Finding your organization's critical success factors

1. Finding your organization's critical success factors Presented by David Parmenter waymark solutions limited November 2009 Website: www.davidparmenter.com Email: parmenter@waymark.co.nz

2. CSF Stories • freight forwarding company • airline

3. The hierarchy of success factors Timely arrival and departure of planes Critical success factors Success factors

4. The hierarchy of success factors trucks leaving on time as close to 100% capacity as can be Critical success factors Success factors

5. This workshop is an extract from my white paper that can be acquired from www.davidparmenter.com

6. This presentation is part of a series of webcasts on ‘winning KPIs’ www.bettermanagement.com • Introduction to winning KPIs (Aug 09) • Implementing KPIs - A 12-Step Process • Implementing KPIs in Smaller Orgs (<200 Staff) • Finding your organization’s critical success factors • Balanced scorecard in 16 weeks not 16 months • Getting started or restarted with winning KPIs • Revitalizing a floundering balanced scorecard with winning KPIs • ‘Winning KPIs’ - a question and answer session • ‘Winning KPIs’ - a question and answer session • “Sorting the wheat from the chaff” – finding your wining KPIs

7. Why does performance measurement fail in so many companies? • do not apply enough rigor in our measures – hospital example • lack of a process – invented in a spare afternoon • little or no tie in to the organization’s critical success factors • observed well after the ‘horse has bolted’ • lack of clarity about who should see what • too many and all treated the same • lack of attention by the senior management team

8. Linkage of strategy to measurement Mission / Vision / Values Financial Results Customer satisfaction Learning & Growth Internal Processes Staff satisfaction Community & environment Key Result Indicators (max 10) Performance Indicators & Result Indicators (80 or so) Key Performance Indicators (max 10) Financial Results Customer satisfaction Learning & Growth Internal Processes Staff satisfaction Community & environment Linkage of strategy to KPIs and BSC Strategies (issues & Initiatives) Critical Success Factors KPIs & PIs in a balanced scorecard and KRIs in a dashboard

9. Changing this Team direction Strategic direction

10. To this Teams in alignment with strategy

11. 4 types of performance measures KRIs peel the skin to find the PIs PIs&RIs peel to the core to find the KPIs KPIs

12. The 10/80/10 rule

13. Critical success factors • “a list of issues or aspects of organizational performance that determine ongoing health, vitality and well-being” source AusIndustry • out of the 30-40 success factors only 5 to 8 will be the critical ones • the missing link to making your performance measures work

14. How well known are the critical success factors in your organization? 24% - there is a list which I have as do other staff 25% - there may be a list but I am not aware of it 51% - no formal list but management refer to them in papers and discussions Source: survey March 08 www.bettermanagement.com over 450 attendees

15. Has an exercise been undertaken to ascertain your organizations critical success factors within the last 5 years? 32% - yes 48% - not to my knowledge 20% - do not know Source: survey March 08 www.bettermanagement.com over 450 attendees

16. With 40 or so success factors there is confusion and a lack of focus • too many measures • strategic plans with too many diverse and contradictory initiatives • lack of communication and direction to operational and support staff

17. Most organizations know their success factors - however few organisations have: • worded their success factors appropriately • segregated out success factors from their strategic objectives • sifted through them to find their critical ones – their CSFs • communicated the CSFs to staff

18. Importance of getting the SFs right • wording of the SFs is critical • retention of staff becomes retention of key staff • increase repeat business becomes increase repeat business from core customers • measures become more specific • daily sales becomes daily sales made to key customers • planned calls becomes planned calls to key customers • deliveries made on time becomes deliveries to key customers made on time

19. Finding your critical success factors (step 6) is a three phase process • finding out the SFs that have been mentioned over the last ten years or so • holding a two day workshop • presentation to the SMT and Board to obtain agreement on the CSFs

20. The Goal: to find your 5 to 8 organization-wide CSFs • 5 to 8 regardless of size • CSFs will largely be industry specific e.g. the CSFs for an airline are different to a retail record chain store • a conglomerate organization would have 5 to 8 CSFs for each different industry • a very subjective exercise - highly dependent on the analytical skill of those involved

21. Please talk to the person next to you about what I have said does it make sense? is it relevant to you? any areas of confusion

22. Phase 1: Researching the existing SFs • finding out the SFs that have been mentioned over the last ten years or so • developing a list of these and grouping similar ones together • consult stakeholders (board members, key customers, key suppliers, unions etc.) and employees • interview some of the SMT and Board members (especially those who have known the organization for a long time)

23. The SF matrix

24. A CSF case study (NZ Maori Arts & Crafts Institute, Rotorua)

25. Background • Rotorua geysers, mud pools and Maori arts & crafts • 56 staff • 600,000 tourists • foreign independent travellers • tours (many from Asia) • domestic • revenue generated from entrance fees, retail shop, evening concerts • geyser is the main draw card

26. Financial SFs • balance of experiences, products and services • increased in overall spend by FIT • increased repeat domestic business • optimal utilisation of assets and resources • optimisation of working capital • understanding of the geothermal valley • continued fiscal responsible management • maximise off-season potential

27. Customer satisfaction SFs • seamless service to inbound operators • modern, well maintained assets for visitors • introduction of new services to enhance experience (one to one, information stations, interactive computer displays) • quality guided tours, intimacy with Maori culture

28. Internal Process SFs • increased linkages with key suppliers (millennium hotel etc) • timely maintenance of assets • effective relationships with key players in tourism, and other stakeholders • optimising technology (extranet for inbound information, intranet etc) • successful completion of projects • increased innovation

29. Learning & growth SFs • increase in adaptability and flexibility • increase in productivity through increase in skills, motivation, etc • increase in empowerment (delegated decision making) • foreign language capability (Korean etc) • increase in technology savvy • develop knowledge database • increase guide skills, cultural sensitivity & storytelling

30. Employee satisfaction SFs • increase in employee satisfaction • retention of key staff • provide opportunities to grow • establish good life and work balance • appropriate reward and recognition for all • increased recognition (celebrating success) • a pleasant physical work environment for all • active and well supported social club

31. Environment, community SFs • good working relationships with key community organisations (IWI, whaka village, all neighbours) • demonstrate leadership in the community • adoption of green globe 21 • linking sponsorship with staff community work • supporting local businesses • favourable reputation in the community

32. Workshop #1 revisiting the success factors of organizations in your sector (see hardcopy) • Please read and follow instructions

33. Phase 2: Holding a two day workshop • planning the workshop • inviting the right people • appropriate location • making sure all attend (invite from the CEO) • use the agenda in the manual • run the 6 workshops • check that proposed CSFs address all the six BSC perspectives • day and half for all, 2 days for the KPI team • utilize material I have put on www.bettermanagement.com

34. Suggested attendees • 20 to 40 people experienced and knowledgeable staff from all around the organization (operators, administrators, sales staff, production) • selection of management from head office including one or two from the SMT • all KPI project staff • external project facilitator, if you have one • if a couple of pilots are to be run, invite a team from the relevant business units

35. Short listing the CSFs – by relationship mapping Increase repeat business Retention of key staff 4 OUT Increased recognition

36. Example of relationship mapping • All teams work with same SF list • Arrows draw in the direction of the relationship • A subjective area, so you cannot be wrong • Compare results

37. Another example of relationship mapping

38. Workshop 2: Airline success factors

39. Feedback of ranking from teams

40. Table for short-listing CSFs

41. Testing that your top 5-8 CSFs link to your strategic objectives No linkage to strategic objective #4

42. Phase 3: Presentation to the SMT and Board to obtain agreement on the CSFs • prepare with PR help – using emotional drivers • present the top 5 to 8 CSFs • explain the ramifications on measurement • list the 24/7, daily, weekly measures, if any, that are currently being collected in this area • discuss requirement to communicate to employee representatives and staff • ask for permission to proceed to next stage, ( team and organizational measures)

43. Please talk to the person next to you about what I have said does it make sense? is it relevant to you? any areas of confusion

44. Brainstorming performance measures using one of the CSFs

45. Implementing KPIs - a 12 step process

46. What we have learnt • gain an in-depth understanding of the characteristics of KPIs • understand the significance of critical success factors • understand how KRIs,PIs,RIs & KPIs fit together • how to brainstorm measures from a critical success factor

47. CSFs help reporting measures in • the board dashboard – the KRIs • daily / weekly KPI reporting • team scorecard reporting • organizational scorecards • reporting progress to staff • the staffs’ own performance agreements see other ‘better management’ presentations I have delivered for examples of these

48. Suggested next steps • read my paper on www.bettermanagement.com – it is free to access • acquire the book “Key Performance Indicators – developing, implementing and using winning KPIs” • ban further development of measures until the CSFs have been agreed • hold the two day CSFs workshop (may need a facilitator) • listen to my other web casts • attend my KPI master class if you are to be in the KPI project team (see www.davidparmenter.com)

49. These books came out in 07 www.waymark.co.nz to order, see link to www.amazon.com

50. Thank you for investing the time