Wednesday, January 16, 2008

A Successful Implementation of Key Performance Indicators

To start any new business management program or strategic management program after self-learning, right after finish class, or even after receiving a nice advice of counseling company, generally the first problem is where are how to start.

To implement of the KPIs to your business, the problems is the same. It is a problem of where and how. To accommodate this problem, I had developed the KPIs Development Model, which I provide the step-by-step explanation on how to implement the KPIs to business. But before that, may I explain how the model had been derived and what did kind of business already apply this model?

During the early development phase when I tried to adapt the Balance Scorecards to the KPIs, I thought that there should be a model to aid the implementation of KPIs to our local business, and the validity of that model should be tested, probably through some action researches, against this hypothesis.

1) The framework of the KPIs is universal to all business or must be tailor to the business.
2) Is the KPIs is fit all businesses or only some business?
3) What model or format should be used to make executive and personnel from all level to understand and actually implement the KPIs in their organization?
4) How to develop a process or follow-up method that be truly benefits to business and indicates the achievement of the goal set at the beginning?
5) During the normal strategy planning session, the KPIs will be included in these process and so that all units can practice and gain more knowledge about it.

After the model had been tested against to the hypothesis, another problem is to figure out how long it would take to see the success of the KPIs because
1) During the KPIs implementation process, there will certainly be many threat,adjustment, including the change of indicating factors from time to time.
2) What tools of supporting factors are required for the continuation of the KPIs? And how can these factors be developed into a format or standard form?
3) If we are to achieve the successful corporate transformation using the KPIsas a catalyst, which period or step during the KPIs development should we begin with? If there are resist to change, how we can manage and turn them into cooperation using the appropriate strategy or incentive.

After taken into account all these points, I started to apply the KPIs development model to many businesses. The result was satisfactory: the model was applicable to many types of businesses whether multinational or local company, from industry ranging from FMCG to services, insurance, telecommunications and e-Business. Thereafter, I wrote a book about the KPIs-Road Map, giving examples and methods. Recently I’ve tried to take a step further by improvising the standardized measurement indexes, which will be included in the second publication (now in progress).

In summary, the KPIs development model that I have developed is based on many extensive actual action researches. Therefore, the model is eligible to be applied to your business immediately.
The KPIs Development Model consists of four major steps:
1) Perform a strategy review session on which business operator will test the materiality execute of existing strategy, the embedded importance of the strategy, and the profitability in terms of customer, product & services, to know how to adjust the strategy during the actual strategy work-out.
2) Implementing the KPIs involves an analysis of Key Result Areas (KRAs) of every business unit or department. These Key Result Areas will become the goal that the unit or department must attempt to achieve. Then the master draft of KPIs is created along these key result areas and tried out.
3) Testing is done during the actual implementation and the KPIs development model will receive a find tuning here. So often that during this step, the company is required to change the way the task is carried out. A new strategy may be necessary so that the preferred results of those KRAs are in line with those set by the KPIs.
4) Become the KPIs-led organization.

The key to successfully implemented the KPIs lies in the development of the KPIs development model according to the above four steps. The early participation of high ranking executive increases the chance of success. Once you start preparing a rough draft of KPIs development model for your organization, you will find that success is just the other side of a coin. So, let’s start doing. The KPIs is ready to help you measure your success.

Dr.Danai Thieanphut
Managing Director
DNTConsultants Co.,Ltd.