(Views expressed in this article are the personal opinion of the author)
Metrics, measurements, and key performance indicators (or KPIs if you prefer); Whatever you call them performance measures are supposed to tell everyone in their area, in their department and across the organization if they're making progress toward the business and corporate objectives. Too often, they don't.
Here are five guidelines to consider when selecting and defining metrics that will communicate the right information and help your company achieve its objectives:
Remember that metrics drive behavior
measuring anything, make sure you understand the root causes and behaviors that
are responsible for achieving the objectives. If the metrics don't correspond
to the hoped-for behavior, you can measure all you want but you it won't help
you get the desired outcomes.
Keep it simple. Metric data needs to be easy to collect and report
If it takes more people to collect, translate and report the metric than it does to do the actual work that is being measured, there is very little chance that the metric is going to drive a positive behavior.
Focus on the critical few.
Using multiple metrics to measure the same thing does not improve clarity or understanding, and therefore won't improve outcomes. Measure all critical factors using only one metric. For example, while it's mandatory to report lost-time accidents, the severity rate, incident rate, and so on, to the government, the accumulated metrics don't increase understanding. Like other after-the-fact measures, they also reflect a performance failure that has already occurred. Other safety metrics, such as hazards eliminated or near misses can be a better way to measure performance and improve safety.
Metric definitions must be meaningful and easy to understand
In the world of continuous improvement, improving year-over year quality by 50% will eventually make an organization world class. But what does that mean? Quality can be broken down into scrap, rework, warranty costs, etc., but those are still percentages. The problem is, while percentage metrics can be easily collected-like financial ratios-they can be difficult to understand and are often meaningless. I once did some work at an aircraft engine builder using percentages to try to drive quality improvements, but nothing was getting any better. After we changed the metric from percentage to dollars the potential impact became obvious to everyone, and performance improved.
Only track metrics that employees can impact.
I have seen too many metrics that point to improvement needs by a specific group in the organization that has no responsibility, authority, or ability to make changes that would improve performance. The associates, who are responsible for delivering the targeted results, as indicated by their metrics, must have authority to make changes to achieve those targets.
About the Author:
US based Anand Sharma, Co-founder and CEO of TBM Consultancy services, is a distinguished professional with more than two decades of experience in consultancy in different industries, all over the world.
This article was originally published in "The Stitch Times", June, 2012.