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Metrics mania.

Harnessing performance measurements in a shared-services operation

It's not unique to routinely measure your company's performance by collecting data about your business processes and then reporting your findings to the head of the business unit or publishing them in the department's newsletter. Lots of companies do it. But few are so devoted to the process that they can tell you - down to the number of minutes they spoke on the telephone to a particular customer - how productive they've been on a given day. At Kraft Foods, we can because we fully embrace the principle that not only "what gets measured gets done" but "what gets measured gets done and improved."

Our story is a satisfying one. In 1993, Kraft, like many companies, decided to develop a strategic plan to re-engineer its transaction processes. First, we assembled a re-engineering team from representatives across Kraft, including the top people in the finance department. Our philosophy? To start with a clean sheet of paper in redesigning our processes, align them with single policies and practices, and then apply technologies where they would benefit us most.

Our strategic plan ultimately called for consolidating the re-engineered processes into a shared services center that operates at a single location, in San Antonio, Texas. We've staffed the center with highly professional individuals to administer our re-engineered processes using a self-directed team approach. Operating with the mission to be the "premier provider of financial and business support services in Corporate America," the center processes accounts payable invoices, expense reports and payroll/benefits for all of Kraft Foods' North American operations.

To make sure we hired the right people for the center, we used a firm that specializes in team-building. All of the candidates for the shared services center had to go through a screening process to judge how well they would adapt to a team culture. For instance, we "play acted" in several simulated, stress-filled work situations while the outside firm judged how each of us handled the stress. Those who demonstrated the personality traits and work style that do well in a team environment were selected - 150 in all, including the leadership of the center.

From the outset, we established three goals to demonstrate the center's success: to achieve a first-quartile ranking for processing costs (as identified by a major benchmarking service) by significantly reducing our costs per transaction; to provide the "right" level of service, as defined by our customer agreements; and to protect and safeguard the company's assets.

We realized early on that metric reporting needed to be an integral part of the center's operations. The metrics would naturally focus on our critical success factors of productivity, customer service and financial control, and we also planned to use these measurements to monitor our key business activities and the service levels the center was providing.

How - and What - We Measure

What we first focused on when we started our center several years ago and what we continue to believe is important - is regularly examining the kind of information we want to gather and measure. In our case, we identify volume and performance data that will assist us in understanding our business. The volume-related metrics include such items as the number of monthly expense reports we process, the invoices we pay and the payroll checks we issue. The performance measurements include our cost per transaction, our live call retrieval statistics and our customer audit exceptions. We used internal and external sources to develop these baseline measurements.

Once we're satisfied we're collecting the right information, we monitor the shared services center's performance levels by setting performance targets based on the critical success factors mentioned above and using outside benchmarking information or our internal goals.

For example, we used external benchmarking figures to come up with our targets for costs per transaction: We decided we want to always be in the first quartile of performers. On the other hand, we used our internal goals to set the target for live call retrieval rates. These metrics not only help us better understand our performance and our business - they give us an objective process that effectively pinpoints future areas of opportunity.

We know that once the measuring and monitoring processes are in place, one of the most important phases of performance measurement is communicating our activities. So we issue monthly metric reports on each of the functional areas (although team members can look at the data online daily to monitor their own performance). We send the information to Kraft's senior management in the form of charts and then post these clearly on the center's walls to provide team members with a direct and informative update of our performance. Everyone's always interested in the data because they're also the basis for the center's incentive ratings.

As a side benefit, the displayed measurements help to gain internal support for key projects we'd like to take on. For instance, our productivity and volume metrics were instrumental in identifying the benefits of - and getting approval for - a recent accounts payable workflow and imaging project.

Since the shared services center is a team-based organization, integrating the metrics into the operation of each of the associate teams is very important, too. While headquarters and the center's leadership formulate the overall strategic direction and key targets, the teams are responsible for the transactional performance.

Initially, our metrics were more subjective, but through refinements, we've increased their objectivity over time. For instance, early in the process for travel-and-expense reporting, we used a metric that measured our goal to audit an expense report within 48 hours of its receipt. But we modified that metric to include a measurement of how many reports are audited per associate per day.

Many of our adjustments in metrics come straight from the teams, because they know how to best track data to help them achieve their targets. And since the team members can view the data online at any time, they're empowered to prioritize their job responsibilities accordingly. Indeed, the team members have been receptive to the metric system since the beginning. We make it a point to say, "This is your data. These are your numbers. You'll know what it takes to get a 'fully meets' or an 'exceeds rating' at the end of the day," and they like that.

Four Years and Counting

Even with all the benefits of measuring our performance in such detail and establishing metric reporting as a key business driver, the process still requires a solid commitment to collect and report the data. Early in our processes, we used manual counting and off-line system reporting to capture information. But we quickly learned to imbed the metric reporting into the shared services center's processes and systems. For instance, in the customer service area, we initially recorded our customer call types on an Excel spreadsheet; we now can automatically capture and report this information using upgraded client-server systems. Electronically imbedding the metric reporting dramatically increases the value we can add to operations and the speed of our decision-making.

So, after four years of fine-tuning our metric-reporting system, we're still discovering some of the positives. Our teams now talk in terms of objective business measures, information that's digestible for our customers. And this year, we're rolling out our data warehouse.

The shared services center has become a model metric-driven organization for other areas within Kraft and we've assisted them in establishing their own business measurements. Our metric culture is very apparent to both our customers and management; we've established customer agreements with our clients and set goals with our management based on truly objective measures of our business and performance.

Beyond the accolades from within the company, the shared services center gets positive feedback from other companies. To do our part in sharing the knowledge we've gained, we host both internal and external visitors who want to learn more about our measurement processes.

We firmly believe that mastering performance metrics has been key to Kraft's shared services center delivering more than 30 percent cost savings, improving customer service and implementing strong financial controls for the company as a whole. But we know to meet management's increased expectations of the center - and to keep pace with every firm's changing business needs - our metrics will need to continue to improve and to become an even more integral component of the center's operations. We're ready for the challenge.

What Kraft Measures Up

Volume

T&E expense reports processed Invoices processed Payroll payments generated

Business analysis

T&E expense by category T&E expense by days outstanding

Productivity

Cost per transaction Headcount Budget

Service

Live call retrieval rate Phone response time Call pickup time Average talk time

Control

Types of audit issues Invoice rejection reasons Reconciliation aging

Mr. Lapp is the shared services group leader of corporate travel accounting for Kraft Foods, a subsidiary of Philip Morris Companies Inc. Kraft's shared services center is based in San Antonio, Texas. You can reach Lapp at (210) 530-7115.
COPYRIGHT 1998 Financial Executives International
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Copyright 1998, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:performance measurement in Kraft Foods
Author:Lapp, John C.
Publication:Financial Executive
Date:May 1, 1998
Words:1491
Previous Article:Collecting more data but gaining less insight.
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