moderated discussion performance kpis and other measures of success kevin giblin, mcgraw-hill rick...
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© 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
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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 - [email protected]
Rick - [email protected]
Cristen - [email protected]
© 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
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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
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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
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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
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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
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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
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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
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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
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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
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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