Understanding Effective Key Performance Indicators:

Key Words:  Target, Performance, Metric, System, Goal, strategy

   

 

 Definition:

In today’s economy ensuring you are getting the best out of any organisational function is vital.  Not just from a ROI perspective but to ensure that your people and process are optimal and supporting your organisational goals.  In order to identify whether or not this is happening for you it is necessary to measure in a meaningful way.  Key Performance Indicators, KPI’s are a fantastic way of accomplishing this and allowing you to visualise performance in a way that brings meaning to numbers.

Forward:

I was recently asked, “what is a KPI”, I had what I thought was a clear understanding and gave the following definition:

“A KPI is an indicator or measure of performance; that can be both quantitative and qualitative in nature.  It focuses on measuring the effectiveness and quality of a system and avoids being a pure measurement of output.  By focusing on effectiveness and quality a KPI becomes a standard by which progress towards a strategic goal is measured”

I was then asked, “what does that mean”, I didn’t have time to fully explain, however, I wrote the following as an explanation and hope it is of some use:

Why do we need KPI’s?

We need KPI’s because they are effective in the following areas:

Internal and External Verification:  A good KPI will indicate to both internal and external stakeholders that achievements are being met or on target.

Planning:  The understanding gained from KPI’s can assist in the planning function on many levels.  For instance if your strategy is to be the best in service they will indicate how well you are doing or what you need to plan for to improve or maintain levels in a proactive manner.

Analysis:  If an organisation has invested resources in a course of action or project KPI’s that are informative will make visible the success or failure of a course of action and in doing so justify whether the correct actions were taken.

Escalation/Change Management:  When KPI’s are used in a real-time scenario as opposed to a snapshot they can greatly assist in identifying a potential issue before it becomes a major incident.  As part of a change management programme they are effective in judging the outcomes and effects of the change.

The Helpdesk Scenario:

A traditional measurement used by helpdesks and call centres the world over is the number of calls answered.  It is used as a measurement of effectiveness to indicate if an operator is meeting targets, often failure to do so will result in various negative consequences for the operator.

 At first glance this would appear to be a good indicator of how well staff are performing, indeed management have the view that the greater the number of calls being answered the more effective staff are being. 

The Reality Check:

 What is being measured is call volume not operator effectiveness.  For instance current call targets state an operator should handle X calls a day, failure to do so means an operator loses out on a productivity bonus.  Amazingly most of the operators hit the target for their bonus, a situation that often leads to a vicious circle of management increasing call targets, which can have a host of negative consequences:

1. Stressed Staff
2. High Staff Turnover
3. Unrealistic Targets
4. Staff taking shortcuts and playing fast and loose with rules

Despite the apparent efficiency, customer surveys indicate dissatisfaction with the helpdesk, indicating:

1. Cases often require several calls to get resolution.
2. Customers are rarely called back when promised.
3. Customers are often referred to a different level of support only to be referred back to the original helpdesk. 

Management scratch their head as far as they are concerned their helpdesk is staffed by capable “efficient” workers.

In reality the system has dictated that dealing with a call efficiently so that it is resolved first time takes second place to staff achieving their bonus and avoiding disciplinary procedures.

Modifying the Scenario:

Examine the same scenario with a slight modification:

The staff are not given a number of calls to achieve, instead they are told that they are required only to record the following:

1.       The number of calls resolved

2.       The number of calls resolved on first contact.

3.       The number of calls appropriately referred to higher level support.

Additionally the productivity bonus is now based on the number of calls resolved on first contact as well as those calls appropriately referred to a higher level of support.

While the number of calls coming into the helpdesk remains high the number of calls being answered falls dramatically.  Management are a worried that calls are not being answered and the delay in answering those calls will lead to even worse customer satisfaction.

In the end they persevere until the next round of customer satisfaction surveys come in.  To their surprise the surveys show that customer satisfaction with the helpdesk is has improved.   Management also note that after a while the number of calls coming into the department is also falling dramatically easing the pressure on resources and operator time.

The New Reality:

As already noted the system and measurements used focused on pure output and were not concerned with quality.  The result of this was:

1.       Staff were focused on achieving their bonus and avoiding the negatives involved in not achieving the target.

2.       Cases were not being resolved on the first call and the majority required 2 or 3 calls to reach resolution.

3.       In an effort to get rid of calls quickly to keep the call rate high, calls were being passed onto upper level staff at the slightest excuse so another call could be answered.

Instead of measuring output the new system used a KPI approach of measuring the quality of the work being done through how many calls were actually resolved and how many were appropriately passed on.

The benefits of this are:

1.       Increased customer satisfactions because calls were often resolved first time and if not the calls were elevated to the appropriate senior technical representative.

2.       The volume of calls coming into the department dramatically decreased because they were being resolved first time.  A simple maths equation shows  that if you have 100 problems and they need 3 calls to be dealt with you have 300 calls coming in.  If you change the system so they only need 1 call to resolution you find yourself with only 100 calls coming in.

3.       The capability of your system to handle calls also increases as the amount of “double” time spent by staff going over the same problem and wasted time passing problems back and forth is now fed back into the system as extra capability.

What we have above is an example of a measurement of volume not quality or how well someone is doing the job. 

So what then in the terms of this scenario are the KPI’s?  the following would be the KPI:

1.       How many calls go to resolution 1^st time

2.       How many calls are elevated appropriately?

3.       The level of customer satisfaction.

It is quite easy to see how the first two measure quality over quantity however the third one as a KPI would be the most important and hardest to measure.

A Reality Check the other side:

This is a REAL life example:

The printing solution at a company I work for (provider name withheld) was supplied by a household name.  My technicians were coming to me complaining that when trying to get support the suppliers helpdesk would keep them on for ages to a frustrating level and made it very difficult to get an engineer to call out for a repair.

I decided to investigate and asked the team to let me make the calls when a printer required an engineer.  Sure enough the suppliers helpdesk on every call attempted to get me to do their job for them:  They would not take my word that I had carried out basic checks, when basic checks failed they wanted me to in some cases carry out what I would describe as invasive maintenance on the printer, in my book that means getting a screwdriver out.

I asked the staff to let me know when one of their engineers came on site, I went with him to the job and when he had finished I gently insisted that he come to my office for a coffee.  I discussed with him the issues my team were experiencing with the companies helpdesk.  His response was not a surprise, “the helpdesk get a bonus for every call they don’t send an engineer out to!!”  This companies meaningful KPI was passing the workload onto my engineers for a service we were paying for.

I quickly contacted our account manager and asked him to come in, when he visited and I explained the situation his first reaction was to tell me that it only made common sense for the customer to take them through basic troubleshooting as it means a speedier resolution less downtime (he had those practiced readymade company lines all waiting for me).  

Well I had done some preparation myself; I invented a fake problem with a printer and called his helpdesk on a speakerphone so he could listen.  45 minutes later I was still on the phone...  during the conversation I was repeatedly asked to carry out tasks far beyond basic checks with assurances of “i will guide you through it”, to the point when I insisted an engineer visit and was told that they couldn’t send an engineer out until all “BASIC” checks had been carried out.

I ended the call and asked the account managers opinion and he didn’t really have anywhere to go, he attempted the, our engineer was just trying to be helpful, and this obviously wouldn’t be a typical call etc.. I asked him if he would like to see me make any more calls to test that out.  We ended the conversation with him promising he would feed my input back to the team.

I then gave my engineers a quick lesson in what I call the ability to say “no” I called up their helpdesk on the next real job, stated I had carried out basic checks and then asked for an engineer, when the conversation began I simply stated that “I would like your name because you are actively refusing to send an engineer out and that it is not my job to spend X time fixing their problem”.  The engineer was very quickly booked and my engineers became much happier with saying “no”.   I trust my engineers to do all they can within their scope and often beyond, I don’t know if the company ever changed their policy, but their helpdesk got pretty use to my team refusing to do their job for them.

I wonder if the supplier realised the negative impact this was having on their reputation, I could imagine a similar experience across their client base. 

 

Quantative or Qualitative:

The above scenario should have explained the key difference between a traditional measurement and a KPI.  To clarify consider the following:

A measurement usually deals with a quantifiable value such as the number of calls answered in an hour. 

A KPI can also be an easily quantifiable value such as how many calls are resolved first time.  The difference between the two is that the KPI is inherently designed to measure the effectiveness and quality of the system.  This however is not the full story; a KPI can go beyond a pure quantative measurement and into the realm of qualitative analysis.

For instance in the preceding scenario it was mentioned that customer satisfaction surveys had indicated poor satisfaction initially but under the new system the customer satisfaction had improved.

Because customer satisfaction is attitude based it is more of a qualitative measurement and therefore harder to quantify.  However by requesting this information using questionnaires and attitude scales it can be visualised and used as a KPI.

When creating KPI’s for your own organisation consider the following:

Firstly consider your organisations goals, KPI’s as previously stated are useful metrics for visualising the progress towards meeting a goal.  Considering the helpdesk scenario it could be said that one of the organisations goal should have been “to deal with customers in an efficient manner”. 

This goal was neglected because the indicators in use were quantative and output orientated.  So firstly the KPI should be based around your organisations goal.

For instance:

A car manufacturer has a goal of producing quality cars; it would be no good measuring the number of cars that are being produced because this is not an indicator of quality.  Some suggestions would be:

1.       Measure how many cars are being returned with fault?

2.       How many cars are failing inspection?

3.       How many cars are coming of the production line incomplete?

4.       How many customers feel their car is not of the quality they expected?

Quality and Effectiveness over Quantity:

You should be looking for measurements that determine effectiveness and quality this does not mean you should ignore production or output based indicators they too have their place.  Instead you should be aligning your indicators with the goal you are trying to achieve.

Make Your KPI’s SMART:

You should always have SMART goals and likewise SMART KPI’s.  A KPI that cannot be effectively expressed is at best not very useful and at worst can be confusing and misleading.  By making your KPI’s SMART you are applying the same criteria to them as you should apply to your goals and strategies which is a good tactic to help ensure your KPI’s are aligned with them.

 Align KPI’s with your Organisation:

Having KPI’s that are aligned with organisational or strategic goals is one way of making them effective and useful, however if the organisations systems work against the KPI’s then they will be meaningless.

For instance the system at the helpdesk meant that quality was punished while pure output and quantity were rewarded.  The only way the system became truly effective was when the system itself was changed.  This perhaps is one of the most useful facets of KPI’s, if you find that the KPI’s are not working or being acted upon it could be that the system itself requires re-thinking and adjusting to match the organisational goals.

Characteristics of a KPI

1. A KPI should be aligned to the organisations strategic goals or intent.
2. A KPI should be decided by the decision makers to inform.
3. A KPI should be clear to understand.
4. A KPI should be based on reliable data.
5. A KPI should be useable by the organisation I.E. meaningful in terms of process adjustment or value added service offerings.

Web Resources:

http://www.kpilibrary.com/