Measure to Manage The Power of KPIs in Modern Business
Saron Solutions
Improving our customers business results by optimizing their operations and providing tailored and streamlined solutions
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Do you have KPIs? How many times have you heard that? And then, do you have them linked per project? Sure, that's easy. But what about cross-departmental KPIs that are tied to your core business strategy? Hmm, that's another story. Just recently, in one of my MBA courses, we had the same discussion. How do you define good, stable KPIs that are applicable to a company's strategy and can be transferred to all departments inside the organization? The goal is for all departments to align with the same goal. In essence, we want something that Purchasing, Supply chain, Operations, and Sales have in common and that is aligned with senior leadership strategies. That's not an easy task.
This is one of the most difficult tasks that we, as consultants, are faced with. However, there is a possible solution: implementing a KPI tree.
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Understanding the KPI tree
As an ex Executive Director for Operational Performance and now as an owner of successful consulting and business support organization, I've seen firsthand how crucial it is to align departmental objectives with the overarching corporate strategy. Here's how we can use a KPI tree to achieve this alignment.
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1. Corporate objectives
These are the typical high-level goals set by the top management. Examples include:
2. Departmental objectives
Each corporate objective is broken down into specific goals for each department. These departmental objectives should support the achievement of the corporate objectives.
Procurement department:
Corporate objective: Enhance operational efficiency
Supply chain department:
Corporate objective: Enhance operational efficiency
KPI: Subcontractor audit rate
Operation department:
Corporate objective: Enhance operational efficiency
Sales department:
Corporate objective: Enhance operational efficiency
3. KPI hierarchy
The KPIs at each departmental level should roll up to provide a comprehensive view of how the organization is performing against its corporate objectives. This hierarchy ensures that there is a clear line of sight from individual employees’ actions to the company’s strategic goals.
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Example of KPI cascading:
Corporate objective: Increase revenue
Sales KPI: Sales growth rate (10% annual increase)
Operations KPI: Cost per service/product produced (reduce by 5%)
Procurement KPI: Implement supplier portal to optimize quality and delivery time (5% reduction)
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4. Implementation and monitoring
Implementing a KPI tree involves several steps:
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5. Communication and alignment
Regular communication, reporting and alignment meetings are essential to ensure all departments understand how their KPIs contribute to the overall objectives. This fosters a culture of accountability and continuous improvement across the organization. By cascading corporate objectives down to specific departmental KPIs, organizations can ensure that every part of the business is working towards common goals, leading to more optimized and efficient operations.
Implementing a KPI tree might seem complex, but it is a powerful tool to ensure alignment and drive performance across all levels of an organization. If done correctly, it can transform the way departments collaborate and contribute to the overall success of the company.
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We love doing this for our clients, so feel free to reach out for more information. Our team is always here to help, and we're excited to discuss how we can assist you with your needs. Don't hesitate to get in touch with any questions or to learn more about our services.
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