Quality Alchemist (品質煉金術師): ESG Webinar – Key Performance Indicator (KPI) Strategy 2.0

2022年9月27日星期二

ESG Webinar – Key Performance Indicator (KPI) Strategy 2.0

The Executive Study Group (ESG) webinar named “Performance Management – Key Performance Indicator (KPI) Strategy 2.0” was held by Asia Pacific Institute for Strategy Limited (APIFS) on 27^th Sep 2022. In the beginning, Dr. Mark Lee briefed the background, history, and goal of Asia Pacific Institute for Strategy Limited (APIFS). Before the webinar, Dr. Mark Lee surveyed participant and found that 40% employed 1-5 KPIs and 31% used 6-10 KPIs. It is very common tools.

Firstly, Dr. Mark Lee introduced today’s content including KPI’s objective, five traps, strategy maps and its implementation, as well as, strategic alignment. He said conventional performance measure of KPI related to financial data. Apart from financial measures, he briefed some non-financial measures such as customer loyalty, employee satisfaction, etc.

Then he introduced five traps of KPIs. The first trap is “Not Linking to Strategy”. Most company employed Kaplan and Norton’s Balanced Scorecard directly (like copycat) but not focused on their strategy. Company should dip deep to discover and track the activities so as to align with their strategy.

The second trap is “Not Validating the Links”. Dr. Lee said even though you set KPI with link but do you validate the link are effective and right? Sometime too many KPIs that difficult to manage your business. Moreover, not every KPIs are equal importance so that we need to assign weightings. Then he surveyed again and 47% responded KPI is effective.

The third trap is “Not Setting the Right Performance Targets”. KPI should set to the right target. Customer satisfaction could set upto 100% but it is not right level to balance. Time should be also considered including short-term and long-term.

The fourth trap is “Validity and Reliability”. Dr. Lee showed a bias survey with not even distributed grading that could cause bias. And he quoted Uniqlo selection rule for promotion idea that advertisement with 60% agree and 40% disagree by internal vote to be selected. Impressive to customer is Uniqlo strategic goal.

The last trap is “Sticking to Your Numbers Too Long”. If you have 20 KPIs, it may be too many without weighting to priority. Dr. Lee said KPI should be updated frequency so as to match the changing environment.

After that Dr. Lee discussed the value of strategy map that provided a clear line of sight that jobs are linked to the overall objectives of the organization. The KPI 2.0 is based on balanced scorecard added cause-and-effect link. The implementation sequency is considered Customer Perspective first, and then Internal Process Perspective (Time-Horizon: short-term for improvement and long-term for innovation). Learning and Growth Perspective followed and considered to be Learning Organization. Lastly, Financial Perspective would be the outcome after increasing shareholder value.

Finally, he compared the financial measures and non-financial measures. When KPIs aligned with strategy, gaps can be discovered for effective fine-turn.