Shell Group\'s Kpi Program Analysis

Shell Group's KPI Program Analysis

What are the strengths and weaknesses of the Key Performance Indicator (KPI) program?

The main strength of the KPI program is that it's geared to be ongoing with yearly reviews and improvements (Jane Wei-Skillern, 2004, 8). Since the KPI program's purpose is to support effective inputs in the SDMF which, in turn, is supposed to make sure that all relevant economic, environmental and social considerations are integrated in decisions on all Shell Group's actions, it's annual review should continually freshen the effectiveness of those inputs.

The KPI program encompasses 16 different KPIs covering economic, environmental, and social and governance and values associated with Shell Group activities. The purpose of each KPI is to drive further improvements in its area of concern. Each was devised to lend some quantitative measure to this improvement, if possible. Both the extensive number of individual KPIs and their coverage over all areas of concerns that effect Shell Group's decision is also a strength of the program.

An important weakness of the KPI program is that, beyond the five KPIs (i.e. ROACE, total shareholder return, critical environmental data, critical health and safety, and greenhouse gas emissions) that were already being annually quantified (Jane Wei-Skillern, 2004, 9), the remaining are difficult to quantify or, at least, qualify effectively and conclusively because of their more nebulous nature.

Though efforts to improve their evaluations over time are targeted, their effectiveness as inputs will be dependent on those persons who are in charge of doing so. But one person's perspective of progress can be considerably different from someone else's. That can pervert the perception of progress. Respect, social performance, human rights, and employees' feelings are good examples of such nebulous KPIs. Most of these are subjective in nature and different people have conflicting ideas of what determines improved performance in these areas.

Does it make sense to have these KPIs, internally/externally?

The fact that the KPI program's review and improvement process relies on internal and external persons and stakeholders makes sense because the Shell Group's decisions and resulting actions impinge on both internal and external stakeholders. Indeed, the SMDF was created in response to two Shell Group engagements - in the Brent Spar region and in Nigeria (Jane Wei-Skillern, 2004, 2) - that left a poor public image of the Shell Group actions -- and a loss in potential profits.

How else can the Shell Group effectively integrate all economic, environmental and social considerations unless their KPI inputs reflect the considerations of internal and external stakeholders. KPIs especially relevant in this regard are respect, social performance, human rights, engagement, acceptability of environment performance, and reputation.

Seeking input from stakeholders that are external to the Shell Group is also a strength of the program. That's because it will help get views into the program that insiders will be forced to address. That can help breakdown some of the internal and self-serving hype that can emerge, especially with the more unquantifiable type KPIs.