Presentation on theme: "Key Performance Indicators KPIs. Purposes of (KPIs) Performance Measurement Systems Providing direction and support for continuous improvement Identifying."— Presentation transcript:
Key Performance Indicators KPIs
Purposes of (KPIs) Performance Measurement Systems Providing direction and support for continuous improvement Identifying trends and progress Facilitating understanding of cause-and-effect relationships Allowing performance comparison to benchmarks Providing a perspective of the past, present, and future
Key Task In designing a performance measurement system, organizations must consider how the measures will support: Senior executive performance review Organizational planning Address the overall health of the organization, and How the measures will support daily operations and decision making.
Key Issues Organizations need comparative data, such as: Industry averages Best competitor performance As well as world-class benchmarks to gain an accurate assessment of performance and know where they stand relative to competitors and best practices.
KPIs & Shareholder Value Shareholders invest to make money. Management invest that money to achieve the objectives of the shareholders. KPIs should focus on achieving the objectives of the shareholders but not ignore the other stakeholders.
KPIs Practical Guidelines Fewer is better. Link to the key business drivers. Include a mix of past, present, and future Address the needs of all stakeholders. Start at the top and flow down to all levels of employees Combine multiple indexes into a single index Change as the environment and strategy changes Have research-based targets or goals
Linkages to Strategy Key business drivers (key success factors) Strategies and action plans KPIs Measures and indicators
KPIs - Measurements Does the measurement support our mission? Will the measurement be used to manage change? Is it important to our customers? Is it effective in measuring performance? Is it effective in forecasting results? Is it easy to understand and simple?
Key objective The things an organization needs to do well to accomplish its vision are often called: key business drivers or key success factors. They represent things that separate an organization from its competition and define strengths to exploit or weaknesses to correct.
Key Criteria Good measures and indicators are actionable They provide the basis for decisions at the level at which they are applied.
Customer Measures Customer satisfaction and dissatisfaction Customer retention Gains and losses of customers and customer accounts Customer complaints and warranty claims.
Product and Service Measures Internal quality measurements Field performance of products Defect levels Response times
Human Resource Measures Employee satisfaction Training and development Work system performance and effectiveness Safety Absenteeism Turnover of Staff (longevity of employees)
Organizational Effectiveness Measures Cycle times Production flexibility Lead times and setup times Time to market Product/process yields Delivery performance Cost efficiency Productivity
Governance and Social Responsibility Measures Organizational accountability Ethical behavior Regulatory/legal compliance (ISO 9000) Community service
Common Production Quality Measures Defects per unit of Production Errors per opportunity Customer returns Patient or Customer Waiting Times Production per employee Sales per square metre
23 Creating Effective Performance Measures Identify customers requirements and expectations Define work processes Define value-adding activities and process outputs Develop measures for each key process Evaluate measures for their usefulness
Analyzing and Using Data Analysis – an examination of facts and data to provide a basis for effective decisions. Examples –Examining trends and changes in key performance indicators –Making comparisons relative to other business units –Calculating means, standard deviations, and other statistical measures –Seeking to understand relationships among different performance indicators
The Cost of Quality (COQ) COQ – the cost of avoiding poor quality, or incurred as a result of poor quality Translates defects, errors, etc. into the language of management – $$$ Provides a basis for identifying improvement opportunities and success of improvement programs
27 Managing KPIs and Information Validity – Does the indicator measure what it says it does? Reliability – How well does an indicator consistently measure the true value of the characteristic? Accessibility – Do the right people have access to the data?
Common Operating Ratios for the Hotel Industry Average room rate (ADR) Revenue per available room (RevPAR) Revenue per available customer (RevPAC) % room occupancy Average Food Service Check Seat Turnover (Covers)
Call Centre KPIs
Questions Suggest suitable KPIs for an airline. Suggest suitable KPIs for the retail sector. Suggest suitable KPIs for the legal profession. Suggest suitable KPIs for schools & colleges. Suggest suitable KPIs for a manufacturer.
Improving Operational Performance A Medical Practice – Worked Example
Patient Care –Response Times –Clinical Performance –Customer Service