Key Performance Indicators – Always an Emotive Subject
You may have seen my recent post if you follow me on linkedin regarding measuring Production Output with Value (£). With over 11000 views and numerous comments, this got me thinking about KPIs (key performance indicators) and business.
KPIs drive behaviour (no doubt in that) getting the wrong KPI can have a massive negative impact, the image below sums it up, wrong KPI with Targets = Lost at Sea, Wrong KPIs and No Targets = Shipwreck.
A good KPI should act as a compass, helping you and your team understand whether you’re taking the right path toward your strategic goals.
KPIs are key for any business and impact on a number of facets,
- TO COMMUNICATE STATUS – ACTUAL v TARGET
- PLANT LEVEL
- BUSINESS LEVEL
- WORK STATION LEVEL
- TO DRIVE IMPROVEMENT BY FACT NOT GUESSWORK
- TO HELP PRIORITISE IMPROVEMENT ACTIVITY
- A CONTINUAL HEALTH CHECK FOR THE BUSINESS
- TO CONNECT THE CUSTOMER TO THE PROCESS (something that gets forgotten)
One of the best ways to understand and align your KPIs is through generating a KPI tree, a KPI tree has 2 main purposes:
To clarify the responsibility (at each level) to ensure achievement of the correct result or activity that will deliver the Company’s and Customers goals, objectives and values.
Definition of responsibility: The responsible level is the lowest level that has the authority and the ability to 100% achieve the required result or activity.
To clarify the link between each result and activity to ensure appropriate prioritisation of activities
The KPI tree structure is separated into four different categories, these are as follows –
High level KPI – The key measure which drives achievement of the Company and Customer goals, objectives and values
Result KPI – The management tool used to measure the effectiveness of the activities completed to support the achievement of the goals and objectives
Activity KPI – The enabler to improve the current situation. (What you can see you can fix)
Activity – Either the physical actions taking place at any level in order to achieve the goals or the understanding of the current situation by Go Look See
Here’s a typical example of a KPI tree for “Delivery”