Key Performance Indicators are graphical representations of critical business processes. Although there are many “status” oriented KPIs such as a Pie Chart or a geographic representation of the distribution of customers (local, national or international), time-phased graphs with included actual vs. target comparisons are the most powerful change management tools. It is not possible to identify business process improvement opportunities unless there is an actual vs. target comparison. As we discussed in part one, you need to ask several key questions when identifying change opportunities.
- Where have we been in the past?
- Where are we today?
- Where do we seem to be heading?
- Where should we be?
All of these questions are supported by the utilization of time-phased graphs that identify opportunities for improvement as in the example to the right. While time-phased graphs most effectively support the identification of opportunities for improvement, that’s just the first step. If a particular KPI graph indicates the necessity for change, the process that follows is your best chance of effecting real and lasting change.
While the objective is bringing the KPI into compliance with an established target, you need to step back a bit and create an effective improvement process that consists of the following steps.
- Determine the business process you want to monitor and control (e.g. average time required to process and ship a sales order).
- Define how often this KPI will be calculated (e.g. weekly, monthly, etc.).
- Define the KPI target value for each measurement period.
- Define how the KPI is going to be displayed (Bar Chart, Line Chart, etc.).
- Define who is responsible for monitoring and improving this KPI (the owner).
- Specify whether other people are going to participate in the improvement process.
- Create a collaborative platform that will give people the ability to share their thoughts regarding how this KPI can be improved.
- Create a link back to these process improvement notes so that people can access them in the future if the KPI falls out of compliance.
Summary
If you are going to utilize KPIs to monitor and improve business processes, you have to create a systematic method of doing so. Displaying pictures of KPIs is but one part of the process. The KPI has to represent a business activity that has a material effect on efficiency and effectiveness. In addition the image itself has to elicit a response on the part of the user who is responsible for the business process. Finally there has to be some method whereby users can track their efforts to improve the KPI value.
Key Performance Indicators are critical Business Intelligence tools that can help users define what they need to do very well, monitor these critical business processes, analyze and improve them, and ultimately increase efficiency and profitability.
Rob Gillespie with Premier Computing, a Microsoft Dynamics reseller based in UT but providing ERP solutions throughout the Western United States would be happy to answer any questions you may have with regard to setting up the right Key Performance Indicators for your business.
