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Key Performance Indicators

Key Performance Indicators
Developing, Implementing, and Using Winning KPIs
Second Edition

DAVID PARMENTER

John Wiley & Sons, Inc.

Copyright

C

2010 by David Parmenter. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in aretrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 RosewoodDrive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher andauthor have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategiescontained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contactour Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of CongressCataloging-in-Publication Data: Parmenter, David. Key performance indicators : developing, implementing, and using winning KPIs / David Parmenter. p. cm. Includes index. ISBN 978-0-470-54515-7 (cloth) 1. Performance technology. 2. Performance standards. 3. Organizational effectiveness. I. Title. HF5549.5.P37P37 2010 658.4 013–dc22 2009035911 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

ContentsPreface Acknowledgments CHAPTER 1 Introduction Key Result Indicators Performance and Result Indicators Key Performance Indicators Management Models that Have a Profound Impact on KPIs Definitions Notes CHAPTER 2 Foundation Stones for Implementing Key Performance Indicators Four Foundation Stones Guiding the Development and Use of KPIs Defining Vision, Mission, and Strategy Note CHAPTER 3Developing and Using KPIs: A 12-Step Model

ix xix 1 2 3 4 16 24 27

29 29 37 39 41

Step 1: Senior Management Team Commitment 41 Step 2: Establishing a Winning KPI Project Team 51 Step 3: Establishing a “Just Do It” Culture and Process 55
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Contents

Step 4: Setting Up a Holistic KPI Development Strategy Step 5: Marketing the KPI System to All Employees Step 6: Identifying Organization-WideCritical Success Factors Step 7: Recording Performance Measures in a Database Step 8: Selecting Team-Level Performance Measures Step 9: Selecting Organizational Winning KPIs Step 10: Developing the Reporting Framework at All Levels Step 11: Facilitating the Use of Winning KPIs Step 12: Refining KPIs to Maintain Their Relevance Notes

62 67 74 74 77 86 88 96 101 105

CHAPTER 4

KPI Team...