines Best Practices:

A technique that produces superior business performance, by doing one or more of the following:

Aligns with strategy Drives greater efficiency and effectiveness Promotes timely execution Leverages existing, and exploits emerging technologies Enables better decision making Maximizes return Ensures acceptable levels of control Optimizes skills / capabilities of the organization Promotes collaboration across the extended enterprise


Benchmarking One of the best definitions remains

to be Michael Spendolini’s from his 1992 The Benchmarking Book:

“A continuous, systematic process for evaluating the products, services, and work processes of organizations that are recognized as representing best practices for the purpose of organizational improvement”

Benchmarking, one of the best places to start measurements

WorldClass

Best Practices

Improvement Over Current Practices

Parity or Below Current Practices


Internal Similar activities in different locations, departments, operating units, country, etc.

•Global / multi-national firm comparisons

•Collection strategies by division

•Data often easy to collect

•Good results for diversified companies

•Limited focus•Internal bias

Competitive Direct competitors selling to the same customer base

•Shell•Exxon•BP

•Information relevant to business results

•Comparable practices / technologies

•Data collection difficulties

•Ethical issues•Antagonistic attitudes

Functional Organizations recognized as having state-of-the-art products, services, processes

•Pipelines•Refineries•Distribution•Usage of technology

•Third party outsourcing

•High potential for discovering innovative practices

•Readily transferable technology / practices

•Development of professional networks

•Access to relevant databases

•Difficulty transferring practices into environment

•Some information not transferable

•Time consuming

Type Definition Examples Advantages Disadvantages

Three Types of BenchmarkingBenchmarking is typically a mix of leading practices and key metric measurements


The standards of a good metric…

Dynamic

Timely

Manageable

Easy ToMeasure

Simple ToUnderstand

Impact

Good Metrics move up and down, they are not always

constant

Good Metrics provide timely information. They do not report on issues

that are already outdated.

Good Metrics “Move the Needle”

Good Metrics provide actionable information

that drive Business decisions

Source: Accenture


Taking a look at our world using our category framework of measurements…

• Time – cycle times for activities

• Return – evaluation of cost vs. benefit

• Capacity – not too much idle, enough to support growth

• Satisfaction – customers, employees, vendors

• Coordination – seamless handoffs across individuals, systems, organizations, processes

• Moods – driving stories of success or failure

• Quality – compared to acceptable standards and criteria already established

360 o

Insight

Financials

Customers

Suppliers

Competitors

Operations

Employees

There are so many value drivers in our organizations, how do we measure performance?


FY 2007Yr 0

Breakeven AnalysisFinancial Summary

In k dollars $

Option 1

Option 2

Key Assumptions

NPV:

Break Even Point:

$343K

4.1 yrs

$450K

5.1 yrs

Est. Cost Summary

Facility

Equipment

$4.8m

3.8m

1.0m

$3.4m

2.4m

1.0m

Est. Benefits Summary

Production Hours

Capacity increase

5

20%

3

35%

FY07Yr 0

-5000

-4000

-3000

-2000

-1000

0

1000

2000

3000

FY2007 FY2008 FY2009 FY2010 FY2011

Option 1($3.4)

($4.8)

Option 2

Risk Adjusted Discount Rate: 10%

you can measure it in terms of money or monetize time or lost opportunity

Prioritizing projects and areas of focus starts with ROI and risk if…


High

High Cost/Complex

Valu

e

Low

Low Cost/Complex Ability to Realize

Evaluating Options and Priorities in cases of “soft dollars”

Return

A/P Module

Processes

CapacityHC-A/R

XXX

2 Day Close

Payroll System

CapacityHC

CapacityHC

CapacityHC-GL


Measuring results based on audience capacity to act

Monthly Score Card

Financials 7-Jun Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08Buyer Revenue 58 Seller Revenue 21 Total Revenue 79 Gross margin $ 40Gross margin % 51%Total Operating Expenses % 42%Avg. Revenue per Unit 5.8

Buyer Stats

# of new leads 25# of listing appointments 20# of new listings 5conversion rate 25%# of new contracts written 10

Operations

Average Daily deposits

Average A/R Aging - # over 30 days



Baseline


20

15

27

3335

40

20

30

20 2018

35

40

35

40

30

$-

$5

$10

$15

$20

$25

$30

$35

$40

$45

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Actual Plan

Revenue

Commentary: Project UpdateAnalysis of ResultsPlan Adjustments, etc.

Measuring results based on audience capacity to act


Performance Metric

Strategy Factor Basic ThresholdAbove

Average Leading RecentIndustry Quartile

Aspirational Target

Industry Quartile

Date to Achieve

Internal Client Satisfaction Results (Quarterly Survey)

65% 4th 1st 2009

Meet Service Level Agreements N/A 2nd 2nd 2008

Reports on Schedule TBD 4th 3rd 2008

Reports Accuracy TBD 2nd 1st 2008

Skill set Avg. High level Acct. 50% 4th 1st 2010

Lost Workdays/Absent 0.56 4th 1st 2009

Internal Employee Satisfaction (Quarterly Survey)

70% 3rd 2nd 2009

Sat

isfi

ed

Cu

sto

mer

sD

edic

ated

E

mp

loye

esMeasuring results based on audience

capacity to act

Current performance goals

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