Monday, June 21, 2010

KPIs

Working with Key Performance Indicators (KPI):
Key Performance Indicators (KPI) help to manage and continuously improve your process or service. KPIs provide insight into:

Quality
How well is the measured area working?

Efficiency
Is the throughput of the measured area sufficient?

Compliance
Is the procedure being followed?

Value
Are we doing what we are supposed to be doing?


Key Performance Indicators measure business performance in the context of predefined targets and goals for a process or a service.




When defining your metrics it is beneficial to consider the following:

Link to the business objectives - not just site centric.

Be meaningful for the business stakeholders - it should connect to their business world.

Provide context - not just raw figures but relative figures measured & compared over time.

Be well defined & easy to understand - no ambiguous interpretation.

Create expectations - allow to set targets

Drive actions!

For defining your KPI it's recommended to use the following checklist:

Key figure / KPI
Name of the key figure / KPI

Process / Service
Which process or service is using this KPI ?

KPI-Owner
Who is responsible for measuring and reporting?

KPI-Objective
What is the objective of measuring this KPI? (Category)

KPI-Definition
Describe the KPI following the SMART criteria

SMART-Check
Check if the KPI definition fulfils the SMART criteria

Formula
How is the data for this KPI collected and/or calculated?

Source
Which source or tools are used to gather the data?

KPI-Unit
Measurement unit

Baseline
What is the baseline value for this KPI?

Target
What is the target value for this KPI?

Frequency
In which frequency is the KPI measured and reported?

Delivery date
When will be the KPI delivered?

Review
In which frequency is the KPI reviewed?


Finally all KPIs should meet the S.M.A.R.T. criteria:

Specific
Are you precise about what you want to achieve?

Measurable
Are you able to measure whether you are meeting the objectives or not?

Achievable
Are the objectives you set, achievable and attainable?

Realistic
Do you have the resources to make the objective happen?

Timed
When do you want to achieve the set objectives?




How many KPIs should be defined for a process or a service?

Golden Rule: "Bad Metrics are worse than no metrics". Therefore it is highly recommended to concentrate on a few but appropriate metrics (e.g. between 1 and 3 KPIs per process or service).



Periodic reviews:

Measures do not last forever. Revisit all metrics at least once every six months to ensure that they are still meeting objectives. Moreover, Periodic reviews enable accommodating CI/Business change.

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