moderated discussion performance kpis and other measures of success kevin giblin, mcgraw-hill rick...

© 2012 Ariba, Inc. All rights reserved.

Moderated Discussion

Performance KPIs and Other Measures of SuccessKevin Giblin, McGraw-Hill

Rick Collison and Cristen Hughes, Ariba

… and YOU

CS

© 2012 Ariba, Inc. All rights reserved. 2

Performance KPIs and Other Measures of Success

Wednesday, April 11, 2012 - 1:15 p.m.

What’s good and what's great when it comes to collaborative business commerce? How are your peers doing, and how are they measured by their leadership? Find out when you attend this informative session. You'll learn not only about how your peers measure success and the metrics that can be leveraged to drive your success, but also how Ariba's stealth metrics program can be used to your advantage.

© 2012 Ariba, Inc. All rights reserved. 3

Moderators and Participants

Kevin Giblin• McGraw-Hill• Director, Global

Procurement• ISM Group Chairman• Curriculum Advisor• Various awards • Well published

Rick Collison• Ariba• Sr. Director,

Adoption & Readiness

• Procurement and Platform Soln Owner

• Buy and Sell side background

Cristen Hughes• Ariba• More than a

decade in corporate reporting

• Ariba’s Metrics program

You• Various

Companies• Newbies and

veterans• All industries• Years of

experience!

© 2012 Ariba, Inc. All rights reserved. 4

Session Format

• Some Initial Topics¨ Rick to setup a topic¨ Kevin to share his experience

and thoughts¨ Audience discussion

• Audience Suggested Topics¨ Cristen to facilitate¨ Topic + your view¨ Discussion

© 2012 Ariba, Inc. All rights reserved. 5

Topics to Start With!

1. Context¨ Objectives of using KPIs (with leadership, you, and users) (Discussion)

¨ Characteristics of ideal measures (Discussion)

¨ Performance measures – different types (Discussion)

2. Putting it into practice¨ Governance and getting this to the next level and alignment (Discussion)

¨ KPIs by business process (Discussion)

¨ Putting KPIs into operation (Discussion)

¨ Frequency and to who? (Discussion)

¨ MBOs and KPIs (Discussion)

3. Key takeaways (final notes)

© 2012 Ariba, Inc. All rights reserved. 6

Key TakeawaysFinal Notes

• Your final notes¨ [to be completed during the session]

• What do you need from Ariba?¨ [to be completed during the session]

© 2012 Ariba, Inc. All rights reserved. 7

Kevin - kevin_giblin@mcgraw-hill.com

Rick - rcollison@ariba.com

Cristen - czhughes@ariba.com

© 2012 Ariba, Inc. All rights reserved. 8

OBJECTIVES OF USING KEY PERFORMANCE INDICATORS

Discussion Topic

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Objectives of Using KPIssetup

• Leadership • You • Users

Results

Action Plan

InsightData

© 2012 Ariba, Inc. All rights reserved. 10

Business Pressures in 2012: How Do We…

Increase Savings Targets• Drive year-over-year savings with fewer resources?• Outperform currency and

inflation factors?

Improve Sourcing Execution• Reduce negotiation time and effort?• Exploit the largest savings

opportunities?• Balance quality, cost and risk?

Drive Sustainable Savings• Leverage supplier knowledge

to improve price performance?• Enforce negotiated terms?

Maximize Sourcing Influence• Consistently apply policy rules

enterprise-wide?• Leverage expert sourcing practices

across all commodities and divisions?

ProcurementOrganization

Establishing Performance MeasuresEnsuring alignment with suppliers...

• Market sector supply strategy for spend category

• Background from sourcing efforts used to establish the relationship

• Understanding of how and where supplier value is delivered to MH

• Prior performance criteria

• MH and Supplier alignment on objectives

• Completed KPI and Survey Templates

• Performance reporting and communications requirements agreed with by governance team

Inputs Implementation Outputs

Review value objective

Establish Performance

Measures

Engage Stakeholders

Document & Communicate

Understand what stakeholders want to get from the relationship

Drive discussions around where supplier performance delivers the value objective

Create metrics that outline relationship value

Align governance team in the performance measures

Solicit their input to the measures and reporting

Document the performance measures agreed upon

Communicate needs to all stakeholders

Establish process for reporting

Developing Key Performance Indicators

Getting clarity on goals and objectives

© 2012 Ariba, Inc. All rights reserved. 13

CHARACTERISTICS OF IDEAL MEASURES

Discussion Topic

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Characteristics of Ideal Metrics

© 2012 Ariba, Inc. All rights reserved. 15

Performance Evaluation Q&A

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PERFORMANCE MEASURES – DIFFERENT TYPES

Discussion Topic

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Performance Measures Ensure Supplier Value

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Supplier Management - Use of Metrics

Daily¨ Record supplier issues¨ Update issues status

Monthly¨ Spend report analysis and review ¨ Monitor issue resolution¨ Escalate critical issues identified, SLA results

Quarterly¨ Program “wellness check”, business review, KPI results¨ Recommendations on program enhancement opportunities

Annual¨ Conduct internal customer survey ¨ 360 feedback¨ Financial analysis

© 2012 Ariba, Inc. All rights reserved. 19

GOVERNANCE AND GETTING THIS TO THE NEXT LEVEL AND ALIGNMENT

Discussion Topic

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KPI’s Value ObjectiveUnderstanding the expected outcome is a must for good KPI’s

© 2012 Ariba, Inc. All rights reserved. 21

Performance Measurement through KPIs

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KPIs BY BUSINESS PROCESSDiscussion Topic

BENEFIT MEASURECost •Cost savings

•Cost avoidance

Time to Market •Shorter project duration•Greater # of projects per year•Increased productivity

Development/Maintenance Ratio •Less internal time spend on maintenance

Business Alignment •Requirements capture

Quality •Increased customer satisfaction•Fewer supplier issues

Transition •Quicker transition time•Lower transition costs

Sources: McKinsey Quarterly, PSC, Aberdeen

Defining Procurement Measures of Success – Internal KPI

© 2012 Ariba, Inc. All rights reserved. 24

Ariba Suggested Adoption KPIsAnd in Solution Reports

• Business Goals:¨ Have a consistent way to view each customer Data¨ Have a consistent way to get a sense of success KPI

© 2012 Ariba, Inc. All rights reserved. 25

Navigation to Usage Reports

Manage Prepackaged Reports System and Benchmark Usage reports System Usage Reports Solution

© 2012 Ariba, Inc. All rights reserved. 26

Sourcing Usage Reports

Our “source of truth” for Adoption

Adoption Rollup Red

Monthly Projects 13

Licensed Sourcing Users 57

Sourcing Projects per Licenced User 0.23

Avg Savings Per Project 23.43%

Suppliers Invited to Events 4.78

Suppliers Participating in Events 2.41

Category Coverage 3

Sourcing Adoption Data

© 2012 Ariba, Inc. All rights reserved. 27

Scenario 1: Sourcing

Adoption KPIs¨ Key Performance Indicators (KPIs) that help you determine how

effective you are using the solution.

Based on the R/Y/G of the "Sourcing Projects per Licensed User"

How many projects is this customer "creating“ this month

How many users are “entitled" to create Sourcing Projects

Number of sourcing project per month/Number of Sourcing Licensed Users

Average event savings percentage over the last rolling 12 months

Average number of suppliers invited to each event (All event types)

Average number of suppliers participating in each event (All event types)

Number of L1 Commodities that are sourced over a rolling 12 month period

© 2012 Ariba, Inc. All rights reserved. 28

Scenario 1: Sourcing

Potential Blocker to Customer Success Patterns

Low savings due to low supplier participation Platform/Roll Out Plan

Low savings due to specific category coverage Commitment/Expectations

Low supplier participation due to complex categories being sourced

Platform/Roll Out Plan

Low monthly project count due to small number of active users

Platform/Org and Technology

© 2012 Ariba, Inc. All rights reserved. 29

Scenario 2: P2P, P2O and APC

Adoption KPIs

Based on R/Y/G values of Active PO Suppliers and Active Invoice Categories

The rolling 12 month approved invoice spend

A Customers Annual Contract Amount of Spend

Ratio of Annualized P2P Spend vs. Annual Spend Entitlement

Percent of PO spend purchased from a catalog over a rolling 12 month period

% Contract PO Spend vs. Total PO Spend

Unique number of suppliers that received at least one (1) PO over the last rolling 12 months

Unique number of categories that been invoiced for over the last rolling 12 months

© 2012 Ariba, Inc. All rights reserved. 30

Scenario 2: P2P, P2O and APC

Potential Blocker to Customer Success Patterns

Low supplier and category count due to phased rollout (by geography or division)

Platform/Roll Out Plan

Issues with Supplier Enablement Capabilities/Coaching

Non-Compliant Spending (Not on-catalog and not on-contract)

Commitment/Value Link Established

© 2012 Ariba, Inc. All rights reserved. 31

Scenario 3: Spend Visibility

Adoption KPIs

Based on the R/Y/G/B of the “Spend Entitlement %”

Sum of rolling 12 month Invoice Spend

A Customers Annual Contract Spend Entitlement

Annualized Invoice Spend / Annual Spend Entitlement

Invoice Spend for the latest month

© 2012 Ariba, Inc. All rights reserved. 32

Scenario 3: Spend Visibility

Potential Blocker to Customer Success PatternsLow Spend or Supplier Enrichment SLA levels Platform/Setup &

Configuration

Low number of source systems compared to expectations Platform/Org & Technology

Higher than contracted Spend Levels Commercial Issue

© 2012 Ariba, Inc. All rights reserved. 33

Scenario 4: Contracts

Adoption KPIs

Based on the R/Y/G of the "Average Monthly Contract Volume"

Average # of monthly contracts created over the last rolling 12 months

% who are Contract Users compared to the entire population of Contract Users and Contract Team Members

Number of Contract Users that have logged within the last 2 months

© 2012 Ariba, Inc. All rights reserved. 34

Scenario 4: Contracts

Potential Blocker to Customer Success PatternsLow User Penetration Platform/Org & Technology

Using as a Clause Library vs. a Repository only Platform/Setup & Configuration

© 2012 Ariba, Inc. All rights reserved. 35

PUTTING KPIs INTO OPERATION

Discussion Topic

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Establishing the KPI Process

Supplier’s input helps drive the program!

© 2012 Ariba, Inc. All rights reserved. 37

Make The Program Count

38 © 2012 Ariba, Inc. All rights reserved.

Delivery

Customer

Customer Marketing

Solutions

CustomerSat SalesForce

Finance

Thousands of Buyer Customers

Hundreds of Thousands Supplier Customers Knowledge@Ariba

Siebel

AN

Quadrem

PeopleSoft

CMO

Support

2000 Realms

Sales Analytics

Fusion

© 2012 Ariba, Inc. All rights reserved.

Data Quality – OMG!

39

• Metrics updated approximately every month.• Four (4) elements to track completeness

¨ Data Completeness (Entitlement) : Measures the percentage of blank/missing entitlement fields¨ Data Completeness (Adoption): Measures the percentage of blank/missing Adoption fields¨ Customer Completeness: Measures the percentage of customers that are missing when

compared to the list of customers from Psoft.¨ Data Accuracy: Measures the percentage of the data that has known inaccuracies and is not correct yet.

• Target for each completeness area = 100%

© 2012 Ariba, Inc. All rights reserved. 40

FREQUENCY AND TO WHO?Discussion Topic

© 2012 Ariba, Inc. All rights reserved. 41

The Performance Monitoring Cycle

KPI Tool Frequency

Issues Log Daily

Status Updates Daily

Spend Report & Analysis Monthly

Compliance Reviews Monthly

Issue Resolution Monthly

SLA Results Monthly

Metrics and Wellness Review, Scorecards Quarterly

Program Enhancements, Collaborations Quarterly

Internal Customer Survey Annual

360 Feedback Annual

Financial Analysis Annual

© 2012 Ariba, Inc. All rights reserved. 42

MBOs AND KPIsDiscussion Topic