Continuous Improvement Toolkit

KPIs
(Key Performance Indicators)

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The Continuous Improvement Map
Managing Deciding & Selecting Planning & Project Management*
Risk PDPC Decision Balance Sheet Importance-Urgency Mapping Daily Planning PERT/CPM
FMEA RAID Log* Force Field Analysis Cost Benefit Analysis MOST RACI Matrix Activity Networks
Risk Assessment* Break-even Analysis Voting TPN Analysis SWOT Analysis Stakeholder Analysis
Fault Tree Analysis Decision Tree Pick Chart Four Field Matrix
Project Charter Improvement Roadmaps
Critical-to Tree QFD Portfolio Matrix
Traffic Light Assessment PDCA Policy Deployment Gantt Charts
Matrix Diagram Paired Comparison DMAIC
Lean Measures Kano Analysis
Kaizen Events Control Planning
Cost of Quality* Pugh Matrix Prioritization Matrix
Bottleneck Analysis** A3 Thinking Standard work Document control
OEE KPIs Pareto Analysis C&E Matrix
Process Yield Understanding Cross Training Implementing
Descriptive Statistics ANOVA Chi-Square Solutions**
Capability Indices Cause & Effect Value Analysis
Probability Distributions Hypothesis Testing Mistake Proofing Ergonomics
Design of Experiment
Gap Analysis*
Histograms & Boxplots Multi vari Studies Simulation TPM Automation
Confidence Intervals
Reliability Analysis
Graphical Analysis Scatter Plots Correlation Pull Flow Just in Time
Regression
Understanding
MSA Run Charts 5 Whys Root Cause Analysis Visual Management 5S
Performance Data Snooping
Benchmarking** Control Charts Fishbone Diagram Tree Diagram* SIPOC* Waste Analysis Quick Changeover

Data collection planner* Sampling Morphological Analysis How-How Diagram** Process Redesign Time Value Map

Check Sheets Brainstorming SCAMPER** Attribute Analysis Spaghetti Diagram Value Stream Mapping
Interviews
Questionnaires Affinity Diagram Relationship Mapping* Flow Process Charts Service Blueprints
Focus Groups
Data Mind Mapping* Lateral Thinking Flowcharting IDEF0 Process Mapping
Collection Observations
Suggestion systems Creating Ideas Designing & Analyzing Processes
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- KPIs
Performance Management:
 An approach used to manage performance of an organization.
 It plays an important role in the success or failure of a business.
 It is applied to measure the performance of:
• An organization.
• A business unit.
• A single department.
• A project.
• A process that builds a product or service.
• An employee.

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- KPIs
Performance Management:
 It includes activities such as:
• Planning and setting expectations.
• Developing the capacity to perform.
• Continually monitoring performance.
• Periodically rating performance in a summary
fashion.
• Rewarding good performance.

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- KPIs
Performance Indicators:
 Measurements that define and assess the performance of an
organization, department, employee, etc..
 Objectives to be targeted in order to add the most value to a
business.
 Choosing the right performance indicators relies upon a good
understanding of what is important to the business.

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- KPIs
Two Types:
 Result oriented indicators:
Business
• Focus on the key outputs of a process. Goals
• Related to the critical success factors. KRIs, KPIs
• Examples: customer complaints
and return on investment (ROI). Project Operational
Goals Goals
RIs, PIs RIs, PIs
 Process oriented indicators:
• Focus on the inputs to a process.
• Examples: time to process customer order
and late deliveries.

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- KPIs
Performance Indicators are Used to:
 Help organizations to understand their performance levels.
 Help setting realistic performance goals.
 Help aligning daily work to strategic goals.
 Help monitoring progress on a real-time basis.
 Help understanding the weaknesses and
establishing improvement priorities.
 Determine whether an improvement is being made
and maintained.
 Help benchmark internally and externally.
 Identify if staff are doing well and to help them if they are not.
 Provide a basis for recognizing team and individual performance.

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- KPIs
Selecting the Proper Performance Indicators:
 Performance indicators should be developed based on:
• Critical Success Factors (CSFs).
• Voice of the Customer (VOC).

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- KPIs
Critical Success Factors:
 Elements that are necessary for a strategy to be successful.
 CSFs selection is a very subjective exercise.
 Examples of CSFs are:
• Delivery on-time and in-full.
• Providing superior customer service.
• Short time to market new products.
• Management commitment.

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- KPIs
Voice of the Customer:
 Performance indicators should reflect the Voice of the
Customer.
 The Critical-to-Quality characteristics (CTQs) features of your
customer should be then used as the basis to select your KPIs.
 Raw data needs to be collected from customers.

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- KPIs
Example - Selecting the Proper Performance Indicators:
CTQs / CSFs KPIs Data to be Collected

All repairs to be % of repairs done Time to complete

done within 5 days within 5 days each repair

Time and
On-time in-full % of on-time in-full
quantity
delivery deliveries
delivered

Calls answered % of calls answered Time to answer

within 5 rings within 5 rings each call

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- KPIs
KPI Tree:
 A visual method of displaying measures:
• In an organization.
• Related to a project.
 Brings all measures together.
 Provides a visual representation for which
measures contribute to other measures.
 Helps aligning work with the organization strategy.

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- KPIs
KPI Tree:
Board of Directors / GM

Purchasing HR Operation Marketing Finance

Planning Production

Processing Assembly Packaging

PI-1, PI-2, PI-3

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- KPIs
KPI Tree Example:

Customer Satisfaction Project

Customer notifications Customer complaints

# of notifications % notifications # of complaints % of major complaints

answered within 24 hours

% dissatisfaction $ cost to business

Average answer time

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- KPIs
KPI Tree:
 A successful KPI tree is the one that contains
a balance of measures covering efficiency,
effectiveness, quality, delivery and cost.
 Effectiveness performance indicators
measure processes in the eyes of the customer.
 Efficiency performance indicators measure
processes from business perspective.
• Are of interest of internal customers.
• Have close links with the 8 Wastes.

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- KPIs
Characteristics of Effective Performance Indicators:
 Reflect the Voice of the Customer.
 Relate to critical success factors.
 Are agreed with and owned by the areas themselves.
 Are well defined and understood by all.
 Are measured regularly and consistently.
 Enable open and transparent communication.
 Are acted upon by the senior management.
 Are used for continuous improvement.

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- KPIs
Balanced Scorecard:
 A common way to manage and monitor performance indicators.
 A report that displays a collection of performance indicators.
 It has evolved from a simple performance measurement
framework to a full strategic planning and management system.
 It helps monitor performance against strategic goals.

Customer Business Process

Financial Learning & Growth

The Four-Perspectives Balanced Scorecard

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- KPIs
Performance Dashboards:
 A series of graphics, charts and other visual tools that can be
easily interpreted and analyzed.
 Easily monitor the performance in an organization.
 They allow to see if the performance indicators
are being met based on the goals in place.
 If not, they will visually alert that corrective
actions should be made.
 They are typically limited to show
summaries, comparisons and trends.

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- KPIs
A Good Dashboard:
 Is simple and easy to understand.
 Conveys important information at a glance.
 Contains minimal distractions and visually appealing.
 Displays real-time information.
 Should be displayed on the shop floor using a screen or a
bulletin boards.

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- KPIs
Examples of Performance Indicators:
Manufacturing / Production Purchasing and Inventory Sales, Marketing and Shipping
• Spoilage / Rejection Rate • Cancelled Purchase Requests • Time to Process Customer Orders
• Re-work Rate • Purchase Orders Completed • Time to Resolve Customer Claims
• Time Spent on Product Re-work • Purchase Order Cycle Time • Visits to Key Customers
• Total Units Manufactured • Emergency Purchase Rate • New Customers Rate
• Units per Day • Rejected Receipt Rate • Customer Retention Rate
• Units Per Labor Hour • Late Deliveries from Suppliers • Sales Forecast Accuracy
• Line Efficiency • Changes in Approved Suppliers • Market Share Growth
• Production Capacity • Unloading Time • Marketing Expenses
• Capacity Utilization • Stock Level • Product Availability
• First Time Right Ratio • Inventory Days Coverage • Loading Time
• Rolled Throughput Yield (RTY) • Re-work on Procured Inventory • Not On-Time In-Full (NOTIF)
• Average Change Over Time
• Material Usage

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- KPIs
Examples of Performance Indicators:
Finance and Accounting Maintenance Human Resources
• Net Profit Margin • Response Time to Breakdown • Staff Turnover Ratio
• Cost of Goods Sold • Mean Time Between Failures • Employee Satisfaction Index
• Operating Income • Mean Time to Repair • Exit Interview Satisfaction Rate
• Cost per Unit • Spare Parts Inventory Turnover • Internal Promotion Rate
• Working Capital • Work Orders Completed • Labor Utilization Rate
• Accounts Receivable Turnover • Preventive Maintenance Completed • High Performing Employees
• Inventory Turnover Ratio • Repair Cost • Training Hours Ratio
• Return on Investment (ROI) • Repair Cost per Unit • Training Attendance Ratio
• Budget Variance • Maintenance / Repair Downtime • Absenteeism Rate
• Capital Expenditure (CAPEX) • Part-Time Employees
• Monthly Department Expenses • Disabled Staff Ratio

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- KPIs
Examples of Performance Indicators:
Health, Safety and Env. Quality Lean
• Recorded Safety Observations • Customer Complaints • Value Added Time
• Workplace Inspection Audits • Returns from Key Customers • Takt Time
• Risk Assessments Implemented • Customer Satisfaction Index • Operator / Machine Cycle Time
• Lost Work Days • Customer Surveys Conducted • Order Processing Cycle Time
• Significant Injury Cases • Defects at Customer Site • Net Available Time
• Near Miss Cases • Defects per Million Opportunities • Work in Process Time
• First Aid Treatment Cases • Defects per Unit • Value Stream Ratio
• Environmental Incidents • Cost of Non Quality • Process Cycle Efficiency
• Safety Circles Conducted • Quality Personnel to Total Personnel • Uptime Ratio
• Satisfaction with Ergonomics • Quality Circles Conducted • Overall Equipment Effectiveness
• EHS Training Hours • Audits Performed on Schedule • Muda-Free Cost

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- KPIs
KPIs and Continuous Improvement:
 KPIs are key to the continuous improvement process.
 Examples:
• Chartered improvement projects
• Project charters approved and signed off
• SOPs developed after improvement projects
• Completed improvement projects
• Financial department involvement in improvement projects
• Processes perform at 4.5 Sigma or higher
• Staff trained in Lean Six Sigma
• Savings resulting from an employee suggestions
• Time to respond to suggestions
• Idea conversion rate
• Kaizen events conducted
• Cross-industry benchmarking studies conducted

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- KPIs
Operational Definitions:
 A clear and detailed description of a performance indicator.
 Ensure consistent data collection.
Customer
 Ensure standards are applied in the reports fault
same manner.

1: Time to repair (hours)

Technician
visit

Diagnose
2: Cup fault
diameter (mm)
1: Cup Fault
height (mm) Fixed?
2: Fixed
first time (%)
Fault closed

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- KPIs
Components of Operational Definitions:
Performance Indicator: Perspective: Unit:

Description / Formula:

Data Source: Measurement Instrument: Process Diagram or

Drawings:
Method of Test (How):

Frequency (When): Decision Criteria:

Data Collector (Who): Owner:

Baseline: Target:

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- KPIs
Utilizing Performance Indicators:
 Review the quality of the current data collection methods.
 Train staff on CTFs, KPIs, empowerment and process improvement methods.
 Start by a few easily understood performance indicators.
 Relate to critical success factors and reflect the voice-of-the-customer.
 Allow teams to define and select their own performance indicators.
 Have performance indicators approved by senior management.
 Measure and report only what matters.
 Monitor performance using dashboards.
 Display at workplace.
 Use them as a basis for team meetings and
decision making.
 Identify and pursue improvement goals.

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- KPIs
Further Information:
 A problem arise when managers struggle to identify the vital
few performance indicators, and instead collect and report a
vast amount of everything that is easy to measure.

 Many of the customer related performance indicators

(mentioned earlier) are developed and managed using
customer relationship management software.

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