Measurement

Once the organization has developed its Vision and Strategies the next step in the Managing Change Process is to develop a Measurement System. This is a means for making it clear to the leadership team whether or not the organization is on target for achieving its Vision. The objective is to select 4-6 Key Performance Indicators (they will be referred to from this point forward as KPIs). The process for selection is very important. The first step is to select the three to four most important “areas” for measurement. The areas will vary according to the business. Areas frequently selected include: Customer, Employee, Operations and Financial. Other areas could include: Safety, Innovation, Environmental as well as others. Many organizations have too many KPIs. Limiting the number of areas is the first step in selecting the critical few KPIs. After the critical areas have been selected options to consider for KPIs in each area need to be identified. It would be good for the leadership team to brainstorm possibilities and discuss each. I would describe selecting the appropriate KPIs as a critical decision so the leaders should reach consensus on the ones chosen. Being limited to selecting no more that 6 KPIs means that only 1-2 KPIs can be selected in each area. A KPI is something that is measurable and for which numerical goals can be established. These are things that would be plotted on a graph that would be updated monthly. When selecting KPIs thought needs to given to several factors. Is the data available or reasonably simple to obtain? Will the data really tell you what you need to know? An example would be a score on a customer or employee satisfaction survey. My experience is that surveys can provide a lot of good information. However, it is very difficult to have meaningful data that can be plotted either monthly or quarterly and truly show a trend in true in satisfaction. I would like to share examples of what KPIs could be to assist with understanding what KPIs are. The following are possible KPIs by areas:

Customer

-Sales

-Customer complaints

-Products delivered on time

Employee

-Turnover

Operations

-Equipment uptime

-Equipment utilization

-% Yield

Financial

-RONA

-Inventory days

-Gross profit

Safety

-Serious injury frequency

Innovation

-Sales from new products

Environmental

-Number of citations

-Emissions violations

Once the 4-6 KPIs have been selected, graphs need to be developed for each. The graphs need to indicate history, a place for monthly performance for the current year to be placed along with short and long-range goals. Please contact me if you would like to see sample graphs that could be used. The leadership team will use these graphs monthly to monitor progress toward achieving the Vision. Goals should be reviewed and updated annually and this is usually best to do during January when the final numbers for the previous year are available.