Key Performance Indicators: You Can’t Manage What You Don’t Measure

Key Performance Indicators: By F. John Reh, About.com Guide

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Key Performance Indicators: You can’t manage what you don’t measure. It is an old management adage that is accurate today. Unless you measure something you don’t know if it is getting better or worse. You can’t manage for improvement if you don’t measure to see what is getting better and what isn’t. This article will help you know what to measure and how.

Definitions

Key Performance Indicators: To begin, we’ll define a few of the terms. We are using “measure” as a verb, not a noun and “benchmark” as a noun, not averb.

Measure: The verb means “to ascertain the measurements of”
Measurement: The figure, extent, or amount obtained by measuring”
Metric: “A standard of measurement”
Benchmark: “A standard by which others may be measured”

So we collect data (measurements), determine how those will be expressed as a standard (metric), and compare the measurement to the benchmark to evaluate progress. For example, we measure number of lines of code written by each programmer during a week. We measure (count) the number of bugs in that code. We establish “bugs per thousand lines of code” as the metric. We compare each programmer’s metric against the benchmark of “fewer than 1 defect (bug) per thousand lines of code”.

What To Measure

Measure those activities or results that are important to successfully achieving your organization’s goals. Key Performance Indicators, also known as KPI or Key Success Indicators (KSI), help an organization define and measure progress toward its goals.

They differ depending on the organization. A business may have as one of its Key Performance Indicators the percentage of its income that comes from return customers. A Customer Service department may have as one of its KPIs the percentage of customer calls answered in the first minute. A Key Performance Indicator for a development organization might be the number of defects in their code.

You may need to measure several things to be able to calculate the metrics in your KPIs. To measure progress toward its customer calls KPI, the Customer Service (CS) department will need to measure (count) how many calls it receives. It must also measure how long it takes to answer each call. Then the CS Manager can calculate the percentage of customer calls answered in the first minute and manage toward improving that KPI.

How To Measure

How you measure is as important as what you measure. In the previous example, we can measure the number of calls by having each CS representative (CSR) count their own calls and tell their supervisor at the end of the day. We could have an operator counting the number of calls transferred to the CS department. The best option, although the most expensive, would be to purchase a software program that counts the number of incoming calls, measures how long it takes to answer each, records who answered the call, and measures how long the call took to complete. These measurements are current, accurate, complete, and unbiased.

Collecting the measurements in this way enables the manager to calculate the percentage of customer calls answered in the first minute. In addition, it provides additional measurements that help him or her manage toward improving the percentage of calls answered quickly. Knowing the call durations lets the manager calculate if there is enough staff to reach the goal. Knowing which CSRs answer the most calls identifies for the manager expertise that can be shared with other CSRs.

How To Use Measurements

Most often, these measurements are used as part of a Continuous Improvement Plan like the Shewhart cycle.

Building Operating Management Magazine: Measure, Improve, Repeat
RAND Arroyo Center: Define-Measure-Improve

It is important that you communicate your metrics both up and down the organization. Your boss wants to know what’s going on, but your employees need to know also. They are not motivated to improve unless they know how they are doing. In addition, most of the suggestions on how to improve will come from them.

Post team and individual results, either on line or just by hanging charts on the wall. Use pie charts, line charts, key driver charts, and other graphs to quickly, easily, and visually communicate the metrics.

Review your metrics and use them to guide your decisions. With your metrics in place, you can tell which strategies are working and which aren’t. If you make a change, you use the metrics to tell you whether the change improved things or not.

When the metrics show improvement, share that success with everyone. Tell your staff. Tell your boss. Tell the guy you meet in the hall. And don’t forget to reward the people who were responsible for the success, even if it’s just a verbal pat on the back.

Measure To Manage

Measure what’s important.
Publish your metrics and benchmarks.
Reward people for exceeding their goals.
And then start over.

You’ll be a better manager if you do.