- 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
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
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.
Technician
visit

Diagnose
2: Cup fault
diameter (mm)
1: Cup Fault
1: Time to repair (hours)

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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