Every business should measure performances against goals, substantiate its existence, and justify paychecks on solid arguments and data that customers can understand. This presentation focuses on the value KPI may show of a business. Suggestions are given about developing KPIs that can be understood by customers.

1. Goals,
performances, and
outcomes
Measuring for success

2. Anything can
be measured
 No rocket science

3. The Fermi
problem
 How many piano tuners in Chicago?

4. Why measure?
 To know something unknown
 To learn what and how to measure
 To reduce uncertainty and the risk of wasting
money

5. Risk  In God we trust. All others must bring data.

6. Processes
 Performance
 The capacity to achieve goals expressed through
preset known standards (how the system works)
 Outcomes
 The end result of the tasks executed

7. Performances
vs. outcomes
 Businesses focus on performances
 Performances can be measured
 Customers are interested in outcomes
 Outcome goals cannot be controlled

8. Performances
vs. outcomes
Performance goal Outcome goal
Run the 100m race in 10” Win first place in the contest
Tackle your opponent out Win the rebound
Sprint after ball comes into play Get to the ball first and control it

9. Continual
improvement
 Measuring process performances against
organizational goals help identify
opportunities for streamlining work, improving
efficiency and reducing waste

10. Information
asymmetry
 Imbalance of power in transactions
 Buyers and sellers have different information
 Buyers cannot assess the value of the product/service
through examination before sale is made

11. Signaling
 Vendor conveys some information about itself
to buyer
 Positively correlated with capabilities
 Measures are signals

12. First steps
 Set the decision(s) to support
 Detail the thing to measure
 Assess impact of measures on decision(s)
 Define the reasons for uncertainty
 Determine the value added by measurement

13. Measurements  Not necessarily exact quantities

14. Scales
Nominal Ordinal Interval Ratio
Membership   
Frequency    
Mode    
Median   
Mean  
Deviation  
 
Operator =,  >, < +, - x, 

15. What to
measure
Area Primary measure Related measure
Sales Price Cost of service
Operations Cost of service Customer satisfaction
Procurement Vendor rating Quality
Human resources Resource development Vendor rating
Quality Quality index Vendor rating
Production Productivity Vendor capacity

16. Expected
measurements
Feature Area Variable
Price Production Cost of service
Timing Production
Shipping capacity
Project management
Quality of service Production
Investments
Analytics
Customer service
Production
Customer service
Quality of service
Maintenance costs
Flexibility
Vendors
Production
Peaks of demand
Planning ability
Creditworthiness
Finance
Production
Sales
Cash flow
Reputation Staff
Resource development
Human capital

17. Baselines,
thresholds and
benchmarks
 Baseline
 The starting point for comparison
 Threshold
 The value for something to come into effect
 Acceptance Quality Levels
 Maximal percentage of non-conforming items to be considered
as a satisfying process mean
 Benchmark
 A performance standard
 Industry average

18. Performance
measurement
 Comparison of results against goals
 According to pre-specified benchmarks
 Compliance of standardized samples

19. A statistical
process control
(SPC) chart
 Nonconformance
 Minimum and maximum limits
 Threshold

20. Indicators
 Result indicator
 The speed a car is traveling
 Performance indicator
 Speed/consumption ratio
 Efficient/economic driving

21. Performance
measures
 Some measures may also seem useless per se

22. Basic measures
Processes Finance Personnel
• Efficiency
• Overhead
• Projects closures
• Complaints
• Unresolved
complaints
• Administration
• Quality
• Automation
• Sales
• Successful
proposals
• New customers
• Customer
profitability
• Customer loyalty
• Revenues
• Cash flow
• Profits
• ROI
• Staff
• Number
• Turnover
• Development
• Empowerment

23. Key
Performance
Indicators
 Relating to strategic goals
 Expressing how well the organization is performing
 Helping make decisions accordingly

24. Process-related
KPIs
 Capacity Utilization Ratio (CUR)
 DIFOT (Delivery In-Full, On-Time) rate
 FPY (First PassYield)
 Order Fulfillment CycleTime (OFCT)
 Rework level
 Complaints
 Complaints rate
 Complaints resolution rate
 Complaints resolution cycle time

25. Capacity
Utilization
Ratio (CUR)
 The output produced in a given time-frame
Actual output
Productive capacity
x 100
 The extent to which an organization uses its installed
productive capacity
 The difference to 100% indicates room to improvement
without incurring costs of increasing capacity
 A low value highlights serious process inefficiencies
 E.g.The number of hours of work assigned to a
resource or group of resources as a percentage of their
availability for a given period.

26. Delivery In-Full,
On-Time
(DIFOT) rate
 Ability of a business to fulfil orders and meet
customer expectations
 A measure of the effectiveness and efficiency of
processes and supply chain
Number of deliveries IFOT
Total number of deliveries
x 100

27. First PassYield
(FPY)
 The percentage of items that are moving
through a process without any problems over a
specified period of time
Number of units coming out
Number of units going in
x 100
 A measure of process efficiency

28. Order
Fulfillment
CycleTime
(OFCT)
 The average time taken to source, make and
deliver a product or service from order to
customer receipt
 The total “time waiting” experienced
 A measure of an organization’s delivery capacity in an
end to end process

29. Rework level
 A percentage of items inspected requiring
rework
 A measure of an organization’s operational efficiency
at delivering the specification that the customer wants
without further correction, alteration or revision
Number of items from a production run
Service period requiring rework
x 100

30. Complaints
 Complaints rate
 The number of complaints received from customers
divided by the total number of items delivered over
the same period of time
 Complaints resolution rate
 The number of complaints solved divided by the total
number of complaints received from customers
 Complaints resolution cycle time
 The total number of hours required to successfully
resolve a customer complaint, from the time the
complaint is submitted until when the complaint is
resolved and closed divided by the total number of
hours worked

31. Quantitative
v. qualitative
indicators
 Quantitative indicators used for outcomes
 Computed with mechanical methods
 Expected to give the same results
 Seen as objective
 Easier to understand and manipulate
 Approximations are always inevitable
 Qualitative indicators are used for judgements
 Depicting experience-based perceptions
 Seen as subjective and unreliable
 Identify constraints

32. Error-based
metrics
 Application of Six Sigma to soccer
 A goalkeeper in a level-6 team playing 50 games in a
season and facing 50 shots per game would concede
one goal every 147 years

33. Create your
own KPIs
1. Identify the strategic goal(s) for each
indicator
2. State the question(s) that the indicator is
meant to answer
3. Specify how each indicator will be used and
shall not be used
4. Identify and describe which data should be
collected and used, and how
5. Specify the assessment criteria (qualitative or
quantitative) and the associated scale
6. Identify baseline, benchmark, and thresholds
for each indicator

34. KPI attributes
Current
value
Plan
value
Trend
value
Deviation
value

35. KPI dashboards
 Track only 5-10 KPIs for gauge charts
 Where is the dashboard “feed” from?
 Use clean raw data
 Many free Excel templates

36. Common sense
goes a long
way

37. Thank you
s-quid.it/en/30min
slideshare.net/muzii/tcworld
s-quid.it/en/kpi/