1 © The Delos Partnership 2004 Performance Measures Developing a New Set of Measures

1 © The Delos Partnership 2004

Performance MeasuresPerformance Measures

Developing a New Set of Measures


The Delos ModelThe Delos ModelFor Business Integration For Business Integration

InnovationInnovation

VisionVision

StrategyStrategy

PrioritisationPrioritisation

DemandDemand

SupportSupport

SupplySupply


Measurement - BasicsMeasurement - Basics

VISION AND STRATEGY

OBJECTIVESOBJECTIVES

TARGETSTARGETS

MILESTONESMILESTONES



VISION AND STRATEGY


TARGETSTARGETS



Setting the VisionSetting the Vision

• Simple• Owned by the

Managing Director

• Understood by everyone

• Visiblee.g. Simply the

best


Communicate to Communicate to Employees ..Employees ..Worried about Confidentiality ?“Knowing our strategy will do our

competitors little good, unless they can execute it. On the other hand we have no chance of executing our strategy unless our people know it. It’s a chance we will have to take.”

– Brian Baker CEO Mobil Ltd.



VISION AND STRATEGY


TARGETSTARGETS



Setting the ObjectivesSetting the Objectives

• Set out areas for success

• Interfaces with– Customers– Suppliers– Employees– Shareholders– Environment

• Clear objectives


Matching ExpectationsMatching Expectations

OurOrganisation

OurOrganisationINPUTS OUTPUTS

How well do we meet their expectations, and how well do they meet our expectations ?


INPUTS OUTPUTSOur

Organisation

Matching ExpectationsMatching Expectations

How well do we meet their expectations, and how well do they meet our expectations ?

CULTURE/BEHAVIOUR

TECHNO

LOG

Y

WAYS O

F

WO

RKING

Use theseTo Measurethese

To Change this



VISION AND STRATEGY


TARGETSTARGETS



Targets should be…Targets should be…

• Specific

• Measurable

• Achievable

• Relevant

• Targeted

Each target Each target supports a supports a

measure of one or measure of one or more strategic more strategic objectives that objectives that relate to the relate to the

overall vision and overall vision and goal.goal.

Each target Each target supports a supports a

measure of one or measure of one or more strategic more strategic objectives that objectives that relate to the relate to the

overall vision and overall vision and goal.goal.


Setting the TargetsSetting the Targets

• Establishes Quantifiable aims

• Sets long term picture

• Challenges through outrageous goals

• Provides view of outstanding performance

Customer QOTIF

0%

20%

40%

60%

80%

100%

120%

Yea

r 1

Yea

r 3

Target

Actual


BenchmarkingBenchmarking

• Benchmarking is a process to evaluate company’s performance against– Sites within same company– Companies within the same industry– Companies within different industries– Companies in different businesses

• Collect the best practices of the best to make you the best


World Class Performance – World Class Performance – Fast Moving Consumer Goods Fast Moving Consumer Goods BusinessBusiness

Measure Average Top 10 % YOU ?

Delivery Reliability % 94 99.9

New Products in last 5 years %

4 63

Scrap Rates - % 3.9 0.8

Total Stock-turns (per annum) (1)

13 30

Training Days per Employee

7 20

(1) Sales Value/Total Stock : assuming average Variable Cost Ratio = 60 % then

Figures would be 8 18Source : Cranfield University



Elements to compare– Lead Times for different activities

• Order processing• New product Development

– Velocity– Inventory Turns– Customer Service Levels



Which is appropriate for you ?INVENTORY TURNS• Japanese Automotive Industry 163 TPY• European Automotive Industry 16 TPY• Manufacturing Industry Average 5 TPY• Tesco Food 200 TPY• Marks and Spencer Marble Arch 1500 TPYTPY = Turns Per Year (Inventory on Hand/Forward Cost of Goods Sold Times

12)



VISION AND STRATEGY


TARGETSTARGETS




VISION AND STRATEGY

CORE VALUES AND OBJECTIVES

TARGETS

MILESTONES


Setting MilestonesSetting Milestones

Set up Time on Baruka m/ c

0

1

2

3

4

5

6

7

8

9

10

Hou

rs Milestone

Actual

Established short-term checkpoints

Provides guidance on whether targets being met

Allows review of targets and objectives


Measurement ExampleMeasurement Example

Product Leader

Develop exciting products for the customerDevelop exciting products for the customer

98 % of New Products on Time98 % of New Products on TimeTime to market reduced from 12 months to 12 weeksTime to market reduced from 12 months to 12 weeks

Time to market will be reduced to 9 months byTime to market will be reduced to 9 months byDecember this year and to 6 months by end next yearDecember this year and to 6 months by end next year


Challenge the Status QuoChallenge the Status Quo

• Set Targets that will utterly challenge the organisation

• Imagineering will make them possible

• “If you don’t have a dream, how can it come true?”

Customer Service and Inventory

98%

99%

99%

99%

99%

99%

100%

100%

100%

100%

Year1

Year2

Year3

Year4

QOTI

F

0

50

100

150

200

250

Tu

rns QOTIF

InvTurns


Establishing New Establishing New MeasuresMeasures• Define simple vision – meaningful• Establish perspectives that need to be

measured and hence objectives• Establish Targets for each measure• Benchmark against best of the best to

establish targets• Agree milestones to provide progress charts

Documents

1 © The Delos Partnership 2004 Performance Measures Developing a New Set of Measures