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Ron Baker, Founder VeraSage Institute
The Three Most Important Key
Predictive Indicators
âBecause its purpose is to create a customer, the business enterprise has
twoââand only these twoââbasic functions: marketing and innovation.
Marketing and innovation produce results; all the rest are âcosts.ââ
Peter Drucker
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A Gedanken
A Gedanken
Unitedâs KPIs: âŻOn Time
Performance ⯠Lost Luggage âŻCustomer
Complaints
From Worst to First, Gordon Bethune
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âWhen weâre looking for goals for an entire company, we make sure our employees know what weâre going for: to get the planes on time, not to aim for a certain return on investment. Goals such as certain equity or debt ratiosâŚwork fine for accountantsâŚBut when it concerns the whole company, we need a companywide goalâsomething that employees can immediately identify.â
âGordon Bethune, CEO, Continental Airlines, From Worst to First: Behind the Scenes of Continentalâs Remarkable Comeback
âThis is one of the most common problems in businesses. Businesses fail because they want the right things but measure the wrong thingsâor they measure the right things in the wrong way, so they get the wrong results. Remember? Define success the way your customers define it.â
âGordon Bethune, CEO, Continental Airlines, From Worst to First: Behind the Scenes of Continentalâs Remarkable Comeback
âWhat you can measure you can
manage.â
ââThe McKinsey Maxim
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Scottish proverb: âYou donât make sheep any fatter by weighing them.â
âThe only way to look into the future is use theories since conclusive data is only available about the past.â
âClayton Christensen, et. al. Seeing Whatâs Next
Why Do We Measure?
â˘âŻHow do our measures contribute to our competitive advantage?
â˘âŻWe get what we measure â˘âŻNew Strategies + Old Measures =
Old Behaviors
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Whatâs Your Canary in the Coal Mine?
Key Predictive Indicators
Economist Classifications: âŻLagging (unemployment, prime
rate) [Hindsight] âŻCoincident (PI, Mfg/trade sales)
[Insight] âŻLeading (Mfg new orders, bldg
permits) [Foresight]
Why CPAs Lose Customers
1.⯠âMy Accountant just doesnât treat me rightâ
2.⯠Ignore them 3.⯠Fail to cooperate 4.⯠Let partner contact lapse 5.⯠Donât keep them informed 6.⯠Assume they are technicians 7.⯠Use as training ground for new team
members
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Why People Select CPAs
1.⯠Interpersonal skills 2.⯠Aggressiveness 3.⯠Interest in the customer 4.⯠Ability to explain procedures in terms the
customer can understand 5.⯠Willingness to give advice 6.⯠Perceived honesty
What Customers Want â˘âŻ Invest in new areas of our
business â˘âŻHelp us think/develop strategies â˘âŻBe proactive w/info in our industry â˘âŻMeet with us to brainstorm â˘âŻHow do we compare to others â˘âŻSuggest things we should be doing
Firm-Wide KPIs
â˘âŻTurnaround Time â˘âŻHSDs⢠â˘âŻThe Value Gap
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$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
Cost
Price
Value
Customer Existing Value Created
Existing Revenue Yield
Customer Profit
XYZ $2,500 $1,000 $1,500
Customer Potential Value
Potential Revenue
Value Gap
XYZ $5,000 $2,500 $2,500
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Net Promoter Score (NPS)
Typical company loses half customers < 3 years
The Ultimate Question: How likely is it that you would recommend this company to a friend or colleague?
Dell had highest NPS
www.netpromoter.com
3 Types of Customers, 1-10 Scale
Promoters (P) = loyal enthusiasts (9-10)
Passives = satisfied but unenthusiastic, easily wooed by competition (7-8)
Detractors (D) = unhappy customers trapped in a bad relationship (0-6)
P â D = NPS
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Constructing a Theory
â˘âŻObservation (How do you know?) â˘âŻCategorization (Rank whatâs
importantââOccamâs Razor) â˘âŻPrediction or Explanation (So
what?) â˘âŻConfirmation/Falsification (If not,
revise, start over)
Key Predictive Indicators
Most importantly: KPIs define success the same way the customer defines
success
Itâs 12:41 a.m: Do you know where your package is?
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FedEx Service Quality Index (SQI)
Hierarchy of Horrors: âŻRight-day late-service âŻWrong-day late-service âŻComplaints/Traces âŻMissing points of delivery âŻInvoice adjustments requested âŻMissed pickups
FedEx Service Quality Index (SQI)
Hierarchy of Horrors: âŻDamaged packages âŻLost packages âŻAbandoned calls âŻInternational SQI
Harris Interactive poll, N= 23,000
âŻOnly 37% clear understanding goals âŻOnly 10% felt org holds people
accountable for results ⯠Only 10% tracked success measures âŻOnly 10% have clear, measurable,
deadline-driven work goals âŻOnly 20% fully trusted org âŻOnly 13% high-trust, cooperative
relationship with other groups/depts
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www.journalofaccountancy.com
June, 2009 Pricing on Purpose: How to Implement Value Pricing in Your Firm
November, 2008 The Firm of the Future
April, 2010 Project Management for Accountants, by Ed Kless
Twitter @ronaldbaker
Phone 707.769.0965
VeraSage website/blog www.verasage.com
Thank You!
Dellâs Dashboard
Three critical success factors: 1.⯠Order fulfillment 2.⯠Product performance 3.⯠Service support
Anything missing?
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One Lexus/Toyota KPI
Lifetime cost of ownership High quality parts Manufacturer warranty on used cars
Walt Disney World KPI for loyalty to resorts?
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Management Ideas 1900-2000 â˘âŻ Scientific management â˘âŻ Cost accounting and variance analysis â˘âŻ The commercial research laboratory â˘âŻ ROI analysis and capital budgeting â˘âŻ Brand management â˘âŻ Large-scale project management â˘âŻ Divisionalization â˘âŻ Leadership development â˘âŻ Industry consortia â˘âŻ Radical decentralization (self-organization) â˘âŻ Formalized strategic analysis â˘âŻ Employee-driven problem solving
The Problem with Efficiency
Why?
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The Problem with Efficiency
The Antithesis of Efficiency
â˘âŻContinuing education â˘âŻKnowledge management â˘âŻTotal Quality Service (Ritz-Carlton) â˘âŻMentoring and coaching â˘âŻNetworking â˘âŻSocial media â˘âŻPricing on Purpose â˘âŻClient relationships (efficient with
things, not people)
Human Capital, Not Cattle
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Knowledge-Worker Effectiveness
â˘âŻ âWhat is the task?â(Definition, delegation, deadline)
â˘âŻAutonomy (Greek for âself-governanceâ) â˘âŻContinuing innovation â˘âŻContinuous learning and teaching â˘âŻEfficiency = Learning Curve â˘âŻQuality at least as important as quantity â˘âŻTreated as Human Capital Investors
(volunteers)
Knowledge Workers KPIs
â˘âŻMarginal Contribution to Firm Revenue/Value
â˘âŻCustomer Feedback â˘âŻEffective Listening Skills â˘âŻEffective Communication Skills
Knowledge Workers KPIs
â˘âŻRisk Taking, Innovation & Creativity
â˘âŻEffective Delegator â˘âŻAbility to Deal with Change â˘âŻContinuous Learning & Coaching
Skills
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Knowledge Workers KPIs
â˘âŻPersonal Development Plan â˘âŻNumber of Customer Contacts/
Week â˘âŻPride â˘âŻPassion â˘âŻProfessionalism â˘âŻHSDsâ˘
âIt doesnât make sense to hire smart people and then tell them what to do; we hire smart people so they can tell us what to do.â Steve Jobs
Apple Computer