Many organisations we work with use performance measures, operational KPIs and a range of other indicators to understand their operational business. We have worked with a number of organisations to review, revise and refine their operational balanced scorecards and KPIs.
What many organisations find difficult, however, is taking improvement action as a result of their balanced scorecard and performance against indicators and trends. In this blog we'll consider what you can do differently to start to take action on your KPIs.
Taking action on KPIs
The value of balanced scorecard-based approaches relies on the idea that once performance problems are identified, there is an efficient and effective resulting method for addressing underlying root cause issues.
From these gaps, solutions should be developed and the performance gaps (or deviation against target) closed. A standard methodology and toolkit for addressing process or operational challenges (and the resulting effort required) is required to close each new performance gap that otherwise could eventually damage the performance improvement.
Process improvement methodologies in combination with focused problem solving methodologies would be of benefit, alongside clear management of the resulting performance improvement initiatives; ideally as sub-projects in their own right.
The benefit of KPIs is not just for the sake of measuring; KPIs are data points that are essential to any business. They help to determine whether or not a company (and its strategy) is headed in the right direction, acting as a compass for the business in order to know whether current operational delivery is working or not.
KPIs are actionable and need to be set in a way that is attainable and realistic based on data that is itself accurate. KPIs also need to drive improvement and learning to help an organisation make better business decisions and direct operational work delivery in the right direction.
KPIs themselves also need to drive continuous improvement and action that closes any anticipated gap in performance; where the KPI isn’t driving the right behaviour or is too easily attained, it should be reviewed and changed.
It is important to remember that a balanced scorecard is a feedback tool and should be implemented alongside other quality improvement initiatives that may be enacted as a result of targeting identified performance gaps. There are many different ways to close performance gaps but as a minimum an organisation should focus on:
- Activity-based costing and unit cost benchmarking to address financial performance
- Six Sigma and lean-based continuous improvement to address process improvement opportunities
- Process re-engineering to reduce waste in operational delivery
- ISO-related or external accreditation activities to focus on a recognised quality standard
- Role-based coaching and empowerment to help individuals and teams deliver targeted interventions
- Training individuals to re-enforce standards and compliance
- Change Management where aspects of the operational strategy or equivalent need to be re-enforced
Points to remember
KPIs cannot be selected in isolation. Inappropriate KPIs drive dysfunctional behaviour. For example a KPI for telephony answering time can cause agents to answer the phone and tell customers “all agents are currently busy, please call back later”. Get your KPIs working together to drive action.
KPIs need to be linked to desired behaviours. Setting KPIs for staff, particularly when incentives are involved, will drive their behaviour to achieve the KPIs. This is often at the expense of other desired outcomes (e.g. balancing efficiency and quality). Review them in the round.
KPIs need to be balanced. All desired behaviours must be considered and a balanced set of KPIs designed to give equal weight to all factors. KPIs will need to be balanced by setting qualifying levels on the other KPIs. The adage ‘you get what you measure’ demonstrates the link between KPIs and behaviour across delivery processes.
How we can help
Working with many field service organisation at Leadent, we have seen at first-hand the ways organisations can improve their performance management approach and ensure their performance measures and KPIs focus on the right things.