Key Performance Indicators KPIs. Purposes of (KPIs) Performance Measurement Systems Providing...
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Key Performance Key Performance Indicators KPI’sIndicators KPI’s
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Purposes of (KPI’s) Performance Purposes of (KPI’s) Performance Measurement SystemsMeasurement Systems
• Providing direction and support for continuous improvement
• Identifying trends and progress• Facilitating understanding of cause-and-effect
relationships• Allowing performance comparison to
benchmarks• Providing a perspective of the past, present,
and future
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Key TaskKey TaskIn designing a performance measurement
system, organizations must consider how the measures will support:
• Senior executive performance review
• Organizational planning
• Address the overall health of the organization, and
• How the measures will support daily operations and decision making.
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Key IssuesKey Issues
• Organizations need comparative data, such as:
• Industry averages
• Best competitor performance
• As well as world-class benchmarks to gain an accurate assessment of performance and know where they stand relative to competitors and best practices.
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KPI’s & Shareholder ValueKPI’s & Shareholder Value
• Shareholders invest to make money.
• Management invest that money to achieve the objectives of the shareholders.
• KPI’s should focus on achieving the objectives of the shareholders but not ignore the other stakeholders.
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KPI’s Practical GuidelinesKPI’s Practical Guidelines• Fewer is better. • Link to the key business drivers.• Include a mix of past, present, and future • Address the needs of all stakeholders.• Start at the top and flow down to all levels of
employees• Combine multiple indexes into a single index • Change as the environment and strategy
changes• Have research-based targets or goals
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Linkages to StrategyLinkages to Strategy
Key business drivers (key success factors)
Strategies and action plans
KPI’s Measures and indicators
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KPI’s - MeasurementsKPI’s - Measurements
• Does the measurement support our mission?
• Will the measurement be used to manage change?
• Is it important to our customers?
• Is it effective in measuring performance?
• Is it effective in forecasting results?
• Is it easy to understand and simple?
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Key objectiveKey objectiveThe things an organization needs to do
well to accomplish its vision are often called:
• key business drivers or
• key success factors.
• They represent things that separate an organization from its competition and define strengths to exploit or weaknesses to correct.
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Key CriteriaKey Criteria
• Good measures and indicators are actionable
• They provide the basis for decisions at the level at which they are applied.
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Customer MeasuresCustomer Measures
• Customer satisfaction and dissatisfaction
• Customer retention
• Gains and losses of customers and customer accounts
• Customer complaints and warranty claims.
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Product and Service MeasuresProduct and Service Measures
• Internal quality measurements
• Field performance of products
• Defect levels
• Response times
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Human Resource MeasuresHuman Resource Measures
• Employee satisfaction• Training and development• Work system performance and
effectiveness• Safety• Absenteeism• Turnover of Staff (longevity of
employees)
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Organizational Effectiveness Organizational Effectiveness MeasuresMeasures
• Cycle times• Production flexibility• Lead times and setup times• Time to market• Product/process yields• Delivery performance• Cost efficiency• Productivity
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Governance and Social Governance and Social Responsibility MeasuresResponsibility Measures
• Organizational accountability• Ethical behavior• Regulatory/legal compliance (ISO
9000)• Community service
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Common ProductionCommon Production Quality Measures Quality Measures
• Defects per unit of Production
• Errors per opportunity
• Customer returns
• Patient or Customer Waiting Times
• Production per employee
• Sales per square metre
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Creating Effective Performance Creating Effective Performance MeasuresMeasures
• Identify customers requirements and expectations
• Define work processes• Define value-adding activities and process
outputs• Develop measures for each key process• Evaluate measures for their usefulness
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Analyzing and Using DataAnalyzing and Using Data• Analysis – an examination of facts and data to
provide a basis for effective decisions.• Examples
– Examining trends and changes in key performance indicators
– Making comparisons relative to other business units– Calculating means, standard deviations, and other
statistical measures– Seeking to understand relationships among different
performance indicators
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The Cost of Quality (COQ)The Cost of Quality (COQ)
• COQ – the cost of avoiding poor quality, or incurred as a result of poor quality
• Translates defects, errors, etc. into the “language of management” – $$$
• Provides a basis for identifying improvement opportunities and success of improvement programs
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Managing KPI’s and InformationManaging KPI’s and Information
• Validity – Does the indicator measure what it says it does?
• Reliability – How well does an indicator consistently measure the “true value” of the characteristic?
• Accessibility – Do the right people have access to the data?
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Common Operating Ratios Common Operating Ratios for the Hotel Industryfor the Hotel Industry
• Average room rate (ADR)
• Revenue per available room (RevPAR)
• Revenue per available customer (RevPAC)
• % room occupancy
• Average Food Service Check
• Seat Turnover (Covers)
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Call Centre KPI’s
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QuestionsQuestions
• Suggest suitable KPI’s for an airline.
• Suggest suitable KPI’s for the retail sector.
• Suggest suitable KPI’s for the legal profession.
• Suggest suitable KPI’s for schools & colleges.
• Suggest suitable KPI’s for a manufacturer.
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Improving Operational Improving Operational PerformancePerformance
A Medical Practice – Worked Example
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Patient Care– Response Times– Clinical Performance– Customer Service
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Employee Wellbeing– Retention– Health / Safety / Welfare– Satisfaction– Compensation– Recruitment
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Bye for now!Bye for now! I’m ready forsome leisure time.
Please ensure you Prepare for next session