Every organization, management and management, is well aware of the benefits of performance indicators. Determining the right indicators remains difficult. Which are important and how do you prevent tunnel vision. A set of strategic indicators offers a solution.
KPIs provide important information to the organization. With this information, the development of the company as a whole can be monitored, compared to the past and compared to the competition. It is also a useful tool to participate in predictions by extrapolating the results. Furthermore, an important advantage of using the KPI is that a long-term strategy can be relatively easily translated into short-term performance.
Determining the right KPIs is therefore of great importance for every organization. Establishing KPIs in the organization on the one hand ensures focus on the things that are important, but too often other perspectives are lost. This creates tunnel vision. Management unnoticed loses control of the company, while KPIs are managed. You can address this by regularly reviewing your indicators, but it is also important which indicators are of strategic importance within each organization.
In recent years, I have been involved with many companies in introducing or updating Balance Score Cards. In addition, a great deal of literature has been published in recent years about Balance ScoreCard and the use of KPIs. Evaluation of that information shows that different indicators always recur in every organization. The financial indicators appeal most to the imagination such as Net margin, Return on Assets and Cash-to-Cash time. But also in logistics, many indicators are interchangeable between organizations, such as Delivery reliability, Fill rate and average stock turnover.
Goldratt provides a number of tools to test the indicators against the interests of the organization.
goldratt model The concept of Goldratt is surprisingly simple, just as a good concept should be. Improving throughput, reducing inventories and expenditures as operating mechanisms have a positive impact on Profit, Return on Investment and Cash Flow. Indicators can be tested against this concept, where when determining the indicators the question is asked: does it reduce inventory, reduce expenditure or improve throughput.
Strategic Indicators model
The Strategic Indicators model is built up along the 4 perspectives that are applicable for every organization and that match the perspectives of Balance Score Card.
On the other hand, the major functionalities that are present within organizations have been identified: Purchasing – Storage – Production – Finished Product – Warehousing – Transport – Planning – Order & Finance – Organization
strategic kpimodel from the perspective of cross functionality and the Goldratt concept I have drawn up the Strategic Indicators model. The most common and prominent indicator within the various benchmarks and Balance Score Cards setups has been determined for each intersection. For each of the established indicators, we looked at how they meet the principles of the Goldratt Concept. If the indicator contributes to this, it is of strategic importance to an organization.
Of course, this does not mean that other indicators are not important. Many indicators are often sector or company specific. However, this set of indicators is ideal for relevant benchmarks because they are broad and are of great importance to any organization.