KPI Management in Theory and Practice
Key Performance Indicators, KPI’s, are commonly used to measure the health of a business, or the performance of departments and individuals. In fact we are surrounded by KPI’s for almost everything including:-
- School league tables,
- Your own monthly sales figures,
- Staff absenteeism
- Overall Equipment Efficiency
- Customer complaints
- Internal audit non-compliances
- FT 100 Share Index
To name just a few, from the hundreds that are used in daily life.
While IT Systems have developed the ability to regurgitate data on demand and re-plot historical data, management has become more ‘data-intensive’. But, many employees now spend too much time entering and processing data that is not used to improve decision making. This lack of correlation between our knowledge of past performance and the behavioural changes required to drive continuous improvement, fuels the growing hostility to a ‘target driven culture’ and demonstrates the urgent need for new approach to KPI management.
The Qualitin Alternative
Working with the Gerdau, the leading Brazilian steel producer, Qualitin have developed and implemented a new approach to KPI management, that is now being used by a growing number of successful Brazilian and international companies to deliver sustainable business improvements, makeing continuous improvement a daily reality. Like other radical innovations, ICG, Qualitin’s KPI management system, succeeds where other have failed by providing a simple cost effective solution to an apparently complex problem. In fact, Francisco Valim, former CEO of Oi Telecom and an early adopter of the Qualitin ICG system has said “ICG is a unique business tool. I have still to see anything else that integrates identifying of objectives and their subsequent management so well”
Developed to meet the needs of medium to large organisations, and supported by a cloud based software solution ICG transforms the way that KPI’s are used.
Applying the principles of good management the ICG System ensures that:-
- Managers and senior executives are accountable for a limited number, usually 5-8, KPI’s that they are expected ‘own’ and actively manage,
- At all levels of the organisation, the KPI’s used are aligned with the business strategy and value streams
- All KPI’s have credible targets that support the business plan and customer expectations – that are agreed and regularly reviewed
- The reporting process compares actual performance with ‘customer expectations’ as well as internal targetsfor each KPI
- Monthly management reviews focus on those KPI’s that have ‘gone off track’ and corrective actions are agreed .
The ICG system enables the managers to actively manage their own KPI’s and supports them through a monthly peer group review. However, this is not the usual blame game or ritual humiliation of those who have not met some arbitrary targets imposed upon then. Instead, the reporting system uses the principles of statistical process control to identify when management intervention is required and separates ‘long term trends’ from ‘normal variation. Focusing attention on specific KPI’s that need improvement now, managers are challenged to:-
- Reduce process variation and improve process capability
- Achieve a sustainable changes in ‘average performance’ to meet customer requirements or business goals
The Qualitin ICG Experience
Managers using the ICG system use continuous improvement techniques to deliver improvements in performance when their specific KPI’s are out of tolerance, knowing that the their own performance will also be reviewed at the the next monthly meeting. Monthly review meetings focus on proposed solutions, not excuses for failure, so managers are expected to:
- Present accurate, unvarnished KPI’s that show their true performance
- Identify their KPI’s that are outside the planned range, showing customer expectations or business needs are not being met
- Present a factual description of any unexpected variation in their KPI values
- Use 8D Problem Solving or other appropriate methods to identify the cause of variation
- Present a ‘corrective action plan’ to achieve a sustainable improvement in performance and prevent recurring problems by removing the causes of failure.
- Review and update their forecast for future performance and revise their targets
- The agenda for each monthly review includes:-
- The effectiveness of corrective actions plans previously agreed and the relevant KPI’s that should demonstrate improvement
- KPI’s that are ‘out of tolerance’ or exhibit undesirable trends
Adapting Deming’s cycle of “Plan-Do-Check-Act”, the monthly review meeting checks that corrective actions have been implemented and monitors the expected improvements. However, the regular monthly review also:-
- Creates the clear expectation that action will be taken and results produced before the next meeting
- Encourages managers to propose practical solution that can be implemented using the available resources
- Requires managers to forecast quantifiable improvements in performance against which they will be judged
The monthly management review allows the management team to develop and mature as they gain new insights into the real reasons for poor performance. As managers are rewarded for their results – not their excuses, they also have the opportunity to learn from practical examples of what works as they share best practice.
Qualitin’s ICG process transforms KPI management , so you can stop justifying the past and start planning the future.
Stunell Technology - Your Qualitin Business Partner
Working with carefully selected Business Partners with experience in different market sectors Qualitin is expandingfrom it’s Brazilian roots to become a global player.
Qualitin Business partners are not only trained mentors who can support the initial implementation, but chosen as seasoned professionals with practical experience of continuous improvement and change management.
Phil Stunell, founder of Stunell Technology said:-
“Working with Qualitin means that we can help our clients introduce an effective KPI Management System, that delivers real and sustainable improvements in business performance ”