KPI’s you gotta love ’em. If you’re in business then the chances are you’ll come across some variant of them during your working day.
KPI’s are measurable variables that indicate how well (or not) a process is performing. If we look at a quick example a common supply chain KPI is on-time delivery performance (OTD). If 3% of items are delivered on time you have a problem – if 75% deliver on time then OK you still have some work to do etc. You get the picture.
Businesses love KPI’s as they help keep you on the straight and narrow. There are numerous KPI’s depending on your function (e.g. Finance specific, HR-specific). And a quick trawl around Google will deliver you a plethora of KPI’s that are appropriate to the process or function that you’re looking to measure.
So you have your measures and are armed with trusty excel (other spreadsheet apps are available) and you can produce a neat chart and some numbers to present.
But what does it all mean and does doing the above add any value?
The long and short of it is that KPI’s are meaningless if you measure the wrong thing or you measure the right thing but then following reviewing the result you don’t take action. If you review a KPI and think “so what” then you know you have work to do.
So without further ado – our top 5 list on how to improve your KPI’s.
1/ Report on what really matters – KPI’s should be tied to business-critical processes and strategies (and linked from your goals). When reviewing KPI’s always ask yourself “so what” – why do they matter. Your KPI’s should deliver value against your goals and objectives. If you set a KPI against something that isn’t an objective while it might prove interesting it’s meaningless. Your business goals are likely to have critical success factors which in turn will have variables that can be measured. These KPI’s add value as they help you correlate performance against business objectives.
2/ Ensure your KPI’s are easy to understand – it’s often not how to create the KPI’s that the challenge. The trick is often presenting and interpretation. You might have followed point 1 in this list to the letter but if no-one can interpret the data or understand your measures when presented, then it’s unlikely that they will drive any corrective action. Great presentation is usually a mix of the right audience and appropriate methods. This could be a simple set of charts, it could be a briefing or other. The key is that everyone understands how that particular variable is performing and what it means in the context of the businesses goals and objectives.
3/ Ensure KPI’s are read/reviewed – So you have KPI’s which are appropriate and easy to digest, you’ve developed corrective action plans to improve performance but the business then doesn’t hear about them – not quite right is it!!
Teams must ensure they have an effective method of reviewing numbers and reviewing action status. There are various ways that this can be achieved, the key things are review cadence and governance.
Your KPI’s are likely to have mixed review requirements. For example, some might be weekly, some might be monthly – establish reviews to assess the data and decide (and document) the course of action.
4/ Ensure you can take action from your KPI’s – how many times do I have to say it….you see a number, you achieved 35% of your target – so what? How do you action the KPI to improve performance? What’s your lesson and what do you need to do to put into action so next month it’s 95% that’s what an effective KPI should do? Often one of the best ways of doing this is combining the chart element of the KPI with some corrective actions as part of a 4-box presentation that can be put up in the workplace. It goes without saying that the actions you put in place should drive the appropriate behaviors and/or changes to drive improvements in the KPI’s (these might be time sensitive as well and should carry close out dates).
5/ Ensure each KPI has an owner – Getting appropriate KPI owners is a must. Generally, it makes sense to match the process and the KPI to a single owner, for example, the purchasing process and it’s KPI set will be owned by the senior buyer. Having an owner ensures that you have someone to champion and monitor the performance. Remember it’s vital that the owner is not ‘thumped’ when the performance of the KPI is poor remember that they own the measure and the improvement actions and should be reviewed on that basis.
Got some thoughts on KPI’s? We’d love to hear some feedback in the comments section below.