KPI's & Metrics
The discussions around metrics and key performance indicators (kpi's) are often lively and everyone has an opinion regarding what a metric is and what a kpi is. In the age of big data, we are finding more and more that having a multitude of metrics actually starts to provide a context around performance even if they are not kpi's in and of themselves. More important in my estimation is the relationship of the kpi developed at the upper levels of company leadership and how that informs what kind of metric that a front line worker will have.
Key performance indicators are those things that a company use to assess their performance. They are typically found at three distinct levels; strategic or overarching, operational leadership which feed up into the strategic kpi's and daily operations which are owned by the front line operations crews on an individual basis. At the front line operations level you can expect to see many kpi's because they will be specific to the unique role that each staff member has.
It's How You Make The Connection
Strategic kpi's must be set at the corporate level and implemented at the operational leadership level but I am going to submit that in order for these to be the most effective front line operations kpi's must be set by the individual operators. The result is an interesting "top down/bottom up" dynamic that can really transform continuous improvement and here is where the role of metrics can be crucial.
A metric is simply something that is counted and tracked. Depending on the industry and product, metrics can be any infinite number of things from counting minutes per call in a call center to how many orders get returned in a restaurant to measuring shots on goal in a hockey game. A metric by itself does not necessarily measure performance but in combination with other metrics can certainly suggest a strong causality. For example a metric may be tracking the minutes per call in a call centre but it may feed into a kpi around total number of clients served on any given day. Once that causality is explored with front line crews then true kpi's can be established and tracked.
Guiding Your Team Around Metrics
Key to this is operations leadership's discreet guidance of crews in first looking for what metrics to count and allowing those to evolve into meaningful kpi's for that staff member. The likelihood of personnel adopting a set of kpi's is directly related to whether they perceive "they" have developed them. To put it another way, a staff member is far more likely to drive performance toward a kpi that they have developed because they will "own" it. There is an added benefit as well in that as leadership walk staff through this process, staff will see much more clearly how what they do contributes to overall company performance. Powerful is a company in which everyone from the operations crews up to the president all own the companies performance!
The Alcoa Example
Getting crews to start looking for and collecting metrics are a key first step in the evolution to creating powerful kpi's. In October, 1987 Paul O'Neill the CEO of Alcoa Aluminum announced a new metric that he wanted his company to focus on, safety. In his words "safety trumps profits" and he set about to change the safety culture of the company. You may ask "What does this metric have to do with continuous improvement and performance?" My response is nothing and yet everything. As the company focused on this safety metric an interesting thing began to happen. When they explored all the metrics around safety they began to uncover other metrics around production methods that produced lower grade aluminum and a host of other activities that they realized were counter productive. As operations explored these various metrics and began to see causality new key performance indicators evolved. Within the first year of implementing this program around safety company profits reached record levels!
Key too in this process is that these kpi's were developed by the staff and they owned them. Metrics are different from key performance indicators to be sure but never forget the role that looking for and tracking metrics can have in creating genuinely relevant and powerful kpi's. Performance Leadership - Think About It!