How The Coca Cola Company links KPIs to Value Drivers

Every company has a goal – be it revenue increase, marketshare growth in a certain geography, to sell off a business, etc. Whatever the goals might be, it is vital your GPO has at least one eye on each and every one of them.

Why? The GPO needs to be acting in step with these high level strategic goals, rather than against them. Unfortunately, this does not always happen. It’s easy – and common – for GPOs to get swallowed up in projects, politics, and prioritizing, to such a degree that they lose sight of the end game. GPOs might not think they are working “against” the company’s goals, but, in actuality, if a GPO is not working in accordance with the goals, s/he is indeed working against the company’s direction.

Andy Cameron, Dir, BPM & Enabling Services, explained how he and his GPOs work this model at The Coca-Cola Company at the GPO Summit in Seattle in May 2016.

Goals – or “priorities”– within the organization cascade down and become Value Drivers at The Coca Cola Company. For example, a priority for the company is to Increase Economic Value.

Some financial Value Drivers that cascade down from this are:

Increase profit:

• Increase revenue
• Reduce operating costs

Manage capital:

• Optimize fixed assets
• Optimize working capital

These Value Drivers flow deeper into the organization, driving the behaviors of functions (AP, Marketing) and ‘pillars’ like process, systems, analytics (see illustration 1).

Illustration 1

The key question that GPOs need to be asking themselves is “which of these value drivers does my process support, and what change needs to occur to support it better?”

This approach enables a number of benefits:

1. It means the GPO is in lockstep with the business, and putting the business’s priorities first
    
2. The GPO uses the same language as the rest of the business
    
3. This common language helps the rest of the business understand the role, function and purpose of a GPO – the connection is clear
    
4. This understanding leads to lower resistance, and wider adoption of change

To go a step further, these Value Drivers then go on to determine what your KPIs should be. For example, if your Value Driver is to Manage Capital and therefore Optimize Working Capital, then four of your KPIs could be:

• Days Payable Outstanding
• Discounts taken as a % of total payments
• Late payment and penalties incurred
• Accruals as a % of AP balance

This alignment and flow between day to day operations, process goals, KPIs and the corporation’s goals lends itself to an operation moving in exquisite unison. GPOs can help secure this connection by asking themselves, on a regular basis, “what needs to change in my process to help us meet our goals, and what does prioritization actually look like?”