KPI is a measurable value of relevant parameter what shows current status on the road towards target. For example we spend 6,6 People Worked Hour (PWH) to produce one chair => KPI1 = 6,6.
Usually we use a set of KPI-s, to describe a process (we need 0,05m3 wood for the chair =>KPI2 = 0,05; we put 0,15 kg paint on the chair =>KPI3 = 0,15; and so on).
Let’s review top 4 ones, from many of benefits to have KPI’s!
- KPI’s gives me a possibility to know: if I continue the same way as I did today, I will arrive to the target or not!
For example: If I planned to spend 0,16 kg paint / chair, as KPI3 = 0,15 => I do O.K., I will make profit.
2. If I make a change in production process, will show me does this change help me to achieve target, or not?
For example: I found a cheaper wood supplier, I received the shipment, and now I spend 0,06m3 wood per chair. Not sure, it is a good business!
3. KPI has their value, and I can compare direct values or calculated values.
a. New KPI2 = 0,06 I spend 1% more wood from new supplier, than earlier.
b. Wood of new supplier is cheaper for 3% /m3. It seems, it’s still profitable for me to buy from the new one!
4. Possibility to compare (bench mark) values.
a. Example: In shift A they spend 6,6 PWH /chair (KPI1=6,6), however in shift B KPI1 = 7,2 (What is happening there?!?)
b. Example: In factory in Arad average value of KPI1 = 6,7; in Sibiu factory KPI1= 6,5. (It seems, factory in Sibiu is better organized!)
Myths about KPI’s:
- My business does need KPI’s.
Not true! Each business needs them!
Why: You do not do profit & loss calculation each day, but once (twice) per year. You should know the way how your organization performs will lead to profit, or loss!
2. I know what I’m doing and my people as well. We do not need KPI’s.
Not true!
Why: You know your good intention, and intention of colleagues. You should know the result as well!
3. I do not have time to spend for reviewing KPI’s
Hmm…
The primary task of a manager is to use certain amount of resources to achieve specific target. If you do not measure how much you used, if you don’t know how far is the target…?
4. My business does not have KPI’s
It has. Every business has.
Can happen, it’s not visible what values should be measured, or the relevant ones it’s hard to measure (Example: customer satisfaction). An experienced Productivity specialist will guide you to establish the right measurement for relevant values of your processes.
Why people avoid to use KPI’s?
- Fear from the transparency
What will happen, if John discovers he has better results than Jim, but Jim is the favorite?
People on the workplace should be evaluated based on their work results, not based on sympathy or friendship. Giving appropriate feedback based on measured results will encourage the team to go after performance improvement!
2. Procrastination
As I see KPI1 =7,2 week by week and I know, it should be below 7, in my thoughts I know: I should intervene in process and I do not do, I rather avoid to watch KPI. This strategy certainly leads to loss… In this case better to employ a Productivity Consultant, to found a right solution!
After all … What to do regarding KPI’s?
- Have implemented set of KPI’s
- Check, do they represent all relevant parameters! (If not sure, ask for an audit. It is better to invest in an audit, than to have a less than optimal KPI’s!)
- Learn your organization to evaluate values!
- Encourage managers to make adjustment in process to arrive values of KPI’s to desired ones!
- Keep process running and enjoy your coffee!
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