The theory and context behind KPIs is well established, a quick internet search leads to pages of results. Debates ensue over what is a KPI, what is a Metric, who should set KPIs and based on what, when and how they should be reviewed, the balance between leading and lagging indicators, the list goes on. But in general a KPI is defined as:
“Indicators are quantifiable measurements with specific targets or goals that make the difference between success and failure of a company.”
So the aim of a KPI, and its publication, is to illustrate how a team/organisation is tracking in any number of areas in achieving business success and to highlight any areas where improvement is needed.
The KPI culture
Achieving the coveted ‘Green’ or ‘Good’ KPI on your scorecard or dashboard is at the very essence of KPIs. Being “in the green” should indicate that a business is on the right path to realise business value. KPIs have infiltrated every level of the workforce and measure performance across every aspect of business, from finance to safety, production to maintenance, HR to supply and so on. They are used as a way to measure performance, and to determine failure or success. A green KPI reflects favourably on an individual, a team and a business unit. It is a measure to strive for and provides recognition of the good job that is being done. KPIs are often linked to personal performance. They are a measure of personal success and a key driver for incentives.
But is a ‘Green’ KPI always something to hang your hat on?
Smoke and mirrors
So there are the obvious tricks, ambiguous metrics, graph scales, clutter, easy targets, but what about the deeper rooted issues. What happens when a given KPI is often obtained and never questioned? It is easy to hide behind a KPI that is reaching targets.
Take, for example, measuring Maintenance Schedule compliance. All maintenance departments have a limited number of resources. If work is scheduled accordingly and the KPIs look good, the conclusion is that the maintenance team is working well and doing what they need to do.
What if the KPI was changed to measure compliance with the Maintenance plan? The plan being a set of predictive, preventive and detective maintenance strategies and tactics put in place to ensure the equipment was maintained to the optimal level. Is everything that is in the plan actually scheduled? If there is a discrepancy, does it mean the right maintenance isn’t being done, or the plan isn’t right? And at what level within the organisation do you want this decision to be made?
Take another example of tracking the effectiveness of work being scheduled for a plant shutdown. At a given time before the shutdown, the work list is finalised and no work is to be added apart from critical exceptions. The effectiveness of shutdown scoping and planning is then measured by the number of jobs completed compared to the number of jobs planned. Pretty simple, right? What happens when a loophole is discovered, that if, during the shutdown, the job is rescheduled to a time after the shutdown, it will not impact on the KPI. Is the KPI now meaningful? And is this one measure really an accurate reflection of planning effectiveness? It doesn’t count the number of work orders planned, so we may find that our KPI is improving, but only because the number of work orders being planned is being reduced.
Tick and flick
What happens when a KPI indicates that all the planned preventive maintenance is being completed on time every week? Typically, given everyone is busy, reaching the KPI target consistently becomes accepted as normal and is not paid any attention. It is assumed that preventive maintenance is under control. But in isolation, this KPI cannot tell us the quality of the maintenance being done or if it is actually adding value.
Hiding behind a ‘good’ KPI
There are many reasons for publishing and celebrating a good KPI result. The power of a good KPI result is that if it looks good it doesn’t attract a lot of questions. Conversely, nothing shines a spotlight brighter than a bad KPI result.
A KPI that looks good on the surface could in fact mean different things, including:
The Good. The obvious, that it is a true reflection of how the team/organisation is performing.
The Bad. Not understanding that the metric result could be misleading and believing that it is giving a true reflection of performance. This can often be the consequence of having well-meaning employees who are following the rules and are merely entering data into a system.
The Ugly. Understanding that the metric result is misleading but wanting to show/prove a high level of performance. This obviously only works when either the audience doesn’t understand the metric or is happy to play along.
Why not embrace the ‘red’ KPI?
Until a problem is understood how do you rectify it? The old adage of taking on criticism as an opportunity to improve as opposed to getting offended rings true. More value could be derived from improving a ‘red’ KPI than accepting the ‘green’. This in turn would reflect a level of maturity in an organisation, understanding that a ‘green’ KPI is not the end goal, delivering business value is.
As the saying goes – the devil is in the detail.
KPI’s are an invaluable tool in any organisation, but what it is measuring, how it is used and what information it is really delivering, are all important factors in understanding a KPI. Garbage in, Garbage Out, as they say. The value that you derive from a KPI will always be a reflection of the quality of the data that goes in. Without a nuts and bolts understanding of how each KPI is generated and what it is measuring, interpreting a ‘green’ KPI as meaning success is fraught with danger.
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