OPEX: Shell and KPIs

It’s great.  Another thought I had was anchoring strategies in, and again you touched on it with KPIs.  KPIs have come up a lot since you spoke.  I’ve got other people’s ideas on it, but how do you approach key performance indictors as a way of…?

IE                Driving the…?

IV                Yes, of, like you say, making it feel part of the fabric.  Again, how do you deal with KPIs?

IE                It really starts with what is our business vision, our strategy, what do we want to deliver, and then going back to, okay, what are the concrete actions, the processes, the daily work that needs to happen in the organisation to deliver that strategy?  There needs to be a line of sight from the goals all the way to what are we doing on a daily basis, and then it’s about prioritising which of these activities are crucial to really make that happen.

                   And it’s in those areas that we set the KPIs.  Actually, we set two sets of KPIs.  One is around the vision and where do we want to head and what are the outcomes that we want to achieve, and some of those are financial indicators, where are you in the… What’s your market share, what have you.  And then there are the leading indicators, and that can be as operational.  Let’s take an example of a retail business.  We want to grow market share, we want to go into rapidly developing new markets.

                   One way to do that is to open new sites, and then one that again determines how quickly we get revenue from those sites is what is actually the time that it takes us between the investment decision and then the time that actually the site opens?  And let’s say that previously took 200 days or 150 - I’m making these numbers up - but what can we do to shave off 20%, 30%, 50%, whatever percent, to get faster and faster?  Because that’s in the end the difference.  If I shave off 50% of the time, suddenly I make money twice as fast, and if I can open many more sites with much less cost…

                   Anyway, that’s how we get to those KPIs, is to see what are the key activities that we need to do to drive our strategy and then measure those.  And that comes back to another point that was shared earlier.  Over time, you may change your KPIs, and that’s actually a healthy thing, because your focus changes, and at some point, some things are just good as they are, you still want to measure it at a local level, but there are other levers now that’ll make a bigger impact for the company, and then you focus on those.

00:06:02

IV                And in terms of over time, the last 20, 25 years, have you seen a pattern with how people’s KPIs are working and how companies are drawing those KPIs up or…?

IE                To be honest, the approach of how you set KPIs is not rocket science, but that was actually the point I wanted to make during my… The difficulty’s all in the application and the actual doing it.  I know plenty of companies, plenty of folks, will take away good learnings from the sessions today and it will not change how they do it in their company.  And we see it in Shell [?] as well.  There are still many parts where we have to go back in and look at, okay, but wait a second, what you’re measuring here, how does that really link to your strategy, and maybe it was right at the time but it’s not now.

                   Part of the role of CI excellence as well is to keep that focus, keep it ever fresh, around are we still doing what’s fit for purpose, the most efficient, the most effective, and revisit the KPIs.

00:07:07

IV                Just one or two more, just because you’re a busy man, you have people asking you stuff all day.

IE                I’m a long talker.  Sorry, go on.

IV                No, no, no.  One of the things I want to ask you… Ignore that.  I suppose I’m trying to think what I meant when I wrote this.  If you fail to refocus KPIs, if you fail to use that Band-Aid to fix a hole in the fabric with a new management structure, how does a process go from being effective to needing to be completely aborted or dropped?  Rather than continuing to exist for years but ineffectively, what would push you to a point where you think, no, this strategy really just needs dropping now; rather than just trying to refocus it, you drop it and you adopt something new?

IE                Sorry, and your question is around the business strategy or the CI strategy or the…?

IV                The CI strategy.  I suppose my question would be, in a CI strategy, what happens…?

IE                There is no CI strategy, there’s a business strategy, and you look at… Maybe if I can quickly build on that.  Because that’s one of the fallacies that we sometimes form.  There’s a business strategy, and CI and operational excellence can support it in many different ways, but because there are so many good practices around CI, sometimes what people do is they start with, in order for me to run an effective CI programme, I need to do ABCD.

                   And all of those things are right, but if they are not connected to the business strategy and how it needs to be supported, then the business will at some point shrug and say, I don’t know what you’ve been doing with all that busywork but it’s not been helping me.  I know you’re building a pyramid here, but my ship is sinking.  What are you doing?

                   I think the question to always ask is, look, at any given point, what is behind the things that we’re doing from a CI perspective and how does that directly tie to the challenges that the company either is having today or has signposted that are coming in the future for which we need to draw up an answer and get prepared?  The examples I shared earlier, all of the work we did in the initial stages, it was because we wanted to be prepared, but these days, it’s all about looking at where does the business have a challenge.

00:09:35

                   Is it about sustainability, e.g., we’re going through a major effectiveness and efficiency turnaround, large size, how do we make sure that’s sustained?  Of course, there are other things that we can do in terms of better training and improvement projects, but that’s not the focus.  We want to make sure that the organisation is ready to sustain these gains [?], and that will require them… A different focus, maybe different skills, different people capabilities.  Does that…?

IV                Yes, that answers it perfectly.  I’ll let you get back.  Gosh, ten minutes already.  Thank you so much.

IE                I need a tip [?] from you.  From the…