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KPIs: Do You Like The Numbers?

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Key Performance Indicators (KPIs) are an essential tool for business management. They can help us to determine appropriate courses of action for our businesses and can help to keep our businesses on track. I meet many people, however, that don't like to look at their numbers...


The problem for some people lies with what the number actually says. If you are trying to achieve 100% on time delivery and your delivery performance KPI is in the low 20s it will look ugly. That's OK though. The KPI will not judge you, it is just a number that you can use.

What you do with the KPI is therefore entirely up to you. It is pretty pointless to capture the data, process it into information and then not use it. It would make more sense, in this case, to save the time and effort and just not bother with KPIs. But, for the rest of us, having meaningful KPIs can really help us with our day to day operations. They confirm the gap between where we are, performance wise, and where we want to be. You may need to use a few different KPIs to tell you the story as to what you need to do, but a well thought out KPI can help you to map out your next set of improvement activities.

A related issue that crops up is when the numbers stop moving in the right direction. I have had a few clients that were getting fed up with KPIs that were stagnant. A simple approach to get them moving again is to use root cause analysis tools such as a fishbone diagram or '5 Why' to get under the skin of the cause and effect relationship. Again, this is to define a set of improvement actions to get performance moving again. It should be the process owner's responsibility to manage this activity and ensure that KPIs aren't stagnating.

One of the drawbacks to many businesses KPIs is that they often focus solely on the outcomes, or outputs, of a business process. They tell you what happened. If this is something that you can relate to then it is worth considering the inclusion of process metrics. These are KPIs that tell you what is happening right now. If you can get these metrics to hit their targets then the outcome is not a surprise, you have a greater degree of control. This also means that looking at the output KPIs is less worrisome, you have a better degree of control and better prediction of the outcomes in advance.

Unfortunately, all of these points lead me to one conclusion. If you don't like looking at your KPIs that's tough luck. KPIs can really make a difference in terms of how you run your business operations. Their usefulness means that you probably do need to start looking at them and to start using them, the way that they were intended to be used. KPIs can be our friends if we realise that they don't carry judgement, just directions. If you follow the directions you will get to your destination.


Giles Johnston
...optimising MRP systems and re-engineering business processes

P.S. If you are looking for a practical guide to help you with your KPI design, check out my book on Amazon.


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