Key Performance Indicators (KPI)

Does your team know what the bigger picture is at your company?  Do your people come to work only to bury their heads in work and then lift their head at the end of the day not knowing what they're working towards?  Why do we perform the work we do each day?  Are all people/departments aligned and moving in the same direction?

These questions, and more like them, should always be on your mind, especially if you're in a leadership role.  I'll take this opportunity to remind you that anyone can be a leader, you don't need to have a title (read "The Leader Who Had No Title" by Robin Sharma if you don't believe me).  Key Performance Indicators, or KPIs as they're commonly referred to, can help any organization create some clarity and answer the questions I started this post with.

In the Lean environment where I work, that I help drive, KPIs are a growing way of life that tie each Team Member and their work to a higher target that we're all a part of.  Now, you don't need to be Lean or Lean trained to understand and apply KPIs, which is why I wanted to write this.  Hopefully I can share some knowledge that will help you create some unity and clarity with your own and your team's work.

In my opinion, there are three levels of KPIs that all companies should clarify.  At each level, you don't want to over-complicate the KPIs by having too many, especially at the high level.  As soon as KPIs become too hard to understand they will be ignored, and you want everyone in your organization to know, understand and feel apart the KPIs at all levels.  Ultimately, you should tie individual performance to the Front line KPIs and then teach people how what they do everyday drives the overall company performance.  Moreover, by improving the KPIs they affect they will be improving overall company performance.  use the KPIs to show how one person can impact the company.

Font Line KPI - Value added level, front line staff, creating a finished good or service, etc.  An example in a Production environment could be the time it takes for one person on a three-person crew to setup their section of a machine.  In an office setting this could be order processing time or paperwork accuracy.  These KPIs drive the mid-level KPIs.

Mid Level KPI - Departmental level, gives a picture of the department overall.  Another Production example could be average daily production setup times, fill rate or availability.  This level drives the high-level KPIs.

High Level KPI - Company level, select one-to-three KPIs in meaningful areas that reflect the "pulse" of the company.  An example could be OEE, on-time delivery or customer satisfaction rate.

I can read your mind...  "This is all great, but where do I begin?", "What should my KPIs be?"  Good questions!  The challenging in answering to those questions is that only you and your company can answer them.  What's important to your business and your customers?  Generally, in my experience, KPIs at the high level usually cover, but are not limited to safety, production, quality, on-time delivery, sales or customer care.  Sometimes this overall company snapshot is referred to as the balanced scorecard.

The last piece of advise I can offer is that your KPIs need to be transparent.  Don't hide them or hide behind them, post them up for everyone in your company to see.  Post them in the lunch room, production floor, office area or anywhere else you will have a large audience.  Talk about the KPIs, share them in company meetings, set goals around them, do kaizen to make them better, and don't forget to involve the team.