Templates and Checklists: Introduction

Less than Between Over 3,000

250 250-3,000 staff
1. Overview of Toyota’s 14 Maybe Y Y
management principles useful
2. Overview of the advice from the Y Y Y
paradigm shifters such as Peter
Drucker, Jim Collins, Jack Welch,
Tom Peters, Gary Hamel, Jeremy
Hope relevant to a KPI project
3. “Getting the Right Consultants on Y Y Y
The Bus” By David Parmenter,
Finance Management Faculty
ICAEW December 2013

Template 1 Toyota’s 14 Management Principles

I believe Toyota to be possibly the greatest company in the world. It has 14 principles
which are the backbone to its culture and Toyota can embed these principles in all
countries it operates within. Its Kentucky plant in the USA exceeded all Toyota
expectations with its acceptance of the Toyota way. To understand the Toyota
principles, one needs to read Jeffrey Liker’s booki The Toyota Way. He has broken
them down into four categories as set out in Exhibit 1.

Exhibit 1 Jeffrey Liker’s analysis of Toyota’s 14 principles

I believe that Toyota’s 14 principles should be embedded in all private, government and
non-profit agencies as best they can. They would make a profound impact on the
organisations, benefitting the staff, management, board and customers. The 14
principles are set out in Exhibit 2.

Exhibit 2 Toyota’s 14 principles

1. Principle 1: Base your management decisions on

Philosophy a long-term philosophy, even at the expense of

short-term financial goals.
 2. Principle 2: Create continuous process flow to
bring problems to the surface.
3. Principle 3: Use “pull” systems to avoid
overproduction.
4. Principle 4: Level out the workload (Heijunka).
5. Principle 5: Build a culture of stopping to fix
problems, to get quality right the first time.
Process
(Eliminate 6. Principle 6: Standardized tasks are the foundation
waste) for continuous improvement and employee
empowerment.
7. Principle 7: Use visual control so no problems are
hidden.
8. Principle 8: Use only reliable, thoroughly tested
technology that serves your people and
processes.
9. Principle 9: Grow leaders who thoroughly
understand the work, live the philosophy, and
teach it to others.
People and
Partners 10. Principle 10: Develop exceptional people and
(Respect,
teams who follow your company’s philosophy.
Challenge, and
Grow Them) 11. Principle 11: Respect your extended network of
partners and suppliers by challenging them and
helping them improve.
12. Principle 12: Go and see for yourself to thoroughly
understand the situation (Genchi Genbutsu).

Problem 13. Principle 13: Make decisions slowly by consensus,

solving thoroughly considering all options and then
(Continuous
implement the decisions rapidly.
Improvement
and Learning) 14. Principle 14: Become a learning organisation
through relentless reflection (Hansei) and
continuous improvement (Kaizen).

Create continuous process flow to bring problems to the surface

This is an important principle for the finance team to master. Here each process is
reviewed for its current timeline and then shortened to eliminate waste. The finance
team need to master lean for themselves and the organisation. Mastering this will leave
a legacy and add to your salary.
One of the best methods to monitor timelines is “Post-It” re-engineering which is
covered later on in the paper.
Level out the workload (Heijunka)
This is a major breakthrough. It points out that if you streamline processes and
eliminate bottlenecks you can make smaller production runs viable and indeed
desirable. In a tractor company where the major sales are for the midsized tractor the
lean manufacturer would manufacture them according to daily demand as Exhibit 3
shows. The better matched production to demand reduces the need for finished goods
stock holding considerably.

Exhibit 3 Matching production to sales

Traditional view of long production runs Manufacture according to customer
demand

Build a culture of stopping to fix problems, to get quality right the first time
This is an important principle for the finance team to master. Finance teams invariably
go from:
 one month-end to another without improvement
 one annual plan to another without improvement
 one year-end to another without improvement.
Whereas if we adopted this Toyota principle we would evaluate, after process has
finished, and ask what can we do better next month, next year.
We would reduce the number of internal transactions, the number of spreadsheets and
constantly review each processes’ timeline to further eliminate waste and shortened
timelines.

Use visual control so no problems are hidden

Toyota is famous for its “andon cord” if problems occur. Andon refers to the pull cord
where any worker on the production line can stop production, and ask for help, if they
see a fault that cannot be fixed by them or the next workers before it will be covered up
by a panel. Immediately lights flash and that part of the production line is halted. The
workers below are unaffected as there is a feed in line with about eight minutes of
product to work on. Trained engineers rush in and fix the problem. They have up to
eight minutes before the whole production line will be halted. The ability of anyone to
stop production and activate the flashing lights to get the roaming engineers to the spot
quickly is a major advantage Toyota and other manufacturers have when using this
visual control.
Visual control is an important principle for the finance team to master as many reports
need a rocket scientist to read them. Whereas if we adopted this Toyota principle we
would make:
 all reports so clear that nobody needs to ask questions about them – I call it
passing the 14 year old test
 use some sort of “and on cord” like a “red cone” so staff, within the accounting
function, can signal that they are having a problem that might delay an
accounting process, at month-end / annual planning/ annual accounts
  use of staff notice boards, screens in canteens to report progress

Respect your extended network of partners and suppliers by challenging

them and helping them improve
This is an important principle for the finance team to master as it will involve:
 ensuring all transactions from major long term suppliers are paperless
 maximising the use out of the G/L, planning tool, reporting tool by constantly
improving the use of their features
 streamlining certain processes to one contractor e.g. purchasing stationery,
travel requirements from one national supplier

Use only reliable, thoroughly tested technology that serves your people and
processes
Toyota are never the first to use a new technology. They let others break-in the new
ground. They are, without doubt, the best users of a new technology once they have
ascertained that it will serve their staff and their processes.
This has important ramifications for the finance team in the selection of a new G/L, a
planning tool, and a new accounts payable system.

Go and see for yourself to thoroughly understand the situation (Genchi

Genbutsu)
Toyota supervisors and managers are always expected to “walkabout” to see for
themselves what is happening. They do not rely on written reports or meetings. The
Finance team should do more walkabouts especially with:
 setting up new “paperless processes” with key suppliers
 reducing waste within operations
 visiting best practice sites, around the world.
I firmly believe if CFOs visited more sites that are using their intended new applications
they might think twice. I am referring to some of the large G/L applications that are so
complex only rocket scientists can implement them, and the organisation and their bank
account are now taken hostage for the foreseeable future.

Make decisions slowly by consensus, thoroughly considering all options

and then implement the decisions rapidly
Toyota is very slow in the planning stage but very fast in the implementation and
commissioning as everything, I mean everything, has been discussed and contingency
plans agreed, ready for action if required. The Finance team should take heed of this
principle especially with the:
 changing of the general ledger
 purchasing a planning tool
 migration from annual planning to quarterly rolling forecasting

Become a learning organisation through relentless reflection (Hansei) and

continuous improvement (kaizen)
One thing that sets Toyota apart from nearly all organisations is its continuous
improvement. Every employee is expected to reflect each day “what could I do better
tomorrow” and come up with at least one innovation per month, no matter how small.
The Toyota average, internationally, is 10 innovations per employee per year.
All the great paradigm shifters such as Peter Drucker, Jim Collins, Peters and
Waterman have preached the need to innovate and not spend too much time trying to
second guess whether it will work or not.
All the built to last companies came up with their big ideas through a bit of serendipity.
Jim Collins refers to it as very much like Darwin’s survival of the fittest. Try a lot of
things and only let the strong ideas survive. In the Motorola example he points out that
Motorola see innovation very much like a growing tree, you let it branch out but you are
also constantly pruning.
Jim Collins has created a blueprint for evolutionary progress based on analysing 3M.
These five steps are:
 Give it a try and make it quick.- When in doubt, vary, change, solve the
problem, seize the opportunity, experiment, try something new even if you can’t
predict precisely how things will turn out. No matter what, don’t sit still.
 Accept that mistakes will be made. Since you can’t tell ahead of time, which
variations will prove to be favourable, you have to accept failures as an
evolutionary process.
 Take small steps. It’s easier to tolerate failed experiments when they are just
that, experiments, not massive corporate failures.
 Give people the room they need. When you give people a lot of room to act
you can’t predict precisely what they will do, and this can be beneficial. 3M give
their staff 15% of discretionary time to play around with ideas. The “Post It” note
was developed this way.
 Mechanisms/build that ticking clock. 3M ideology creates an environment
where innovation was cut loose. 3M does not just throw a bunch of smart people
in a pot and hope that something will happen. 3M lights a hot fire under the pot
and stirs vigorously.
Template 2 Applying the Knowledge of The Paradigm Shifters
Peter Drucker’s Lessons for Performance Management. Sourced from The
Definitive Druckerii

Impact on Performance
Peter Drucker’s Wisdom Management
Have an outside-in focus to your Outside-in initiatives will be measured,
business. See the operation from your particularly as a future orientated
customers’ perspective, especially the measure. For example, date of next
perspectives of your important customer feedback survey.
customers. Implementation of survey
recommendations being monitored
weekly after the survey report is
issued.
Focus on your noncustomers. Which of We will need to measure the success
your noncustomers should you be doing we have in doing business with new
business with? (Desirable potential targeted customers.
customers)
Look for opportunities as if your life Measurement of innovation will be very
depended on it. Drucker emphasized the important.
importance of innovation
Management versus Leadership. Measurement of the progress with
Management is ensuring that staff are leadership training and development
doing things right and leadership is will be very important.
ensuring that staff are doing the right
thing.
Recruitment is a life and death The recruiting of the KPI team should
decision. Drucker was adamant about be done very carefully, ensuring they
the significance of recruiting the right have the right mix of knowledge,
staff. experience, and credibility within the
organization to be successful.
Many organisations focus on
“recruiting the right people all the time”
as a critical success factor, and they
will need to develop specific measures
to track recruitment processes.
Do not give new staff new In this KPI project, it is important to
assignments. Drucker is referring to new ensure that the project team is made
projects where the organization’s staff up of experienced staff who know the
have no previous exposure. He referred critical success factors and the
to these jobs as widow makers, jobs members of the senior management
where an external appointment did not team. Bringing in consultants to
have a chance to succeed as it was high manage the KPI project will, more than
risk requiring a well-liked and trusted in- likely, lead to failure.
house project leader.
The scarce resource in an Performance measures will be
organization is performing people. designed to monitor high performing
Drucker highlighted that these scarce staff.
resources need to be specifically
monitored and not taken for granted.
Their goals should be challenging enough
to stretch them and keep them interested.
 Impact on Performance
Peter Drucker’s Wisdom Management
Outstanding performance is Measuring the go-forward nature of the
inconsistent with a fear for failure. organization and the measurement of
Without the will to take risks, to venture the mistakes will flag whether we are
into the unknown and let go of the familiar moving quickly enough. Mistakes being
past, an organization cannot thrive in the seen as a necessary learning
twenty-first century. experience.
Today’s advanced knowledge is It is necessary to measure the extent
tomorrow’s ignorance. Drucker saw it the organization is gathering, sharing,
as very important to harness knowledge and using knowledge.
in every aspect of the organization.
Embrace abandonment. Drucker said: Promote Peter Drucker’s concept of
“The first step in a growth policy is not to abandonment. Many existing
decide where and how to grow. It is to measures should be abandoned along
decide what to abandon. In order to grow, with processes and reports. The KPI
a business must have a systematic policy project needs space to work. Other
to get rid of the outgrown, the obsolete, systems need to be abandoned to
and the unproductive.” allow enough time for the KPIs to
He also said: “Don’t tell me what you’re function properly.
doing, tell me what you’ve stopped The amount of abandonment will need
doing.” to be measured.
Measuring the extent of innovation and
abandonment will help focus
management’s attention on these two
important areas. Abandonment is a sign
that management are recognizing that
some initiatives will never work as
intended and it is better to face this reality
sooner than later.
Collaborate with other organizations, We will need to measure the extent to
even your competitors. Jack Welch which collaboration is happening. The
turned General Electric (GE) into a date of the next collaboration meeting,
powerhouse by striving to focus on what the date of the next shared
GE was good at. This led Welch to follow collaboration, the date of the next
Drucker’s advice on collaboration, and he agreement to contract out a service
pointed out that “Your back room is can all be measured.
someone’s front room.” In other words, if
others can do a job better than you can,
subcontract to them rather than diverting
energy to be good at everything, a task
that is impossible to achieve.
Know what information you need to do We can measure the reports that have
your job and from whom you need it, been removed from circulation.
When and how? By answering these
basic questions, we can streamline much
of the reporting formats, dispensing with
those reports that add no value.
Understand the importance of self- The KPI team should ensure that that
renewal. Drucker emphasized the they have enough time for family,
importance for leaders to have balance, friends and self-renewal.
to have interests outside the work
environment that help them maintain a
balanced perspective.
 Impact on Performance
Peter Drucker’s Wisdom Management
Have three test sites. Drucker pointed On a KPI project, we should follow the
out that to do one pilot was never sage’s advice and pilot the KPI project
enough. in three entities.
Place people according to their The selection of the KPI team should
strengths. Drucker was adamant that focus on the candidates’ strengths.
you focus on what people can do rather Organizations can highlight those staff
than focus on what they cannot do well. members that are not in the right place
(e.g., not performing) and take action
to reposition them or assist them to
find the right job elsewhere.
Generate three protégés for each Status of succession planning for all
senior position. key positions should be monitored on a
quarterly basis. Following Drucker, any
shortage from the three protégés for
each senior position should be
reported as an exception once a
month.
Jim Collins’s Lessons for Performance Management, Sourced from “Good
to Great”, “Built to Last” and “How the Mighty Fall”iii

Jim Collins’s Wisdom Impact on Performance Management

Getting the right people on the bus. The recruiting for the KPI team should
Collins emphasized the need for be conducted carefully. Organizations
organizations to place more emphasis can measure a manager’s rate of
on recruiting. success at recruiting. Managers who
have a record of failure should be
retrained or relieved of recruiting duties.
Getting the wrong people off the Organizations can highlight those staff
bus. Collins is very consistent with members who are not in the right place
Drucker. Move staff on if they are a (e.g., not performing) and take action to
poor fit with the organization’s values. reposition them or assist them in finding
the right job elsewhere.
The “hedgehog” concept. Collins By understanding an organization’s
points out that organizations need to critical success factors and deriving
know what they can be the best in the performance measures from them, you
world at, what they are deeply will create an alignment that is
passionate about, and what drives consistent with Collins’s thinking.
their economic engine. These three,
when they are present give the
organisation an impregnable position.
Collins likened it to a hedgehog that is
able to roll into a ball when facing
attack.
The flywheel effect. Collins found By reinforcing alignment to the
that Good to Great organisations had organization’s critical success factors,
exponential growth when the we will be consistent with Collins’s
organization worked as one to thinking.
innovate, implement and celebrate.
Big Hairy Audacious Goals The KPI team needs to set some
(BHAGs). Jim Collins and Jack Welch BHAGs for the project that will stretch
are at one here. They say incremental the KPI team’s thinking.
improvement will never stretch your
thinking. We should be asking “What
would you need to do to achieve this
BHAG”. It is not implying that falling
short of the BHAG is a failure or that
bonuses will not be paid.
The silent creep of impending The highlighting of the critical success
doom. Collins warns us about the first factors coupled with the KPIs will ensure
stage of decline “Hubris born of the senior management team focus on
success,” excessive pride leading the what matters to their flywheel.
management team down the slippery
slope. An organization always needs
to focus on its economic engine,
make sure its flywheel is turning and
maintain a profound understanding of
the fundamental reasons for success.
Try a lot of stuff and keep what The CEO and senior management team
works. Collins points out that need to encourage innovation. The
visionary companies often made their number of innovations by team should
best moves not by detailed strategic be measured. The benchmark is Toyota,
 Jim Collins’s Wisdom Impact on Performance Management

planning, but rather by which has an average of ten

experimentation, trial and error, implemented innovations per employee
opportunism, and in some cases, by per year.
accident. Collins compared innovation
to branching and pruning. Clever
gardeners let a tree add enough
branches (variation) and then prune
the dead wood (selection).
Is the risk above or below the The focus on the right measures will give
waterline? Collins specifies that, clarity and purpose.
when making decisions, you need to
know if they will affect you above or
below the waterline if they go wrong.
Those risks that affect you below the
waterline can obviously sink the
organization.
Grasping for salvation. Collins It is important for all organizations to
points out the propensity for revisit their values and to include a bold
organizations in decline to bring in an statement that indicates they should
outside CEO to be the savior. These develop their own leaders. The progress
initiatives fail more often than they in this development of in-house leaders
succeed. As Welch observes, to bring should be measured.
in a CEO from outside is a sure sign We can also measure the number of
that your organization failed to nurture protégés for all senior positions.
protégés. It is far better to appoint
from within.
In the private sector this stage of
decline is often categorized, as
Collins points out, by a massive
merger. Naturally enough, less than
one in six of these mergers ever
breaks even.

Jack Welch’s Lessons for Performance Management. Sourced from

“Winning”iv

Impact on Performance
Jack Welch’s Wisdom Management
Embrace candor. Welch has reinvigorated The KPI team needs to ensure that it
this word and placed it in front of is open and honest about performance
management. He said, “It is a leader’s measurement in the organization.
obligation to tell their staff how they are
doing and how they can improve
performance in a candid way.” As Welch
points out, candor allows more people to
participate in the conversation, generates
speed, cuts costs, and encourages
underperformers to reflect on their
achievements and move forward or move
on.
Jack Welch’s 20/70/10 “differentiation” It is important for organizations to
rule. Tied to candor is Welch’s 20/70/10 measure the handling of poor
“differentiation” rule. The top 20 percent of performers. Staff in the wrong
performers should be promoted into jobs
 Impact on Performance
Jack Welch’s Wisdom Management
that are a good fit for their strengths, assist positions may be a significant issue for
the next 70 percent to better meet their the organization.
potential, and make it clear to the bottom Organizations can measure
10 percent that their future lies elsewhere. managers’ success rate at recruiting.
Good communication will see these staff
members moving on to better pastures for
themselves; failing that, these staff
members need to be assisted in moving on.
Have a cluster of mentors. As Welch Ensure that all KPI team members
says, “There is no right mentor for you; have appropriate mentor support.
there are many right mentors.” He sees Measures need to be developed to
mentoring more holistically. A mentor can monitor take-up of mentors by
come from a staff member many levels management and staff. First, target
below who passes their knowledge on to senior managers who do not have a
you. In Winning, Welch was forever grateful mentor.
for the young human resources (HR)
advisor who patiently helped him master e-
mail.
Read, read, read. Great leaders have a The KPI team will need to read the
thirst for knowledge and are constantly books indicated in the Epilogue.
looking at ways to move their learning on; Organizations can measure the extent
they are continuously reinventing to which the senior executives are
themselves. Welch was an avid reader of maintaining their learning, especially
the financial and management press and the CEO.
journals. He makes it very clear that it is a
leader’s role to be up to date.
Raise the profile of human resources in The KPI team should work closely with
your organization. Great leaders like Jack the HR team. The HR team will be
Welch have always recognized that the able to help sell the required change
human resources team are vital to the and get more senior managers on
organization. At General Electric, the head board. In some organizations, the
of HR was a member of the senior balanced scorecard has been
management team and the HR team was implemented by the HR team.
involved in all recruiting, promoting, Performance measurement initiatives
training, and disciplining processes. will work much better with skilled HR
input. Leaving human resources to a
young graduate to write meaningless
policy inserts for a never-read manual
is a surefire way to run down an
organization.
Make innovation work. Welch was a Innovation needs to be measured both
champion of innovation. He wanted in the past (“How many innovations
innovation to be part of the culture. did each team do last month?”) and in
Workshops were held called “work-out the future (“How many innovations will
process” where groups discussed better be up and running in the next two
practices and at least 75 percent of all weeks, four weeks?”).
recommendations from the brainstorming
sessions had to be given. A yes or no by
the manager at the close of the workshop
and the remaining recommendations had a
maximum 30-day gestation period before a
decision had to be made. This technique
forced the decision makers to apply
innovation practices, which allowed for
 Impact on Performance
Jack Welch’s Wisdom Management
some failure but ensured much success at
the same time.
Recognition and celebration. Welch says The KPI project team will need to be
great leaders celebrate more. As he points active with recognition and celebration
out “Work is too much a part of life not to to assist with buy-in and maintain
recognize moments of achievement.” You interest and momentum.
can sense from listening to his webcasts Recognition and celebration needs to
that his celebrations would have been fun be measured both in the past (“The
to attend. number of recognitions and
Welch was all about making business fun. celebrations that occurred last month”)
Realize that it is not life or death, but a and in the future (“recognitions and
game you want to win. celebrations planned for next week,
next fortnight”).
Organizations also need to measure
the number of positive press releases
printed in the papers for, as sure as
night follows day, the press will have a
field day on the negative events that
are press worthy and happen because
of the very nature of the work a
government or nonprofit agency
performs.
Embrace the crisis. All exceptional It would be worth measuring the
leaders are great in a crisis and Jack Welch integrity gap within the organization,
was no exception. He had a large realism that is, the time between when an
streak in his body. He would take the event is known about and when it is
necessary action, face the necessary conveyed to the senior management
music, and move on. Welch handled each team.
crisis on these five stages:
The crisis will be worse than it first appears.
The bad news will come out sometime, so
may as well face the music now.
The situation will be portrayed in the worst
possible light by the press.
There will be carnage.
The organization will survive.
Setting goals that stretch. Welch liked to In performance measurement, it is a
see goals that were a mix of possible and sure way to limit performance by
the impossible. He went on to say, linking KPIs to bonuses. The key
“Effective leaders are not afraid to envision driver here will be politics and
big results.” By raising the bar so high that questionable measurement practices.
staff and management were forced to
totally rethink the route plan, new ways had
to be found to succeed and so often this
was achieved.
Be number one or two in the game. We need to measure our success at
Welch was aware that many of GE’s service delivery and the amount of
investments did not make sense. The abandonment we are doing in those
answer would have been no to the Drucker services that can be better done by
question, “If you were not in the business other organizations.
would you enter it now?” Consequently,
Welch was known as ruthless for his
directive of “Fix it, sell it, or close it” when a
 Impact on Performance
Jack Welch’s Wisdom Management
business did not meet the strict criterion of
being either number one or two in that
particular sector.

Tom Peters and Robert Waterman’s Lessons for Performance

Management. Sourced from In Search of Excellencev
Impact on Performance
Peters and Waterman’s Wisdom Management
Importance of chaos rather than The project team needs to be wary of
unnecessary order. Throughout the first adopting the easier command and
three chapters of In Search of Excellence control approach. The KPI team must
the importance of allowing overlap, internal allow a fair degree of autonomy in the
competition, impromptu contact, while pilots and rollout stages so long as
minimizing head office command and the foundation stones are intact.
control was highlighted through the case
studies quoted.
A bias for action. The emphasis is on The CEO should have a weekly
action, getting something into prototype, record of the last meaningful action
test, test, test rather than trying to second from every standing committee. If the
guess. The disbanding of committees that last action was over six weeks ago,
meet and do not convert anything to action maybe it is time to abandon it.
is a very strong message.
Get close to the customer. Being close to We need to measure the frequency of
the customer does not only help with our interaction with customers:
customer retention, it is the major source of Date of next contact with key
innovation. Peters and Waterman found customers.
compelling evidence that customers are the
main source of innovative ideas. Date of next customers’ focus group.
Date of next research project into
customer needs and ideas.
Follow-up on ideas from customers.
Embrace autonomy and We need to measure the speed of
entrepreneurship. Peters and Waterman decentralization and empowerment
observed that radical decentralization and until it is well and truly embedded.
autonomy, with their attendant overlap,
messiness, lack of coordination, and
internal competition, were necessary in
order to breed the entrepreneurial spirit
and champions who were required to take
risks in developing new ideas.
Intense communication.
Tolerating failure.
Internal competition.
Promote legends.
Absence of excessive planning and
paperwork
Productivity through people. Peters and The KPI team will need to apply these
Waterman noted that the following were techniques to be successful.
evident in the best-run organizations:
Unabashed hoopla.
 Impact on Performance
Peters and Waterman’s Wisdom Management
Internal competition.
Family atmosphere.
Available information.
Trust.
Keeping units small and fast and flexible.
Stick to the knitting. Peters and We can measure the degree to which
Waterman coined this famous phrase, and resources and time are directed away
it is consistent with Jim Collins’s, from the core activities, indicating a
“hedgehog” concept. loss of focus.
Simple form, lean staff. Peters and We can report the levels of command,
Waterman offered the following advice: the headcount of head office, and the
Avoid the trap of economies of scale—they numbers of staff reporting to
seldom eventuate. managers.
Avoid constantly hiving off into new
divisions.
Maintain a small corporate office.
Keep a flatter organizational structure.

Gary Hamel’s Lessons for Performance Management. Sourced from The

Future of Managementvi.
Gary Hamel’s Wisdom Impact on Performance
Management
Continuous management innovation. The KPI team needs to be very open
You need to have a process for continuous to new management thinking and
management innovation. To be an processes. It is very important that
organization that is capable of trauma-free new management concepts are
renewal rather than one that is moved to embraced by the project team.
change through a crisis.
Creative apartheid. Hamel points out that The KPI team must be open to new
most human beings are creative in some ideas during the project. Be flexible
sphere of their lives. The point he makes is with how workshops are run,
that this creativity needs to be embraced ensuring that creativity is given time
at the workplace. He believes that to flourish.
creativity can be strengthened through
instruction and practice, e.g., Whirlpool
has trained more than 35,000 employees
in the principles of business innovation.
Too much hierarchy, too little The KPI team must promote a
community. Hamel points out hierarchies community feel to the project, selling
are good at aggregating effort the benefits through the emotional
(coordinating activities) but not good at drivers and gaining credibility by
mobilizing effort (inspiring people to go abandoning process, measures, and
above and beyond). The more you reporting that is not delivering.
consolidate power in the hands of a few
leaders, the less resilient the system will
be.
Aggregate collective wisdom. Hamel The KPI team should consult widely
points out the compelling evidence that and hold sessions during each
“large groups of people are often smarter workshop to ensure an adequate
than the smartest people in them.” chance for all to have their say. This
Gary Hamel’s Wisdom Impact on Performance
Management
is best done by limiting each
workgroup in the workshop to no
more than seven.
The Internet and intranet should be
used widely by the KPI team to tap
into the collective wisdom within the
organization.
Embrace differences. Hamel is very The KPI team should be selected
consistent about the need to: from all experienced employees. It is
Embrace irregular people; their irregular important to consider those
ideas can be very valuable. employees who have always shaken
the cart. They may have the X factor
Look for positive deviants. to make this project work.
Mission matters. The mission must be The KPI team should ensure its
compelling enough to overcome the mission statement is worded carefully
gravitational pull of the past and spur so it will energize and assist with the
individual renewal. selling of the winning KPI
methodology.

Opt-in commitment. Hamel believes The KPI team should have an open
organizations should have an opt-in and selection process so that a wide net
self-chosen commitment. is cast for the best team members.
Passion for performance
management will be a very important
attribute to look for.

New management order. Hamel wants to The KPI team members should run
see a new management order and the the KPI project on this model.
signs are there in how the Internet works.
He points out that the reason the Internet
is so successful is:
Everyone has a voice.
The tools of creativity are widely
distributed.
It is easy and cheap to experiment with.
Capability counts more than credentials
and titles.
Commitment is voluntary.
Authority is fluid and contingent on value
added.
The only hierarchies are “natural”
hierarchies.
Just about everyone is decentralized.
Ideas compete on an equal footing.
It’s easy for buyers and sellers to find each
other.
Resources are free to follow opportunities.
Decisions are peer based.
Jeremy Hope’s Lessons for Performance Management. Sourced from
Reinventing the CFO and Beyond Budgetingvii.
Jeremy Hope’s Wisdom Impact on Performance Management
Bottom-up focus. Most systems The KPI project needs to focus on a
incorrectly aim to improve top down bottom-up process.
control –rather than bottom-up.
Always use tried and tested The KPI team should utilize only tried
technologies. Be skeptical about and tested balanced scorecard software.
investing in new, untried systems

Six or seven measures. Cut back on Follow the 10/80/10 principle and ensure
measurement to the point where only six that teams do not have more than six to
or seven measures are used at every seven measures.
level.
Relative performance. Recognize and If there is an incentives scheme, ensure
reward shared success on relative that it is consistent with the foundation
performance with hindsight, not on stones of Performance Related Pay, see
meeting fixed targets. Best to have team wwwdavidparmenter.com.
rather than individual incentives. Be wary
of aggressive targets and incentives.
They lead to high-risk strategies and the
wrong behavior.
Avoid setting annual measures. Avoid Important to understand the issue about
turning measures into targets and why a fixed performance contract is
performance contracts otherwise they will always broken. It is either too hard or too
lead to the wrong behavior. When using soft.
the balanced scorecard be careful that
measures do not become an annual
contract.
Measures should be of help to We need to avoid all measures that do
managers. Select operating measures not help improve or support a system.
on the basis of whether they help
managers to improve the system.
Measures that don’t pass this test should
be questioned and probably abandoned.
Avoid complexity. Whatever you do The winning KPIs methodology follows
don’t make management life more this advice.
complex! Avoid complex systems. Aim to
simplify everything at every level.

Tom Peters’ Lessons for Performance Management. Sourced from

Thriving on Chaosviii

Tom Peter’s Wisdom Impact on Performance Management

Characteristics of successful firms. Measures should support these

These include: characteristics.
1. Flatter structures
2. Populated by more autonomous units
3. Orientated towards differentiation
4. Quality and service conscious
5. An obsession with responsiveness to
customers
6. Constant innovation in all areas
7. Partnership with all parties connected
to the organisation
8. Leadership that loved change
9. Measuring and reporting the right stuff
Aim for ten new differentiators with a The CSFs and associated measures
products / services each 90 days should support this rate of innovation.
Also, the barriers to trying new
products/ services need to be lowered
in the organization. Failing quickly and
cheaply should be seen as a success.
A focus on Quality. A senior Measures should focus on quality
management team (SMT) commitment to issues bringing defects to the addition
quality means the SMT focusing on a lot of the SMT daily. We need to ensure
of big things and little things Quality is external customer surveys are targeted
what a customer says he needs not what at the important customers.
your tests indicate.
Benefits of a well-handled problem. A The foundation stone of empowerment
well-handled problem usually breeds needs to be constantly promoted by the
more loyalty than you had before the KPI team.
negative incident
Customer satisfaction guidelines. We should monitor the date of the next
Some considerations on customer customer satisfaction survey. This is a
satisfaction: good future measure.
1. Surveys every 60-90 days
2. Using external
3. Measure direct and indirect customers
4. Results in the customer satisfaction
study should be the “go or no go” for
share of bonus pool
5. Wide communication of customer
satisfaction results
Benefits of starting small. You should The mantra for the KPI project
imitate nature, start small and grow by
small amounts
Embrace multi-functional The KPI team should always aim at a
representation. Single most important broad multi-functional representation
reason for delays in development with its KPI co-ordinators.
activities is the absence of multi-
functional representation on development
projects.
How to get innovation to work. Peters The measures used should be
nine steps are: weighted towards measuring
1. The model for innovation: innovation.
2. Have a “Saw the top of the damn
thing” attitude to innovation.
3. “Have little patience for protocol when
fast tracking innovation.
4. Behave with purposeful impatience
5. Have executive retreats where goals
are set to locate innovative ideas
6. Seek out and celebrate the maverick
innovators within your organisation
7. Establish a hall of fame in every
division / unit and ensure it is active
and up to date
 8. Encourage small innovations as well
as big ones
9. Identify the supporting cast in a
successful innovation and make them
heroes.
Failing fast. Doing it right the first time is Measuring the frequency of fast failure
totally consistent with fast failure. The will be a useful barometer.
former demands that we are constantly
trying new things to get things better.
Celebrate constructive defiance. Here Measuring the celebration of success
Peters is saying that we need to make will be important.
heroes of those individuals who challenge
the status quo to improve the
organisation.
Focus on new product growth. There should be a KRI measuring
Measure the % of revenues that are growth of revenue in new products.
generated from new products
Do it In-house. To get the right structure The KPI team should comprise totally
for your organisation visit interesting inhouse staff
organisations – don’t use consultants
Walkabout. Leadership is about clearing The time the CEO and SMT spend on
the diary so that 60% of time is available walkabout should be measured by their
for listening during walkabout not the executive assistant and report back to
number of internal meetings attended. them weekly.

i
Jeffrey Liker, The Toyota Way: 14 Management Principles from the World’s greatest
Manufacturer, (McGraw-Hill, 2003).
ii
Elizabeth Haas Edersheim, The Definitive Drucker: Challenges for Tomorrow’s
Executives—Final Advice from the Father of Modern Management (McGraw-Hill, 2006).
iii
Jim Collins and Jerry Porras, Built to Last: Successful Habits of Visionary Companies
(HarperBusiness, 1994). Jim Collins, Good to Great: Why Some Companies Make the
Leap and Others, (HarperBusiness, 2001). How the Mighty Fall: And Why Some
Companies Never Give In (New York: HarperCollins, 2009).
iv
Jack Welch and Suzy Welch, Winning ( HarperBusiness, 2005).
v
Thomas J. Peters and Robert H. Waterman, In Search of Excellence: Lessons from
America’s Best Run Companies (New York: Harper & Row, 1982).
vi
Gary Hamel, The Future of Management (Harvard Business School, Press, 2007).
vii
Jeremy Hope, Reinventing the CFO (Boston: Harvard Business School Press, 2006).
Jeremy Hope and Robin Fraser, Beyond Budgeting: How Managers Can Break Free
from the Annual Performance Trap (Harvard Business School Press, 2003).
viii
Tom Peters Thriving on Chaos – Handbook for a Management Revolution, (Harper
Perennial 1988).