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Measures that Matter
KPI Spotlight: NPS
Big Data Analytics Buzz
 
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Hello! 
I very much hope you are well and been able to enjoy the first half of 2012? As you can see from this email, I am now using a new format for my emails with the aim of making them a little more interesting (hopefully!) but without losing the personal touch. 

 

My aim is to send them a little more regularly to keep you up to date with developments in the field of business performance and share with you relevant news and insights. 

 

So, this time I would like to tell you about the latest best-practice case-study, talk a little about the new buzz word 'Big Data Analytics', explore the measures that matter do drive business performance and insights, and put a spotlight on one KPI - the Net Promoter Score.
 
Performance Management Best Practice 
Today's news are full of negative and scary stories about banks and if you are like me than you'd probably much rather hear nothing about banks for a while. However, I have a good news story here. I have just completed a case study based on work with the The Co-operative Banking Group. 
 
It is rare that I talk about 'world-class' Balanced Scorecard implementations but the IT function at the Co-operative Banking Group has created a performance management approach that should be the beacon of best practice for companies the world over. 
 
The elements that have made this implementation so successful included:
  • Complete senior level buy-in and support
  • A performance framework that is tightly linked to the strategy of the business
  • Relevant metrics that help to answer the most important business questions
  • Using the scorecard as a learning tool to generate insights and discussions 
  • Engaging and involving everyone in the development and use of the performance management approach
  • Effective communication of performance results and insights
  • Ownership of the process throughout the organisation
  • Keeping it relevant and simple
The case outlines in detail how the company implemented the performance framework and describes how it created a high-performance culture in which data-driven decision-making is the norm, rather than the exception.  Read the full case study here.

The Measures That Matter
Performance indicators are essential tools which will tell you if your business is on target or veering off course. Using the right indicators will help you deliver the right results.

In order to be useful performance measures have to answer the most important questions in your organisation. A good starting point is therefore to come up with the questions you want to have an answer to before you start designing KPIs.

So-called Key Performance Questions (KPQs) should be identified for each of the strategic aims of an organisation. KPQs will help you articulate the information needs which in turn allow you to design the right performance indicators to help you answer your KPQs. For a bit more guidance on designing indicators read my overview and download my white papers on how to design KPIs.

In my latest book Key Performance Indicators I cut straight to the 75 + KPIs that matter the most. In the book I explain what key performance indicators are, give overviews of each metric and describe how to use the measure effectively (including the KPQs they are helping to answer). There are worked examples throughout which will equip you with the skills to understand, assess and interpret the most important aspects of any business. 

From net profit margin, to customer satisfaction through to brand equity, six sigma level and employee engagement the book gives you the manageable and essential key indicators. Read a fee sample chapter of the book or browse our online KPI library for an overview of the most important KPIs. 

 

KPI Spotlight: The Net Promoter Score (NPS)
Let's look at one performance measure that is becoming increasingly popular with companies the world over to measure customer satisfaction: The Net Promoter Score (NPS). 

The NPS score was developed in response to traditional customer satisfaction surveys, which are usually complex, expensive and hard to interpret. Instead, companies ask a simple question: 'How likely is it that you would recommend [company x / product y / service z] to a friend or colleague?'.

You then use a 10-point scale on which respondents can score from 0 (Not at all likely) to 10 (Extremely likely). The NPS score is based on the fundamental premise that every company's customers can be divided into three groups:
  • Promoters (score 9 or 10)
  • Passives 
  • Detractors (score 1 to 6)

 To calculate your NPS score you then subtract the detractors from the promoters:

 

NPS = % of Promoters - % of Detractors

 

This allows organisations to track and compare their NPS scores. What's more, extensive research has found a striking correlation between the customer's grouping and actual behaviour (e.g. repeat purchasing and referral patterns). 

 

Furthermore, comparing the NPS of companies in the same sector seems to explain much of the variation in relative growth, meaning companies with a better ratio of promoters to detractors out-perform and out-grow their peers. 

 

When I develop KPI systems for clients I often recommend to supplement the NPS score with two additional open ended questions: 'What do you particularly like about [our company / product / service]?' and 'What could we do better'?'. This way you not only get a comparative number but the relevant insights about what customer really like and what you could improve. 

 

The NPS score is one of the 75 KPIs I discuss in detail in my book 'Key Performance Indicators'.

 

Big Data Analytics and Enterprise Performance Management 
The world around performance analytics is changing very fast and the term 'big data' sits at the centre of these changes. I have for long argued that success of companies - big or small - will increasingly depend on their ability to capture, analyse and gain insights from data.

 

While Enterprise Performance Management (EPM) has always been about collecting, analysing and reporting of data to support management decision making, the emergence of 'Big Data Analytics' is going to change EPM as we know it. 'Big Data Analytics' is one of the biggest business buzz words of 2012, so let me outline some of my thoughts on how this will change EPM in most companies. 
 
Traditionally, companies have collected performance measures and transactional data, stored it somewhere and then used it to analyse it and gain new insights. However, this world is changing very quickly. The rapid evolution of computer technology combined with the stellar growth in social media are just two factors that have given rise to Big Data Analytics. 
 
'Big Data' generally refers to larger and more messy types of data that we can't easily store in our systems and that are too big to store and analyse in our traditional data warehouse systems. Examples of Big Data include the vast and ever changing amounts of data generated in social networks where we have (unstructured) conversations with each other, video data, internet search and browser logs, as well as the ever-growing amount of data generated by the sensors and chips in our smart phones and tablets. 
 
The idea behind Big Data Analytics is basically that companies use and analyse lager and more complex sets of data to inform their decision-making - data sets that were previously unthinkable to analyse. Analysing Big Data would, for example, allow companies to better understand customer or employee behaviours by using their own transactional data and weblogs and combining this with video tracking, social media postings and search engine data to get much richer insights.
 
To read on what the emergence of 'Big Data Analytics' means for Enterprise Performance Management read my blog post on the issue.

As always, please feel free to forward this e-mail on to any colleague or friend and don't hesitate to contact me if you feel I could help you with any of your enterprise performance needs or if you want to explore any other opportunities.

 
Best wishes,
Bernard Marr
Founder and Chief Executive, 
Advanced Performance Institute

 

 
 
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