Matthew Peacock, manager of Vision in Print, explains why should better understand your company’s KPIs.
It’s true; what gets measured gets managed. And no sports coach was ever successful who did not constantly review his athletes’ performance against a few key measures: faster, higher, stronger or more goals, points or tries. Almost all businesses use profit to measure success and accountants have extensive and well-developed measures of financial health. But while financial measures can indicate the impact of operational activity on finances, they are less specific in identifying actions to improve. Key Performance Indicators (KPIs) are the practical measures that show how to improve financial performance, customer service quality, safety or other important business aims.
Measures drive behaviour but in-appropriate measures can cause great damage. For instance, salesman measured only on sales value can be tempted to take unprofitable work. To drive positive behaviours KPIs must be relevant and balanced. Selecting appropriate KPIs should start by identifying strategic business goals and then cascading them into supporting departmental goals and measures to form a detailed business plan. A balanced set of operational goals can often be achieved by considering measures for quality, cost, and delivery (QCD). Some measures may cross more than one category, e.g. bad quality could impact quality, cost and delivery.
Time and effort to collect data has to be balanced against the benefit - often the simplest measures are the most effective. Carnegie was reputed to monitor the activity of his steel mills by observing number of chimneys producing smoke. In contrast, data collection systems wired into modern equipment such as printer/presses can quickly generate overwhelming amounts of confusing data and to avoid this the purpose and relevance of the data analysis must be carefully planned.
Gaining local ownership of performance improvement and related measures requires consistency and trust. Random analysis can quickly cause confusion and shifting objectives for the operators, particularly if the ill-conceived analysis is publicly used as a “tool for blame”.
Confusing measures are also likely to discourage ownership so care must be taken that everyone understands measurements in their area of activity and what is expected of them.
A few gifted people can happily interpret tables of raw numbers but most mortals find simple charts bring the data alive. Good charts are relevant and simple to understand and displayed close to the point-of use.
Collecting data is an expensive waste of time if it is not analysed, reviewed and then, importantly, acted upon. Time spent on analysis without constructive response is merely paralysis by analysis.
Of course, if a measure shows a process is working correctly then the response may be to carry on doing what is already being done. Who, when, how often and where measures are reviewed must be an established routine, according to the importance and purpose of the measure.
Well chosen measures, routinely reviewed, and locally owned is a foundation for continuous improvement. So here are ten key pointers:
1. Cascade measures from company objectives
2. Use balanced sets of relevant measures
3. Don’t keep moving the goal posts - keep measures consistent
4. Use charts to bring numbers to life
5. Keep charts simple
6. Make sure people understand the measures relevant to their work
7. Don’t use measures as a public weapon; keep individual’s performance private
8. Involve staff in regular reviews
9. Identify good performance as well as disappointing
10. Use measures to drive actions