Skip to content
Skip to main content
header search
ahihi OpenLearn
OpenLearn
Menu
sticky search

About this free course

Become an OU student

Download this course

Share this free course

Course content Course content
Sustainable innovations in enterprises
Sustainable innovations in enterprises

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

More free courses

3.1 What is social impact?

What does the term social impact really mean? The word impact means there are consequences to the actions you take. You therefore create change in something else.

What about the social element? This is the reason for being, the purpose of the organisation you work in. It addresses a social need identified in your community. If the impact you have consists of the consequences of your actions, then your social impact is simply the consequences of the actions you take to address the social needs you have identified. Put even more simply, social impact is the change you bring to the lives of the people and organisations you work with.

Rather than asking about the social impact your organisation achieves, you can think about it by giving an example of how your organisation has changed someone’s life. Your ‘social impact’ is how the lives of your clients are being changed. ‘Social impact measurement’ is just a new approach to doing something that has always been done.

Activity 8 Key Performance Indicators (KPIs)

Timing: Allow about 20 minutes

Before going on to study what social impact to measure and what framework to use, it is important to first ask yourself: how do you know that the strategy of your sustainable enterprise is on track? In this activity, you will look at how organisations can use Key Performance Indicators (KPIs) to measure and manage key aspects of their operations. Watch this introduction to KPIs and make your own notes about what steps this organisation takes to incorporate KPIs into its business.

Download this video clip.Video player: b327_openlearn_vid009-640x360.mp4
Copy this transcript to the clipboard
Print this transcript
Show transcript|Hide transcript

Transcript

[MUSIC PLAYING]

NARRATOR:
Welcome to a typical organisation. Let's call it Furniturecorp and imagine that it's a long-established company that manufactures and market's chairs, tables, and other furniture for end-consumers. The senior management team at Furniturecorp has been on a strategy away day. After a series of workshops facilitated by external consultants, they've come back with a clear strategic direction for the organisation which will require a number of changes to it's traditional practises.
They've also got a plan for consulting the rest of the organisation about the new strategy. Everything's looking good, so far

[DING]

But how do they ensure that the organisation as a whole is in tune with this new strategy and that everyone is headed in the same direction?
As the 20th century business leader, John Harvey-Jones once said, ‘The challenge is to get all your ducks in line.’

[QUACKING]

Key Performance Indicators, or KPIs, are one popular approach to tackling this issue. According to one of the leading writers on KPIs, David Parmenter, ‘If KPIs are implemented effectively you can encourage the various teams within your organisation to come more closely aligned with other teams, so reinforcing its overall strategic direction.’
A good place to start is the organisation's Critical Success Factors, or CSFs. These are the things that the organisation needs to do particularly well in order to achieve its goals. For example, Furniturecorp might have CSFs such as designing robust products that customers can rely on. Or manufacturing in sufficient volumes to meet the demand of large retailers.
But CSFs can change over time, perhaps due to technological changes, or because the business is competing in a different kind of market. For example, Furniturecorp's new CSFs might include responding quickly to the latest fashion, providing an effective online ordering facility for end-consumers, or being able to demonstrate that all their raw materials are from environmentally sustainable sources. So Furniturecorp might run some workshops to identify a relatively small number of CSFs – perhaps five or six – and distinguish them from a larger number of general success factors.
Next, the KPI team needs to find a set of measures that will help to drive the kind of behaviour that is needed in order for these CSFs to be realised. Staff consultation is needed over these measures to ensure they're based on a realistic assessment of the organisation's activities and the constraints within which its people are operating.
As David Parmenter emphasises, it's essential to put the right measures in place. Amongst other things, KPIs should be nonfinancial. They should be measured frequently and linked to a particular group or team within the organisation. They also need to be clearly understood by the people involved and capable of acting as a trigger for corrective action.
For example, in order to promote this new CSF of effective online ordering, Furniturecorp might develop a KPI related to the speed with which online furniture orders are processed and dispatched to their customers. They'll also need to be careful to avoid what Parmenter describes as the dark side of performance measurements. For example, ‘Where a badly implemented set of measures distorts behaviour as people become cynical and try to 'game' the system.’
It's important to distinguish KPIs from what Parmenter calls Key Results Indicators, or KRIs, These are also important measures, but they are summaries or overviews of past performance, and they're based on the combined activities of many different teams. For example, Furniturecorp's sales turnover, its net profits, or its market share, are all KRIs.
They are important measures, but they're not the kind of indicator that people in the organisation can use to monitor and improve their day to day activities. For David Parmenter, ‘KPIs are the only things that truly link day-to-day performance in the workplace to the organisation's critical success factors.’
But it's important that these performance measures are not simply a way of exercising top-down control.

[ALARM SOUNDING]

Instead, they communicate what needs to be done and they help staff to understand what's required. So at Furniturecorp, the leadership can use their KPIs to help people in the organisation to understand the general direction of travel with their new strategy, and let them use these measures to guide their daily decision making.

[DING]

End transcript
Download
 
Interactive feature not available in single page view (see it in standard view).
To use this interactive functionality a free OU account is required. Sign in or register.
Interactive feature not available in single page view (see it in standard view).

Discussion

The video illustrates how Furniturecorp, a small business, goes about incorporating KPIs in its strategy in order to be sustainable. Once the business develops a strategic plan which requires a number of changes, it then has to work with its staff to ensure that everyone within the organisation understands and buys into the new strategy. The concept of KPIs is discussed in the video as one popular approach to tackling this issue. It requires the organisation to follow the steps below:

  1. Identify the organisation’s Critical Success Factors (CSF), that is, what the organisation must do successfully in order to achieve its goals (e.g. manufacturing and sales targets) while being aware that these may change over time.
  2. Work with staff to develop and agree measures to achieve CSFs and to discuss the constraints to be overcome. Some of the measures identified include non-financial aspects, frequency of measurements, and links to individual and team goals, all of which must be clearly understandable and serve as triggers for action.
  3. Identify the Key Results Indicators (KRIs), that is, summaries of past performance (e.g. sales turnover, net profits and market share) and how they differ from KPIs. KRIs can be used to measure day-to-day performance.
  4. Beware of the ‘bad side’ of KPIs. Make sure you consider their implementation and ensure that staff are not focusing only on KPIs. KPIs should be used as a guide to ensure the attainment of organisational and individual goals.

If you want to read more about these four steps, you can consult Parmenter, D. (2015) Key Performance Indicators: Developing, Implementing, and Using Winning KPIs, Hoboken NJ: John Wiley & Sons.