Here are some pointers for the not so obvious when determining which KPI (Key Performance Indicator) to measure and report for your key processes:

1. Measure things that matter – to our customer (Critical to Satisfaction)
2. Measure consistency reduce and understand variation (Critical to Quality)
3. Monitor and evaluate performance (Critical to Delivery)
4. Measure conformance to the process
5. Identify improvement opportunities
6. Make your metrics practical and graphical

The $ KPI

Metrics reporting provides information for a specific audience. Sometimes reports are prepared for customers, managers, executives, or other departments. Many of these metrics reports represent different performance indicators such as:

• The number of credit memos posted for a given time
• Sales revenue for a given time
• Number of customer calls to technical support at rush hour
• Number of returned products (RMA)
• Number of days late for a customer’s account
• Number of bugs in a software version release

These examples are great but wouldn’t it be better if they all made sense to everyone? Operational Excellence and BPM is about attaching a dollar amount to a given problem. Instead of saying you discovered a show-stopper and you cannot ship, try to express that in dollar amounts. For instance, sales revenue reports are usually expressed in terms of dollars but when projects run weeks late, what is the dollar amount impact? Not everybody agrees to why delays are caused or why “show-stopping” bugs present themselves the day before a product release so what is a week delay worth? If the release was to introduce a new feature meant to drive revenue up, this could be estimated quite accurately.

Always try to express things in terms of dollars. After all, everyone agrees what a dollar is and until we all agree to what a show-stopping bug is worth, or a week delay in a project, or paying invoices ahead of time we will continue to miss easy opportunities for improvement. Also, you can read an introduction to Lean and identifying waste here.

6 Points to Consider When Suggesting a KPI