KPIThere is an overwhelming, and sometimes conflicting, amount of advice about must have key performance indicators. Try these ideas to help you select the most useful for your particular business.

  1. Choose the KPI appropriate for the level you are measuring at

In your organisation you have different groups of employees. They require different information in order for them to carry out their responsibilities.

Research into businesses that have successfully implemented a continuous improvement culture concludes that you must use measures appropriate to each organisational level. In addition these measures must tie in with the organisation’s strategy.

Do the measures you have selected meet the needs of all the different user groups?

  • Shareholders, board and executive members.
  • Operations managers at plant and department levels.
  • Team leaders and team members at cell level.
  • Managers and team members of non manufacturing departments.

And do the measures cover?

  • Meeting daily performance targets and satisfying customer demand.
  • Achieving strategic goals.
  • Tracking the progress of improvement activity.

At the end of this post I have put a few links to articles and publications demonstrating the wide variety of measures you may consider.

  1. Don’t have too many

Just having one key measure will not give you the full picture. Equally having a one size fits all “dashboard” of measures with the complexity of a flight deck attracts limited buy in.

In my days as a fire fighting shift manager, a team of external consultants insisted my colleagues and I needed 96 key measures to manage daily operations. I walked out!

Perhaps if they had helped us to put in just 3 or 4 measures we would not have rejected the idea. And if those measures were selected to help us focus on our biggest problems and eliminate them……..

The key is to create a set of measures that are appropriate for each level of the organisation and tie daily business to the achievement of both strategic and operational targets. The Integration Model, discussed in a previous blog, helps you to do just this.

  1. Test it – could it drive the wrong behaviour?

An associate I recently worked with shocked me with this story. Many schools in the UK are judged on their pupil attendance metric. When it snows there are usually a number of children who can’t get into school and so the pupil attendance figure drops.

However if the school is officially shut for the day (often using Health and Safety as a reason) then the pupil attendance figure does not drop!

Is this metric driving the right behaviour by the schools? What is the knock on effect on working parents?

The same associate recommends this approach when defining your KPIs. As a team, brainstorm all the ways in which you can improve the KPI. Then examine if any of these could drive unwanted behaviours and try to mitigate this.

You may need to use 2 measures to ensure a balanced approach. You can achieve excellent Delivery Schedule Adherence by keeping high levels of finished goods, but this drives up costs associated with inventory. So measure Stock Turns as well.

How have you selected the best KPIs? What horror stories have you found?

Interesting Links

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