KPI vs KPM

 

Key Performance Measures

• A key performance measure is a kind of measurable value that helps explain and quantify a key performance indicator. A key performance measure might be one of several that support a key performance indicator. For example, key performance measures for a school might be students' national assessment test performance in reading, mathematics and science. The measure would include a goal, such as that a set percentage of students should perform at or above proficient standards.
  

Key Performance Indicators

• Key performance indicators, or KPIs, help organizations focus on progress. The progress is defined as improvements in reaching the firm's strategic goals, achieving goal objectives, working toward a company vision and enforcing values. Key performance indicators track information that reveals problems and gives quantifiable feedback. Tracking KPIs and using the resulting knowledge helps companies improve customer satisfaction and morale among employees and enforces effective financial tracking and management. KPIs are used in schools as well, such as tracking enrollment by grade level, ethnicity and each school within a certain district. Schools also use KPIs to assess program effectiveness, such as how well special-needs students perform, how well the school manages their needs, and how well the school works with special-needs support agencies.
  

Differences

• Key performance measures are the actual data values that support the key performance indicators. Key performance indicators are critical performance metrics that are explained by the activity of the key performance measures. The terminology is interchangeable, and firms may use each term to represent the same type of metrics and performance information.
  

Uses

• The process of formulating KPIs or key performance measures starts with collecting an initial set of performance data to set a baseline for future comparisons. The information serves as a benchmark, or point of reference, to judge the organization's performance in future periods. Each company has core processes that are critical and fundamental to its success, and failure to perform them well causes the company's performance to deteriorate. These form the basis of the KPIs and key performance measures. The KPIs or key performance measures may be reported to external parties; either a group or an individual. These parties would use the outputs of the benchmarking process to analyze the company and make decisions. External parties could be bank lenders, stockholders or investment analysts.
  

Getting More from Your Employees (If you think your workers are motivated without consequences, think again. )

Getting More from Your Employees

If you think your workers are motivated without consequences, think again. Being a good leader means providing checks and balances.

"Average" isn't good enough any more. Not in this competitive environment. Not in this lagging economy. If you accept average performance from your employees, you're doing your company a huge disservice.

So why is it then that so many of us mutely accept mediocre performance? Perhaps because raising the bar isn't easy. Taking corrective action can be unpleasant. And if you haven't done any of this before, it may not be clear how or where to begin.

One place to begin is with the 20-60-20 percent rule. It goes like this: rate the performance of nearly any employee group, and you'll find the population divides itself into three categories:

20 percent are strong performers

60 percent are average performers

20 percent are weak performers

You have three possible places to begin, but which one's most critical? Here's a clue: your strong performers are already doing fine under your current management, so don't waste time fixing what isn't broken. We'll come back to them later.

That leaves your average performers--your majority--and your weak performers, a smaller but more dangerous group. Whom do you start with, and what do you do?

The good news is you can kill two birds with one stone. Research has shown that when you start vigorously managing your weakest employees, it makes the biggest impact on your next group up--namely, your average workers.

If you aren't taking action against underperforming employees--employees who aren't productive, who come in late and waste time or perhaps don't come in at all--what message does that send to the average worker?

It tells them that there are no consequences for performance. Remember, your employees are well aware of one another's behavior, even if management pretends not to notice. This fosters a culture of apathy and negativity that drags everyone down.

On the other hand, if you start holding underperformers accountable, many of your average employees may just step it up a notch, all by themselves.

There are a number of ways to manage poorly performing employees. Start by creating job descriptions and performance standards for everyone--a step many small employers wrongly overlook.

Job descriptions are incredibly useful tools. They tell employees what's expected of them. They give you a standard for measuring performance, a must when it's raise and bonus time. And they protect employers against wrongful termination suits, because now you have a specific tool for documenting problems.

If someone isn't performing well in his or her job, figure out why. Is it a training issue? If so, make training available and you may solve the problem. Is this person a good worker, but poorly suited to his job? Then see if there's a more appropriate role for him elsewhere in the company. Or does she simply have very poor work habits? If no matter what you try, you can't motivate her to improve her performance, you need to do the toughest thing of all: terminate her.

"Neutron Jack" Welch, the former CEO of General Electric, is famous for his extreme managerial practices. In the 1980s, Welch insisted that each year, every department manager rank his or her personnel and eliminate the bottom 10 percent of workers. His theory was that it raises performance expectations and keeps everyone--even stellar employees--on their toes. Fear of losing one's job is powerful motivation.

While Welch's practice was radical, it's also radical--dangerously so--to keep non-performers on board. Plain and simple, they are hurting your business! Cut them loose, and you'll send ripples throughout your organization, shaking up other non-performers and prodding average employees to aim higher. As a bonus, you'll boost morale among your top performers, because it shows that you're paying attention and that you value good work.

According to an old Icelandic proverb, "Mediocrity is climbing molehills without sweating." If you want to climb mountains, not molehills, develop a zero tolerance for mediocrity. Use the 20-60-20 percent rule to keep your employees moving upward.

Centralized Purchasing – Good Or Bad?

Centralized purchasing is the control by one headquarters department of all purchasing that is undertaken by a business. This allows for central management and volume purchases that lead to better prices and terms as well as the ability to work with larger suppliers.

This central control enables more efficient inventory control, lower staffing costs and a decrease in overheads. Staff also benefit with better training and support and the ability to build better relationships with suppliers.

While this may seem obvious, many large companies either have grown quickly and organically or have grown via mergers and acquisitions. This means that they often have several separate purchasing departments that are each responsible for purchasing a group of products.

Advantages of centralized purchasing:

• Allows for fewer overheads.
• Duplication of staff efforts and resulting costs are negated and all activities are standardized.
• Many staff no longer have to spend time on low level ad hoc purchasing.
• Volume purchasing means that better prices, greater discounts and more agreeable terms can be obtained.
• Volume deliveries cut down on delivery charges and staffing costs to move and store the goods.
• Computerized systems can be used to automate much of the work as well as integrate the purchasing systems with accounting and stock control.
• Centralized records can be kept of all purchases.
• Staff can be trained in purchasing and how to minimize costs.
• Suppliers know where and whom to contact which makes supplier contact much easier.
• Purchasing staff can build good relationships with the buyers that enable the supplier to understand the business need and suggest other products that may be more suitable and cost effective.
• It allows for better control of inventories so that they can be kept at optimum levels.
  

Disadvantages of centralized purchasing:

• Purchase requisitions for ad hoc goods have to be sent from other areas to the purchasing department causing delays and some irritations.
• If the company is very geographically diverse, it may not be able to take advantage of local discounts.
• The centralized purchasing department may become too large and complex to manage.
• Conversely, with a small company it may not be cost effective to have staff and a computer system that only deals with purchasing.
  

As you can see if you are a large company that is not too geographically dispersed the advantages of a centralized purchasing department far outweigh the disadvantages

4 Tips for Creating a More Effective Supply Chain

Successful warehouse management requires you to maintain an effective supply chain. Many manufacturing and distribution companies, however, struggle with how to go about streamlining and improving upon their current supply chain. The process can be an expensive and arduous task, especially if you don’t know where to begin. While we cannot do the work for you, we can provide you with a few tips to launch your supply chain initiative.
The following list reflects the habits of the most successful and effective supply chains:
1. Create a written strategy and update it often.
While it may seem like common sense, few manufacturers actually maintain a supply chain strategy in writing. While budgets and objectives are beneficial, companies need to focus on developing a strategy in order to improve their supply chain.
What, exactly, is a supply chain strategy? In short, it’s a plan designed to help supply chain leaders decide how they will allocate their scarce resources over a period of time. Many companies also include an assessment of their strengths, weaknesses, opportunities and threats in their supply chain strategy. Regularly updating your strategy will help you gain a better view of your supply chain and develop solutions to problems that arise.
2. Align your business with your supply chain.
Sales and Operations Planning has made it easier for companies to align supply chains with the business. However, companies often lose track of the importance of this alignment due to critical operational pressures and additional factors.
Make sure that those higher up in your manufacturing company realize the importance of aligning your supply chain with the business and make it a top priority.
3. Make decisions based on facts.
In order to find true success, companies need to develop a “fact-based” culture. Rather than accepting assumptions at face value, employees need to dig for factual evidence. Managers and executives need to stress the importance of fact-based analysis among supply chain teams in order to improve success in logistics.
4. Take advantage of the latest technology.
The most successful supply chains incorporate technology such as warehouse management systems (WMS) and mobile warehouse management applications into their strategies and warehouses. Using mobile devices and mobile apps, can help you streamline key supply chain operations and save time (and money) along the way.
The top performers are more aggressive and smarter users of technology because they know that the competitive advantage comes early in the technology cycle. Companies that adopt technology after it has matured are merely catching up to companies who have already mastered the technology. Stay ahead of the game and adopt early. This will guarantee your future in the global marketplace, as well as give your supply chain a boost.
Effective supply chains also regularly assess their software implementations to determine if there are any capabilities that they own but are not currently using or if they should consider investing in additional technology to improve their value. Ensuring your systems and processes are in top shape will not only help you are get your money’s worth from your warehouse management software, but it will also help you create a more effective supply chain.

THE SEVEN TYPES OF MANAGERS What type are YOU ?

THE SEVEN TYPES OF MANAGERS

With all the efforts those who are managed, the mass, put forth in a regal and often last attempt to salvage a once positive work environment, at the core of every toxic working environment is the toxic boss, manager or supervisor that breeds it. All roads go back to the manager. And if the manager isn't willing to change, then it's a safe bet that nothing will. That's why to impact long lasting change, managers need to upgrade their style and approach to managing their people.

Throughout my years of coaching managers, business owners and executives, I've been able to identify seven types of managers. Using these seven types of managers as examples, identify the critical competencies necessary to become an effective sales coach. It all starts with the way we communicate. Which one best describes you or your boss?

1. The Problem-Solving Manager
This boss is task-driven and focused on achieving goals. These problem solvers are constantly putting out fires and leading by chaos. The paradox here is this: It is often the manager who creates the very problems and situations that they work so hard to avoid. Continually providing solutions often results in the lackluster performance that they are working so diligently to eliminate.

2. The Pitchfork Manager
People who manage by a pitchfork are doing so with a heavy and often controlling hand: demanding progress, forcing accountability, prodding and pushing for results through the use of consequence, threats, scarcity, and fear tactics. This style of tough, ruthless management is painful for people who are put in a position where they are pushed to avoid consequences rather than pulled toward a desired goal.

3. The Pontificating Manager
These managers will readily admit they don't follow any particular type of management strategy. Instead, they shoot from the hip, making it up as they go along often generating sporadic, inconsistent results. As a result, they often find themselves in situations that they are unprepared for. Interestingly, The Pontificating Manager thrives on situations like this. Often adrenaline junkies themselves, these managers are in desperate need of developing the second most essential proficiency of a coach: masterful listening. The Pontificating Manager is the type of manager who can talk to anyone and immediately make people feel comfortable. This character strength becomes a crutch to their leadership style often blinding them to the need to further systematize their approach. As a matter of fact, the only thing consistent about these managers is their inconsistency.

4. The Presumptuous ManagerPresumptuous Managers focus more on themselves than anything else. To them, their personal production, recognition, sales quotas and bonuses take precedence over their people and the value they are responsible for building within each person on their team. Presumptuous Managers often put their personal needs and objectives above the needs of their team. As you can imagine, Presumptuous Managers experience more attrition, turnover, and problems relating to managing a team than any other type of manager. Presumptuous Managers are typically assertive and confident individuals. However, they are typically driven by their ego to look good and outperform the rest of the team. Presumptuous Managers breed unhealthy competition rather than an environment of collaboration.

5. The Perfect Manager
Perfect Managers possess some wonderful qualities. These managers are open to change, innovation, training, and personal growth with the underlying commitment to continually improve and evolve as sales managers, almost to a fault. This wonderful trait often becomes their weakness. In their search for the latest and greatest approach, like Pontificating Managers, Perfect Managers never get to experience the benefit of consistency. This manager is a talking spec sheet. Their emphasis on acquiring more

facts, figures, features, and benefits has overshadowed the ability of Perfect Managers to recognize the critical need for soft skills training around the areas of presenting, listening, questioning, prospecting, and the importance of following an organized, strategic selling system. Perfect Managers rely on their vast amount of product knowledge and experience when managing and developing their salespeople. Because of this great imbalance, these manager often fall short on developing their interpersonal skills that would make them more human than machine.

6. The Passive ManagerAlso referred to as Parenting Managers or Pleasing Managers, Passive Managers take the concept of developing close relationships with their team and coworkers to a new level. These managers have one ultimate goal: to make people happy. While this is certainly an admirable trait, it can quickly become a barrier to leadership efforts if not managed effectively. Although wholesome and charming, this type of boss is viewed as incompetent, inconsistent and clueless often lacking the respect they need from their employees in order to effectively build a championship team. You can spot a Passive Manager by looking at their team and the number of people who should have been fired long ago. Because all Passive Managers want to do is please, they are more timid and passive in their approach. These managers will do anything to avoid confrontation and collapse holding people accountable with confrontation and conflict.

7. The Proactive Manager
The Proactive Manager encompasses all of the good qualities that the other types of managers possess, yet without all of their pitfalls. Here are the characteristics that this ideal manager embodies, as well as the ones for you to be mindful of and develop yourself. The Proactive Manager possesses the:

• Persistence, edge, and genuine authenticity of the Pitchfork Manager
• Confidence of the Presumptuous Manager
• Enthusiasm, passion, charm, and presence of the Pontificating Manager
• Drive to support others and spearhead solutions like the Problem-Solving Manager
• Desire to serve, respectfulness, sensitivity, nurturing ability, and humanity of the Passive Manager
• Product and industry knowledge, sales acumen, efficiency, focus, organization, and passion for continued growth just like the Perfect Manager

The Proactive Manager is the ultimate manager and coach, and a testimonial to the additional skills and coaching competencies that every manager needs to develop in order to build a world class team.

Growing Pains: Structural Considerations for Growing Your Business

Ask any small-business owner what he sees as the major challenges to growing his business, and chances are he'll say: winning more sales. Ask any medium or large business owner what her major challenges have been, however, and she'll probably say: structural growing pains -- putting into place the necessary processes and structure to accommodate a higher volume of business. In fact, one of the most common reasons businesses plateau at a certain level is their inability -- or unwillingness -- to develop the structure needed for growth.

But aligning structural changes with sales growth is not simple. It is often more of an art than a science. The systems, processes, staff, and organization changes needed to grow are ongoing and dictated by myriad factors such as the nature of the business, its capital requirements and, ultimately, customer demands. Nonetheless, certain structural growth concerns -- excluding financing and office/production space issues -- are shared among all growing companies and fall into three overall areas: organizational structure, policies and procedures, and systems/technology.

Staffing/Organizational Structure

Among the most common growing pains small companies experience are those related to organizational structure. Organizational structure and reporting hierarchy for a 25-person company is quite different than it is for a five-person organization. Typically, an entrepreneur can manage fine until there are about a dozen people in the organization. At this point, the initial structure -- where everyone usually reports to the owner -- breaks down. In effect, nothing can be done without involving the owner, creating a communications log jam and a barrier to growth. A telltale sign of such a situation is the line of staff outside the boss's office -- waiting patiently for a decision before work can recommence. The best way to overcome or prevent this from happening is simple: Trust your key employees and learn to delegate. A good place to start is to look at where you are spending your time. You can still have final say on any important decisions, but you need not be involved with the time-consuming, day-to-day issues that can prevent you from focusing on larger, more strategic matters. It's also important to formalize delegated authority with an organizational chart and job descriptions. These will help you better define functional expertise for a given job and for various departments across the organization, and provide the foundation for the growth of future personnel and key management staff.

Lack of functional expertise is another common growing pain of small companies. Too often, businesses fail to recognize that specific expertise is needed as they grow. Typically, small businesses are organized around the manager's area of expertise, such as marketing, accounting, or production. This specialized expertise often prevents the business owner from recognizing problems that may arise in other parts of the business. It's a good idea to periodically get an outsider's opinion of where expertise may be lacking. These need not be paid consultants, but are often trusted business acquaintances. Tapping into this same group, you can also form an advisory board to give you periodic feedback on strategic direction.

Policies and Procedures

For most smaller businesses, written policies and procedures are often nonexistent and sometimes cursed. Typically, they are associated with the bureaucracy and inefficiency of big companies and the enemy of customer responsiveness and quick time to market. Not surprisingly, most smaller businesses have few documented operational policies or procedural guidelines. But it is precisely this lack of documentation -- and the thought that goes into it -- that can put a stranglehold on rapid growth. If your business is growing fast enough to require frequent additions to staff, formalized policies are a must for training purposes. Even if you are expanding at a moderate pace, documented policies will likely be necessary once you reach 20 or more employees.

What warrants a formal policy and what should be documented? This will depend on the nature of your business and average skill level of your employees. In general, however, it's a good idea to document all HR policies in detail, expense approval authorization levels, inventory control policies, billing and collection procedures, and any operational policies that could materially affect your business if they went amiss. An annual budget and sales projection, updated monthly, are also a necessity if you are ever to obtain outside funding or sell your company. Later on, consider putting together a comprehensive policy manual where employees can get answers to questions when decision makers are unavailable.

As you grow bigger, you will also need to put into place more formalized communications channels for employees and customers. An informed and involved staff is usually a more productive and enthusiastic one; whereas a staff that is left in the dark often feels alienated and unappreciated. Regularly scheduled employee meetings, periodic e-mail updates, and a cascade communications policy are several ways to make sure your internal communications channels facilitate, not constrict, growth.

Is your business suffering from growing pains?
Here are some sure signs that structural changes may be in order. Sales continue to grow but profits do not. Everyone is working increasingly long hours. People spend too much time putting out fires. There are constant lines outside the boss's door. There are no regularly scheduled meetings or employee communications. The "system" is constantly down. Aging equipment is not replaced.

Systems/Equipment

Perhaps more obvious than organizational or procedural growing pains are those associated with systems and equipment. Smaller businesses are often the last to upgrade to new technology, usually due to cost. Yet the costs of not upgrading are usually much higher. Low productivity, frequent down time, and incompatibility with newer client systems can cripple a business that's poised for growth. There's also the matter of keeping up with your competitors both operationally and across product and service offerings.

The average computer is virtually obsolete in just three years, and most of the widely used software applications come out with new versions every two years, so keeping on top of technological advances must be an ongoing endeavor. Start out by working regular capital upgrade costs into your budget. Consider dedicating a full-time person to information technology (IT), if you don't already have one, and make sure he or she is current on the latest technological developments in your field. Even though you may not be able to afford all the latest equipment, at least you'll be on top of technology trends in the industry and know what your competitors are up to -- or are capable of.

Points to Remember

1. One of the most common reasons businesses plateau at a certain level is their inability to develop the structure needed for growth.
2. Organizational structure for larger companies is necessarily different from smaller organizations.
3. It's a good idea to periodically get an outsider's opinion of where your business's functional expertise may be lacking.
4. If your business is growing, documented policies and procedures will likely be necessary once you reach 20 or more employees.
5. Regularly scheduled employee meetings, periodic e-mail updates, and a cascade communications policy are several ways to make sure your internal communications channels facilitate, not constrict, growth.
6. Smaller businesses are often the last to upgrade to new technology, usually due to cost, yet the costs of not upgrading are usually much higher.

What Are the Advantages of Centralized Purchasing?

What Are the Advantages of Centralized Purchasing?

This form of purchasing can save a company a lot of money. The greater amount you buy of an item, the better bargaining power you
possess. Consider this method of buying if you know that your company is going to need a large amount of one item. Good relations are developed with suppliers and can open doors for better deals and bargains in the future. Transportation costs are also reduced since fewer shipments are processed. Also, less people are held responsible for an order placement error. Centralized procurement can be very beneficial for a company if it is implemented correctly. The logistics department needs to be run by highly capable individuals. It's a good idea for a growing company to determine how items are purchased throughout its various locations. Choosing the right type can save money and time throughout the entire company.



Example:
A oil services company mandated that a certain type of employees must wear impact resistant gloves.
In a decentralized purchasing system that this company uses each pair of these gloves cost 18 to 26 dollars a pair. Each location buys them from local retailer or via internet.
If this company was to adopt a centralized purchasing program for these consumables the cost of each set of gloves would be $8.42 a pair.



Lets do the math:
15 Employees per location 1 pair of gloves per week. Equal 780 pairs per location.
This particular company has 15 locations per region and 5 regions.
So hiring a supply chain managers at the corporate level and implementing a centralized purchasing program would save $13.58 per pair on average.

Or:

$10,592 per location annually
$158,886.00 per region annually
$794,430.00 corporation wide in annually

Other Advantages: 
Company branding for the price of 8.42 the company can also have its own logo company colors. a uniform appearance of all employees across the entire company. 

Is it time for your company to look at centralized purchasing. If you would like help setting up a centralized purchasing and distribution division in your company give us a call or drop us an Email.



Earle Morris
MBA Supply Chain
CSCP