Performance Management for Best Practice

Size: px

Start display at page:

Download "Performance Management for Best Practice"

Jessie Norris
8 years ago
Views:

1 Performance Management for Best Practice John Swete Kelly November 2013

2 Crowe Horwath A Vast Resource Pool Crowe Horwath Australasia is the largest provider of practical accounting, audit, tax, business and financial advice to individuals and small and medium businesses from a comprehensive network of over 100 offices. Formerly known as WHK in regional Australia, our team includes more than 3,000 principals, professionals and support staff located in Australia and New Zealand. Crowe Horwath International is ranked amongst the top 10 global accounting networks, and is known for delivering quality audit, tax and advisory services in more than 100 countries. 2

Formerly known as WHK in regional Australia, our team includes more than 3,000 principals, professionals and support staff located in Australia and

3 Performance Management for Best Practice An integrated model for evaluating Performance Understanding & Managing Activity Building an integrated suite of Scorecards Benchmarking performance Lead, Lag and Trends 3

4 An Integrated Performance Model Income Cost = Profit Capital Charge OPERATING ASSETS Working Capital Non-current LIABILITIES Debt Equity FINANCIAL KEY PERFORMANCE INDICATORS OPERATIONAL Quality differentiation Lower costs Improved activity Competitive advantage Strategic analysis Strategic evaluation Resource allocation STRATEGIC 4

PERFORMANCE INDICATORS OPERATIONAL Quality differentiation Lower costs Improved

5 Why do we need KPI s? We need to understand what is driving the value of our business! We need business intelligence to deliver planned business outcomes! 5

6 Wealth Creators & Wealth Destroyers 6

7 Performance measurement What is critical for our current and future success? Lag How do we tell staff what to do and measure their execution in a meaningful way? How do we substantially increase performance? Lead Finance 1. Key Result Indicators KRI s 2. Performance Indicators PI s Lag Customer 55 1 A++ Your eis Scorecard Target 2 Innovation 3. Key Performance Indicators KPI s Lead Our People 4 3 Internal Processes 7

How do we substantially increase performance? Lead Finance 1. Key Result Indicators KRI s 2.

8 Business Flows Organisation INPUTS Business Processes OUTPUTS Support Processes Expectations Customers Stakeholders Community Employees Partners Lead Indicators Measure Input Probable success of the process Lag Indicators Measure Outcome Indicators of Efficiency or Effectiveness 8

Partners Lead Indicators Measure Input Probable success of the process

9 ABM doesn t replace the accounting system An ABC/ABM system does not replace the accounting system. It restates the same data and adds operating relationships to more effectively support decision making. Data Data+ Information A blizzard of transactions General Ledger (expense account balances) A B C / A B M Executive (Strategy) Management (Operations) Decision makers Accumulator Optical Lens (Reassigns Costs) 9

Data Data+ Information A blizzard of transactions General Ledger (expense account balances) A B C / A B

10 ABM uses drivers to trace costs to Key Business Outputs what we use in what we do in what we deliver Develop products Serve customers Manage the business Resource Drivers Activity Drivers 10

11 Lead & Lag Indicators Lead Indicators Lag Indicators What is Measured? Causes Effects Timeliness of Measure? Early Warning Historical Units of Measurement? Mainly non-financial Mainly Financial Main Use? Directional Problem Solving Scorecard 11

Early Warning Historical Units of Measurement?

12 Benchmarking Metrics Productivity / Efficiency (Ratio or Percentage) BENCHMARK Cash Conversion Efficiency LTI Frequency Rate Labour hrs/output unit Machine Utilisation Orders filled/employee Labour efficiency Labour efficiency Training days/total days Conversion rate quotes to orders Dynamic Investment Overtime Revenue Cost Profit Revenue/employee ROI ROS Admin costs/revenue Value added per employee Revenue vs budget Value of quotations submitted Achievement to Plan Cost-Time Profile Vendor Delivery Performance Adherence to schedule/plan Routine maintenance done Project overrun Achievement of quality plan Material orders placed to schedule Training undertaken vs budget QMS audit performance CI Matrix Open Organisation Profile Organisation Performance Profile Stage of Concern Image Customer Satisfaction (int) Customer Satisfaction (ext) Cycle Time Time Contact time with customers Delivery lead time Idle time On-time delivery Time to solve industrial problems Promptness Time from receipt of order to start of task Time to change over machines Time to fix customer problem No. backorders No. complaints No. people No. successful CI teams No. suggestions submitted No. claim forms processed per day Product output per week Attendance at key meetings No. key skills acquired No. high impact defects No. customer contacts per month BUSINESS OUTCOMES Financial ($ or %) Survey / Questionnaire Index Number / Quantity / Activity 12

13 The KPI Scorecard The Lead Indicators of Success 13

14 Financial Scorecard 14

15 Assess Key Performance Indicators 15

16 Assess Trend and Benchmark 16

17 Rank By KPI, Category and Keyword 17

18 Rate Relative to Targets 18

19 Rate Relative to Peers 19

20 Rate Best Practice 20

21 Rate Opportunities for Improvement 21

22 Correlation analysis. 22

23 23

24 The Trend is my Friend Lead & Lag 24

25 Wise Words About Measurement You can t manage what you don t measure What gets measured gets done When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind. - Lord Kelvin 25

26 Best Practice Process Use a Lead and Lag framework (Map the relationships with ABC Correlate KPI s to outcomes Embed the system in a scorecard & Comparative Analysis Trend financial and non-financial Communication monthly (Scorecards and Benchmark Results) Measure Trend Correlation Weighting Lead Scorecard Lag Scorecard 26

27 Our Service Offering Tel The relationship you can count on Disclaimer Crowe Horwath (Aust) Ltd is a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. 27

28 John Swete Kelly Principal Business Advisory Brisbane Tel Mobile John.swetekelly@crowehorwath.com.au 28

Managing Third Party Risk

Managing Third Party Risk Robyn Cooper and Mark Scales 21 November 2014 Don t get yourself in the headlines! Australia: Outsourcing responsibility: risks of giving government contractors too much autonomy