How to Develop KPI

November 2, 2008

KPI or key performance indicator is a set of targets to be achieved in certain period of time by the Organisation, Department, Division, and employees. This article is about to develop KPI for a department.

1. Formulate Department’s Objectives

A manager of the department must formulate the objectives of his department. The department’s objective should be in line with the organisation’s vision, missions, strategies and objectives. The KPIs for the department are the normally the KPIs for the manager.

2. Component of KPI

The manager should now the components of KPI. KPI is comprised four components. There are (i) Objective, (ii) measurement, (iii) target, and (iv) initiative.

(a) “Objective” tells what the department want to achieve. Example: to increase deposit, to increase customer satisfaction, to increase profits, to send staff for training, to reduce expenses and to improve loan processing.
(b) “Measurement” is what measurement we use. Example: Percentage, number of days, dollars, and kilometer.
(c) “Target” is what to achieve and “when”. Example: increase deposit growth 20% this year; and to reduce customer waiting time from 5 minutes to 3 minutes within 2 months.
(d) “Initiative” is a set of actions to achieve the target. Examples: (i) Improve customer service (ii) Increase promotion (iii) reduce lending rate (iv) to increase staff training.

3. Cascade the KPIs

The Manager should cascade his KPIs to his subordinates. Let say, if the manager’s KPI is to achieve $20 million value of loan, how does his KPI be translated to 5 marketing assistants? In this example, KPI for each marketing assistant is $4 million! So, the achievement of the manager’s KPI is the achievement of his subordinates’ KPIs. The only different is the function. The function of the manager is to lead his subordinates whereas the function of his subordinates is to meet customers.

4. Monitor the KPI

The KPI should be monitored regularly, say weekly or monthly. Normally a tracking system is develop to monitor the achievement of KPIs of the department (directly the manager) and his subordinates.

Achievement of KPI can be rated into scales. This is an example:

5=outstanding
4=exceed requirement
3=meet requirement
2=does not meet requirement
1=unsatisfactory.

Use of KPI

Achievement of KPI is used by a manager to give reward to his subordinates such as bonus, letter of recognition, send staff to oversea trip, and yearly increment and promotion.

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How to Make a Decision

November 2, 2008

As a manager, we do make decisions everyday. There are many methods or ways how we make a decision. In 1970’s, when I was a young executive in a bank, I was given a training on ‘Systematic Managerial Analysis’. The course’s leader was from Manila, the Philippenes. This is a good and simple concept, and practical. I would like to share with you on how to make a decision based on this concept.

1. Systematic Decision Analysis

A decision is made based on the criteria you set. Under the “systematic managerial analysis”, a decision is made based on the ‘must criteria’ and ‘want criteria’.

2. Set Must Criteria

‘Must criteria’ are criterias that you must fill first and it cannot be compromised. Let say you want to buy a hand phone. You set a budget $500 as a must criteria. It means you will buy a hand phone which the cost is below $500.

3. Want Criteria3

‘Want criteria’ are additional conditions that will help you to make a better choice. Let say you have identify a list of hand phones which its cost are below $500. Say, the hand phones are Nokia, Samsung and Sony. In order to choose one of them, you set these criterias: built in camera, MP3 tools and data storage capacity.

 4. Evaluate the Criteria

You assign points from scale one to ten for each criteria. One is the lowest point (lowest priority) and 10 is the highest point (highest priority). Next, you evaluate and give your points to Nokia, Samsung and Sony. You sum up points by each camera. The camera which has the highest point should be the first choice. Let say Nokia is the highest point and you should buy Nokia brand.

5. Potetial Problem Anaysis

Even though you choose Nokia, you must study the potential problem analysis if you buy Nokia. It is a risk analysis. In other words, what can go wrong if you buy Nokia. Let say, if you find problems when buying Nokia (example: difficult to get back-up service), you may review your decision to buy Nokia. Instead, you buy the hand phone which have the second highest points, say Sony.

From my experience , this is a simple and practical concept on how we make a desion.

How to Impress Your Boss With One Page

November 2, 2008

One of my function is prepare papers for our boss, management or the board. These people are busy and may have enough time to read papers when attending a meeting. Some papers may have 20-30 pages and we don’t expect they will read all the pages. Normally, I will write an executive summary. An executive should be simple and interesting to read. The main issues and recommendations should be in the executive summary.

1. TITTLE OF THE PAPER

You should write the tittle at the top. You should use capital letters for the key words.
Example: How to Write a Good Report.

Suggestion: One or two sentences.

2. OBJECTIVE

You should state what you want your boss to do with your paper when he read it? For example the paper needs decisions or just for information.

Suggestion: One paragraph with one or two sentences with not more than 5 lines.

3. ISSUE

You should write clearly what are issues that he should know. The most important issue should be written first, follow by the second most important issue…and so on.

Suggestion: 5-7 lines.

4. EVALUATION

You should analyse for each issue. The main issue should be analysed first, follow by the second issue, and so on…

Suggestion: 10-15 lines.

5. RECOMMENDATION

Write your recommendations. Each line is for one recommendation. Put a number for each recommendation.

Suggestion: not more than 5-6 lines.

6. CONCLUSION

You should conclude the benefits the company will get from the recommendations.
For example, it would save company’s money; increase customer base; and make employees are happy.

Suggestion: 2-3 lines.

Oversea Trips

September 20, 2008

I must thanks to the Agrobank giving me many chances to visit many countries for official purposes. The Phillippines was the first country I went. The organisation sent me to Manila attending Basic Management in Asian Institute of Management (AIM) in Makati, Manila. The course was about one month.

Iran was the second country I visited. The bank sent me to Agricultute Bank of Iran. I went with a few staff from Bank Pertanian (now is Agrobank of Malaysia) The Agriculture Bank of Iran is located in Tehran. We went about a week.

The third place I went was Osaka, Japan. I went under the program of Malaysia Look East Policy. The objective of the program was to learn about good practices in Japan, and when we back home, we should be able to apply what good things we learnt. There were nealy 45 goverment officers was attended the program. We learnt about Japanese culture, work ethics and business culture.

I have a chanced to visit Taiwan. The trip was about two weeks. In that trip I was one of the Malaysian delegation to attend workshop on agriculture finance. The other representives from Malaysia were from Agriculture Department, Fishery Department, Development Bank of Malaysia (know is known as Infrastructure Bank).

During my service in the Bank, I had an opportunity to pursue my post graduate in the United States. I went to University of Detroit Mercy and did my Master Degree in Economics. I was in 1990-1992.

The last country I visited is Netherlands. There we 5 of us included 2 of board members. We leaent about risk management, corporate governance, branc operation and credit management.

Chief Internal Auditor

September 20, 2008

After spent so much time in Corporate Planning, since 1 May 2008, I become Chief Internal Auditor. Again, this is a new experience and challenge to me. As an auditor you main responsibility is to give reassurance to the Board that all internal controls in the organisation are in place.

It was a right time when I joined this department. In April 2008, the bank was corporatised. It changed its name from Bank Pertanian Malaysia to Agrobank of Malaysia. As a new organisation, new board members and Audit and Examination Committee (AEC) were appointed.

The current Audit and Examination (AEC) are comprised four members and headed by Datuk Elias Kadir. The first AEC meeting was held on 15 September 2008 and the second AEC was on 16th Septembr 2008. I feel the bank have very strong AEC.  You see in the two AEC meetings, we were presented a few important policy papers

In the first AEC meeting on 15th September 2008, we have presented four papers related to policy matters. The papers presented were Vision and Mission of Internal Audit, new Terms of Reference for AEC, Audit Charter, Audit Programs for branches and a new organisation chart of Internal Audit.

In the second meeting we tabled a few more papers. There were ‘KPIs for Internal Auditors’, ‘audit rating’ for branch audit and ‘whistle blowing policy’, Audit Program for ICT and Audit Time Sheet. In that meeting we also proposed audit plan 2009 which cover nearly 150 auditable areas. Audit Plan 2009 is based on risk based auditing. Risk based auditing is still a new approach to us.

Corporate Planner

September 20, 2008

When I went back to Malaysia in 1992, again I was posted to Research and Planning Department as head of the Department. Since I joined the deparment in 1992, it was evolved  a few times. It was known as Economy Division, Research and Planning Division and Corporate Planning Division.

As a the head the department, I was responsible and involved in many policy matters which deal directly with top management, the Board, the Ministry of Agriculture (MOA), Ministry of Finance, Bank Negara Malaysia, Prime Minister Department and almost departments in the MOA (such as Agriculture Department, Fishery Department, LPP and FAMA.

As a corporate planner most of my times were involved in planning and managing plan of the Bank. These include strategic plan (3-5 years) and yearly plan. As a goverment body (when it was Bank Pertanian, Bank Pertanian was involved in preparing Government’s 5 Years Development Plan.

One of the major assignments was related restructuring and to corporatisation of Bank Pertanian Malaysia. Bank Pertanian Malaysia was established under the Act Parliment 1969. It was a 100% government body where its staff salary scheme, yearly budget and business direction are followed the goverment. But its nature of operation was 100% like an private sector.

As result of the development, Government has decided to corporatised Bank Pertanian Malaysia. The journey to corporatise Bank Pertanian was initiated by Bank Negara Malaysia in 2005. A Steering Commitee chaired by Governor was established in 2005. The members were from Economic Planning Unit, Ministry of Agriculture, Ministry of Finance, Public Service Department and Bank Pertanian Malaysia (the Chairman was the member). This steering committee was aided by Policy Committe and Technical Committee. As a head of Corporate Planning, my involment was in the paper writings and did a secretariat job. We did many presentation to Bank Negara, Ministry of Agriculture and Economic Planning Unit (EPU).

I went to United States

September 20, 2008

In 1990 I got scholarship from Malaysian Goverment to pursue a post graduate in the United States. I went with my family. I did a master degree in Economics at the University of Detroit Mercy. We lived in Ferndale, about 2 kilometers from the University of Detroit Mercy. I still remember, we stayed in 9th Mile Road, Ferdale. But I can’t remember the apartment where we stayed.

It was Fall when we came. I remember we bought a car named Pontiac which cost only $1,200. My first challenge when we came was to find shools for my two kids. My first kid, Adilla was 9 year old; the second is Iqwan (6 years old); and Aqeeda was 6 months.

I was Unit Head in Credit Operation

September 20, 2008

After three years as branch officer, I was transferred back to Head Office, specifically in Loan Supervision Department. As a Unit Head I was incharged to take care of few officers who were managed ‘board loans’. ‘Board loans’ meant loans were approved by the Board of Director which my Unit had to manage these loans. This included to visit project sites and made recommendation to withdraw or disburse loan to finance the projects.

I personally took incharged a few loans. When I was in this Departement, I gained experience to supervise oil palm plantations in Sabah, Perak and Terengganu. On average, the loan for each customers was about RM3 millions and the size was about a few hundred acres.

I became a branch manager

September 20, 2008

After seven years as research officer, I was transferred to Malacca branch as branch manager. This was another challenge to me. Try to imagine, without experience in operations (such as credit operation, financial management and office management), I was to take charge to manage a branch!

Malacca branch is a medium size branch. The staff was about 30. Main activities of the branch was loans and deposits. Malacca is basically is not an agriculture area. So there was not so much big agricultural activities.

My Experience as Research Officer

September 20, 2008

When your training was towards the end of 9th months, each executive trainee was given a chance to choose a department or branch he preferred to work. I chosed to work in Research Department. Until today, I still do not understand why I chose the department. Since I don’t have any experience in banking operation, I should not choose the reseach division as my first choice.

I did remember my first assignment was to prepare a bulletin on soya bean. The bulletin would be distributed to all bank pertanian branches as a guideline to credit officers when entertained potential customers who wanted to get loan to finance soya bean crop. Among the contents of the bulletin were yield per acre, viability, profitability, cash flow analysis, market potential, technical analysis and management.