Key Performance Indicators (KPIs) Essay

Key Performance Indicators (KPIs) argon quantitative and qualitative measuring rods used to review an brasss progress against its goals. These are broken down and set as targets for deed by departments and individualistics. The achievement of these targets is reviewed at symmetric intervals. KPIs are used to monitor the military operation of a company, department, process or tear down an individual machine. They go away also help shape the behaviors of employees within the company. KPIs need to be flexible and forge the changing goals of the judicature. Goals wobble as the constitution win overs in reaction to external factors or as it gets next to achieving its original goals. Individual KPIs need to be directly linked to organization goals and objectives, or overall organization KPIs where they are used.They need to reflect organization culture and values, by indicating the types of behavior and executing the organization will recognize as successful and reward empl oyees for. KPIs need to be measurable and reflect a relaxation between operational and people orientated measures. KPIs are a fundamental component of sustaining a change process and maintaining a performance management culture. KPIs should be aligned with the organizations vision and direction. When performance is measured, and the results are made visible, organizations can take action to improve. SMART KPIsThe acronym SMART is often used to delineate KPIs.SpecificMeasurableAchievableRelevantTimelySpecificKPIs need to be specific to the individual wrinkle and if possible expressed as statements of actual on-the-job behaviors. For example, a KPI shouldExplain clearly to the employee what he/she has to do in terms of performance to be successful Have an shock on successful job performance, that is distinguishing between effective performance and ineffective performanceFocus on the behavior itself, alternatively than personality attributes such as attitude to customers. Terms suc h as work grapheme, and job knowledge are too vague to be of much use. MeasurableKPIs must be measurable, that is ground on behavior that can be observed and documented, and which is job-re deeplyd. They should also provide employees with ongoing feedback on their measuring rod of performance. AchievablePerformance management needs to be an open, collaborative communication process. KPIs must be seen by all that they are achievable. The KPI must be realistically achievable. If it is set too high for the circumstances (such as an ambitious production target), not only will it be irrelevant but it will find failure. RelevantIt is essential that employees clearly understand the KPIs, and that they have the same meaning to both parties. Consultation is to a greater extent likely to result in standards that are relevant and valid. TimelyKPIs should have an appropriate condemnation frame.It should be possible to collect the relevant information either as it happens or within a piteo us time afterwards, otherwise it will lose its relevance. As outputs of the performance management system, KPIs also need to be in alignment with other HR-related functions, including training and increment, recruitment and selection, rewards and recognition, and career planning. Business aspects that require KPIsKPIs should cover every aspect of the business. Sample examples are Customer satisfactionEmployee satisfactionStaff turnoverAbsenteeismDepartment/ share specific measuresTriple bottom line financial, environmental and social responsibility Finance including revenue and costOHS reporting including incidents and related costsEquipment usage and OEEMaintenance costs and effectivenessNew product development & innovationLead times and down timesQualityKPI componentsKPIs should identify the required outcomes, for exampleThe nominal acceptable performance e.g. quotidian break even point Target performance eg desired daily output.KPIs shouldBe communicated to all staff so that t hey are aware of how they are to be measured and how their KPIs impact on the organization as a whole Be aligned with the vision and direction of the organization Have relevant reward and recognition criteria linked to each KPI. When implementing new KPIs, having baseline data to measure improvements is very important. Progress on KPIs should be communicated at timed times to highlight emerging trends. As these trends emerge, corrective action can be implemented in a timely fashion. KPIs need to be communicated via multiple media. The measures that are selected must be carefully specified to ensure they do not start non-lean behaviors. In many cases there will need to be a selection of measures that balance quality and quantity factors to ensure the correct behaviors are encouraged. Listed below are some examples of the behaviors and outcomes that measure in isolation can cause.Measure in isolation Behavior OutcomeProduction output Make more OverproductionMachine efficiency Run machine longerRun in most expeditious sequence for machine Unnecessary stock Customer orders lateMaintenance costs Reduction in maintenance activities to reduce costs Machine breakdowns Cash flow performance Pay suppliers as late as possible Supplier deliveries XX unreliable Creating KPIsKPIs must be designed for each proposed change to the production process so that There is a base line measurement taken to make a starting performance standard There are measures developed to track the squadsperformance There are measures established that can highlight any variability. This can assist in future diagnoses Reward and recognition can be effectively implemented.Before data is collected tierce questions need to be asked.What is the purpose of collecting this data?Will this data tell us what we wish to know?Will we be able to act on the data we collect?The goal is to produce an easy-to-use, accurate measurement system with as few measures as possible. The following questions need to be answered when fit up a data collection system What type of metric is it (financial, behavioral or core-process)? why was it selected?Where will the data be collected?How will it be collected?How often will it be collected?How often and where will the metric be displayed?Who will use it?KPI examplesSome examples of measures that can be used to monitor the performance of a competitive manufacturing company are listed below. Financial Examples embodys square costsLabor costsOperations costsInventoryOvertimeWarrantee costsCost of SalesInterest on overdraftNumber of projects completed on time and on budget tax income SalesGross marginsReturn on assets or investmentProduct profitability squad up metrics OvertimeMaterial costsRevenue generated by teamInventory value in teams areaNumber of projects completed on time and on budgetCore metrics ExamplesOHS Lost time injuriesNumber of staff off workLength of time staff are off workDIFOT Delivery in full on timeQuality First time throug h qualityYieldLead-time Order to cash in bankRaw material to set downDock to dockInventory Inventory turnover rateOEE Overall equipment effectiveness inscription performance % Changes to the weekly scheduleValue added ratio Ratio of value adding time to lead timeTeam metrics Turnaround time for jobsOutput placeQuality ratesEquipment OEEAttendance ratesSchedule complianceCustomer feedbackNumber of deadlines/milestones metMetrics relating to specific team tasksBehavioral metrics ExamplesEmployee satisfaction Gained from regular Employee Satisfaction Surveys Staff turnover ratesParticipation levels in improvement activitiesCustomer satisfaction Gained from regular Employee Satisfaction Surveys Retention ratesSkill uptake Skill matricesAbsenteeism AbsenteeismError rates Error ratesTime spent on managing under-performing staffTeam metrics Number of team meetingsMembers at team meetingsNumber of ideas generatedNumber of ideas implementedTotal Savings generated