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Posts Tagged ‘KPI’

Performance management at the departmental level: the balanced scorecard approach

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The Balanced Scorecard is one of the most important performance management tools used to improve business functions and their outcomes. This tool is used not only at the organizational level but also at the departmental level.

By using departmental scorecards, managers are able to get detailed insights into the performance of their departments. The scorecards can also determine the responsibilities of the employees in terms of achieving strategic objectives.

To implement an effective balanced scorecard for the departmental level, organizations should take into consideration these best practices.

1. Develop the right template.

Employees are often asked to collect data since every manager knows that it is essential in generating qualitative insights. However, the different performance reports could easily lead to different interpretations. A well-designed template leads to a clear, structured reporting and improves communication through standardization.

The template should contain four perspectives that meet the organization’s strategic needs. The most commonly used perspectives are Financial, Customer, Internal Processes, People Learning, and Growth.

Moreover, the template should also display the objectives associated with each perspective and the KPIs associated with each objective. For each KPI, the target and thresholds, the trend, and the previous and current result should also be presented.

2. Choose the right objectives.

When preparing a departmental scorecard, one of the most important steps is to select the right objectives for the different categories, and those objectives should align with the organizational and departmental strategy. Through the cascading process, the organizational objectives and KPIs are translated from the strategic level down to the departmental level.

The departmental scorecard must contain some specific objectives depending on the activities of the operations team. The same objective can be cascaded to more departments, each of them measuring it through different KPIs. Some organizational objectives may not be cascaded to lower levels.

For example, the objective of the Financial perspective is to Increase profit. This organizational objective can not be directly cascaded to the human resources department since the human resources department has no direct influence on the revenue of the organization. However, they could reduce their spending in order to increase organizational profit. Therefore, the objective for the human resources department could be to minimize operational costs. Since the sales department is responsible for profit generation, they can cascade down this organizational objective without any modification.

Figure 1: Objective cascading example

3. Choose the right KPIs to measure the objectives.

As mentioned before, it is recommended not to cascade all objectives and KPIs from the organizational level to the departmental level, but organizations may add specific ones that represent the department. The most important attributes in KPI selection are relevance, clarity, and balance. In many cases, organizational and departmental scorecards may not be enough to communicate the organizational strategy to all employees. Therefore, individual scorecards should also be created for them.

Data sources for a scorecard

During the scorecard development process, organizations may find it hard to determine the right objectives and KPIs. Objectives and KPIs must be based on relevant data. There are two types of sources of data to consider: primary and secondary.

Feedback from internal stakeholders can be considered as an internal primary data source, while feedback from external stakeholders is an external primary data source. Secondary internal sources could a company’s previous reports and strategy plans, while smartkpis.com and academic articles are external secondary sources.

Figure 2: An example of a marketing departmental scorecard

Find out more about the Balanced scorecard tool and the KPI selection process in our Certified Balanced Scorecard Management System Professional and Practitioner Courses.

A brief primer on team performance measurement

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Working in a team can create synergy, since a good team will likely produce better results than individuals working separately. However, measuring team performance is even more challenging than measuring the performance of each employee separately, since you have to take into consideration each and every member’s performance, in relation to the others’, as well as the overall team’s.

In general, employees are members of departments. A department is a subdivision of an organization and an individual, generally, can only be part of one department. That being said, nowadays, teams are more flexible in how they are formed and how they operate: a team can be a temporary group formed to work on a specific task or project. Therefore, employees can be members of only one department, but several teams.

The first step is to link the team results to the organization’s goals, by cascading the objectives and KPIs from the organizational level to the team level. It is not very productive to have a well-performing team whose work does not help the organization reach higher performance goals.

Key aspects of team performance measurement

There are many indicators and measurements that can be useful when considering measuring your team’s results. In what follows, we’ve put together a list of the most widely employed benchmarks, so that you may get a general feel for what is considered useful to keep track of.

Employee attendance: Employee attendance is an important aspect of team performance since absenteeism incurs excess costs and will have an unwanted effect on team productivity & employee morale.

Moreover, late employees can be the source of annoyance or frustration, which will reduce team cohesion and further reduce a working unit’s effectiveness. Therefore, attendance related KPIs should be the first ones to track, when we talk about team performance:

  • % Absenteeism: Indicates the percentage of employees within the team who are repeatedly and/or unexpectedly absent, out of the total team members.
  • $ Lost time accounting: Measures the potential revenue lost because of idle workers or wasted hours within the team.
  • # Time lost by starting work late: Measures the volume of time lost due to employees starting their working hours late.

Client satisfaction: Every team has an internal/external customer, which is why satisfaction can be a good measurement unit. Improving customer satisfaction will eventually result in a more efficient production process, better service and ultimately, lead to more satisfied external customers. The most important KPI to measure in this regard is the following:

  • % Customer satisfaction: Measures the level of satisfaction exhibited by the team’s customers (current employees, distributors, vendors, departments, or external clients), towards the inter-functional services provided, be it communication, productivity and/or responsiveness.

Employee retention within the team: A low retention level or a high turnover level is usually connected with low levels of efficiency and productivity, which in the end can lead to a negative impact on an organization’s overall results.

This aspect can be influenced not just by the team performance, but also by the HR department’s performance, the working environment and work policies, the supervisor, as well as the promotion and professional development opportunities for the future. However, high level of employee turnover within a specific team could indicate team-related problems. The most important employee retention KPIs to measure are the following:

  • % Employee turnover: Measures the rate at which employees leave the team in a given time period (e.g., month, quarter, year).
  • % Employee retention rate: Measures the total number of employees retained at the end of the reporting period, expressed as a percentage from the total number of employees that were in the team at the start.

Employee satisfaction: Studies suggest a direct correlation between employee satisfaction, employee engagement and increased performance. Employee engagement can be increased through various company efforts, such as facilitating the development of skills for its employees, giving them a sense of trust and integrity, and clarifying their opportunities for future career development. The most important indicators to take into consideration, when looking to improve or maintain employee satisfaction, are the following:

  • % Employee satisfaction: Measures the employees’ satisfaction and motivation level, with aspects regarding their job and working environment: job responsibilities, team and management, workplace, and professional development.
  • # Employee Engagement Index: Measures the engagement level of employees in their work activities and responsibilities, in terms of enthusiasm, commitment and discretionary effort.

Productivity of individuals: Productivity of individuals is a key element of team performance. The following KPIs help measure a team’s contribution to the organizational goals, and the contribution of its members to the general team results:

  • $ Profit per employee: Measures the team’s contribution to the overall profit pool. It is a particularly important ratio in customer-focused businesses, such as those in the service sector.
  • $ Sales per employee: Measures a team member’s productivity and efficiency in generating sales.
  • % Human Capital Return on Investment (ROI): Measures the return on investing in a team’s human capital, after adjusting for the cost of financial capital.
  • $ Human capital value added: Measures the value added through productive activities, by a team’s members. Reflects the adjusted operating profitability figure, calculated by subtracting all expenses except for labor expenses, from revenue, and dividing the adjusted profit figure by the total headcount.

OKRs or KPIs?

In some specific cases, where the productivity of a team is not directly linked to the organizational revenue or profit (ex. support teams), it is more advisable to use OKRs (Objectives and Key Results), instead of KPIs (Key performance indicators), to measure productivity. OKRs contain a well-defined objective and one or more key results. OKRs help define how to achieve a goal through concrete, measurable actions. So, in case of the support teams, these results should be measured to track team performance, as they will be able to paint a more accurate picture of their efforts.

Conclusion

It is a complex process to measure team performance; therefore, it should be analyzed from numerous angles, according to each team’s specialization and workload. It should be noted that the aforementioned indicators are not the only ones which can portray a group’s results. However, if you are looking for a quick introduction into this topic, these KPIs will serve as a sustainable foundation on which you can build your employee management system.

Find out more about the team and employee performance measurement from our Certified Employee Performance Management course  or learn more about the OKRs from our Certified OKR Professional course.

Adapting to change: The Top 25 KPIs for project management

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Project management is no longer just viewed as an end-to-end process, but it is also an area in which skills are in high demand. The Project Management Institute’s “Pulse of the Profession” report shows that senior management increasingly places a high value on project management. 

It is also becoming a new culture for nearly half of the organizations. Meanwhile, those who do not consider project management a strategic competency posted 67 percent more of their projects failing.

Today, project managers are compelled to think more strategically as they adapt to the uncertainties brought by the pandemic. That’s on top of dealing with multiple stakeholders and changing market dynamics. 

For instance, construction companies and laborers face new disruptions as they execute their projects. A report from Markets and Markets highlights the growing awareness about antibacterial construction materials, volatility in raw material prices, and changes in the supply chain particularly for the residential construction sector. 

Given the ever-changing business landscape, how can organizations manage projects successfully and get the most out of their teams to meet deadlines, achieve high productivity levels, and drive results? 

They can start with selecting and using the right Key Performance Indicators (KPIs) to achieve clarity, focus, and improvement as they go through the stages and elements involved in managing a project. 

Why use KPIs in project management?

A KPI expresses the achievement of the desired level of results in an area relevant to the evaluated entity. In terms of project management, KPIs mirror the quality of the implementation processes, quantitative outputs, and project outcomes.

Based on a survey of over 200 contractors and trade professionals conducted by Dodge Data and Analytics and commissioned by the software company Autodesk, contractors can obtain data by employing digital technology to manage projects, but they do not have a system to process their information and utilize it meaningfully. Having identified the most useful KPIs in the field to interpret overall performance, the study concludes that “by adopting specific processes for project management, contractors can reduce risk, thus minimizing downstream problems and improving performance.”

KPIs are applicable across multiple industries and functional areas. However, they are not the same for every industry or for every company. They are selected based on an organization’s environment, activities, and objectives. You can sign up for the live online course offered by The KPI Institute to learn how to implement a KPI Measurement Framework in your organization.

To give you an overview of the KPIs used in project management, the Top 25 Project Management KPIs – 2020 Extended Edition presents the most viewed KPIs based on the information from smartKPIs.com, a database of over 20,000 documented KPIs. 

The top 25 KPIs belong to four crucial facets of project management:
  1. Project Budget involves the number of resources allocated to the project.
  • % Project budget variance 
  • % Project or program budget spent on training
  • $ Project budget size
  1. Project Assessment refers to the reviewing process of the development of projects and their outcomes.
  • % Project resource utilization
  • $ Profit per project
  • # Cost Performance Index (CPI)
  • # Project issues addressed ratio
  • % Requirements changed during project execution
  • % Project budget overruns rate
  • # Projects issues identified
  • # Projects per project manager
  • $ Project cost savings from innovation
  1. Project Timeline relates to the use of schedules or charts used to plan and subsequently report project progress.
  • % Overdue project tasks
  • % Project milestones missed
  • % Project schedule variance
  • # Requests for time extension submitted
  • % Time spent on new projects development
  • $ Estimate at Completion (EAC)
  • % Delivery deadlines met
  • # Time per project task
  • # Project delay
  • % Timely production of management reports
  • % Project completion predictability
  1. Project Team Performance refers to the performance that meets the needs and expectations of company colleagues.
  • # Conflicts arising during the project
  • # Project managers to staff ratio
To view the complete profile of each KPI and access exclusive in practice recommendations, you can download the Top 25 Project Management KPIs – 2020 Extended Edition.

KPIs every mobile game studio needs to track

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In today`s economic environment, a business`s ability to monitor and measure performance, in all its dimensions, is essential for fostering organizational growth and profitability. This requirement becomes even more challenging within one of the worldwide highest performing industries in the last few years, namely the mobile game industry. 

game kpis

Source: Pixabay

To measure a game’s success before and after its release, gaming studios need to prioritize several areas for optimization and decide what data is the most relevant for decision making. In other words, a game studio should focus on selecting and using Key Performance Indicators (KPIs) that best reflect how they’re performing with meeting their goals. 

What success implies can be different from one mobile game to another; however, three essential categories stand out as areas for optimization:

    1. User acquisition – reflecting on how to improve targeting new users


    2. User retention – focusing on how to keep users engaged the most


    3. App monetization – conveying how to increase revenues to sustain further business development
 
For each of the above categories, there are some essential KPIs a mobile game studio needs to track.

  KPIs to monitor mobile game user acquisition

Determining the amount of new daily and weekly users allows the company to discover the number of game installations every week and observe its progress. These KPIs can help the gaming studio team to discover what engagement strategies are or aren’t working promptly.

# Monthly Active Users (MAU) and # Daily Active Users (DAU) are KPIs that allow a business to follow up on its user base over time.

# Monthly Active Users (MAU) – reflects the number of unique users who engaged with the game in the past month

# Daily Active Users (DAU) measures the number of unique users that participate in at least one session of a game each day

# K-factor – is another fantastic metric that keeps track of the effectiveness of a business’ customer referral strategy. A game’s K-factor represents the number of invites sent by each application customer multiplied by the conversion of each invite. It becomes a quantifiable metric that can afterward be monitored at specific times in the studio’s game development process.

# Invites sent / DAU – is an offshoot of the K-factor metric, which provides a thorough sample of how well a business’ referral program is retaining players that have downloaded and played the mobile game.

% Users acquired virally (virality metric) – reflects how a gaming development business segment its customers, thus measuring the percentage of users generated by referrals from its overall existing users. 

Monitoring this KPI can also provide insightful data to support an effective marketing strategy, one that works best for increasing a studio’s chances of its game going viral. After observing the virality metrics, a business will be able to segment the information even further, and the segmenting can be done by source, by geographical location, by the time of day or year, etc. 

% Conversion rate  – measures the proportion of players who decide to invest money into the game, either by acquiring the full game from the demo or lite app version or simply buying an in-game item in the case of the Free to Play title. The conversion rate for each paid object in the game can be calculated so that the business can find out which ones sell the best.

  KPIs to monitor mobile game user retention

What KPIs can help mobile game studios develop a long-term strategy that will encourage players to keep playing their game? 

% Retention rate – measures the percentage of users who came back to the game after several days in a row

% Churn rate – As opposed to % Retention rate, the % Churn rate of a mobile game app measures the proportion of users who stopped playing during a specific period.

% Average Session Length per Usermonitors the proportion of users who play for a long time in comparison to those who leave the game fast. For instance, the distribution of the session length can show what proportion of game sessions lasts less than 10 minutes and how many last for more than 10 minutes. 

# Starts, # Fails, and # Successfully level completions – are three metrics that are useful in determining the learning curve of the game. By understanding how difficult the game is in practice, a business could properly adjust their user engagement and boost their retention. 

While # Starts emphasizes how many times a player has started a new level, the number of # Fails measures how many times a player has started a level without being able to complete it. Meanwhile, a KPI such as # Successfully level completions measures how many times a user has successfully completed a game`s level.

  KPIs to monitor app monetization

game kpis

Source: Pixabay

Gaming studios may come up with different strategies for monetizing their app, and using KPIs can help determine which model can maximize their revenue and suit their audience’s preferences. 

$ CPI (cost per install) – measures the amount of money invested in acquiring a new user from paid advertisements. 

$ LTV (lifetime value) – measures the total earnings from a relationship with a user who installed and paid for the game over that customer’s life span. 

$ Return on Investment – measures how much profit was generated out of the total cost of an investment, reflecting on the difference between $ LTV (lifetime value) and $ CPI (cost per install). If the value of this metric falls in the negatives, it denotes that the studio is keeping the game alive at a loss.

$ Average Revenue per User (ARPU) – measures the amount of income generated by each active user. 

To better understand how the game’s revenue-generating potential is best achieved, two similar KPIs should be monitored, namely: $ Average Revenue per Paying User (ARPPU) and $ ARPDAU (Average Revenue per Daily Active User). 

A game studio’s ability to visualize the relationship between acquisition, retention, and monetization KPIs can provide extraordinary insights into a game’s growth and profitability. By combining the acquisition and retention measurement results, powerful trends can be observed and lead to customer satisfaction and customer stability.

By combining retention and monetization, a business will quickly discover what kind of user behavior translates into its most profitable users.

With reports and insights from Daniela Vuta  

THE KPI INSTITUTE

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