The Organisation As A System An information management framework Information Delivery – KPI’s The Performance Organiser

Key Performance Indicators Some Concepts KPI’s are not “Indicators” until they are linked to objective(s) and are used cumulatively to show progress towards meeting it/them. Until then, they are merely measurement metrics Indicators are used to provide measurements of the defined priority and key success factors of a project or system KPIs measure the quantifiable performance of an activity that is critical to the success of an organization A properly defined and designed scorecard and KPI mechanism forms the basis of one of the strategic information management dimensions of the organisation The Performance Organiser

Key Performance Indicators The Purpose of KPI’s The primary purpose of a KPI is to detect, monitor and illustrate variance in behaviours in processes, with a view to reducing variance to acceptable limits. At the point at which variance is reduced or eliminated, then the process that a KPI is monitoring should be running at optimum efficiency. However, they are “INDICATORS” not the sole authoritative source of information. Therefore, they should trigger investigation as to why extremes of behaviour have been transgressed. The Performance Organiser

Key Performance Indicators KPI’s Are Not... Performance targets Objectives Strategy The Performance Organiser

Key Performance Indicators KPI’s Are decision support aids Should be evidence based using supporting data where such data exists May be related to each other both top down and laterally Should be capable of being linked to each other to present perspective based view of organisational performance that are not necessarily based on the organisation management structure The Performance Organiser

Key Performance Indicators KPI’s KPI provide objective evidence related to the probability of the achievement of Vision and Mission based objectives. KPI’s provide one of the most significant links available to an organisation between strategy and process Part of the descriptive attributes of a KPI should be the means to link a KPI to other information dimensions the organisation may have identified. KPI Data collection should be as unobtrusive as possible, where data collection does intrude on normal operations, it should require minimum additional effort to complete satisfactorily The Performance Organiser

Key Performance Indicators KPI’s KPI provide objective evidence related to the probability of the achievement of Vision and Mission based objectives. KPI’s provide one of the most significant links available to an organisation between strategy and process Part of the descriptive attributes of a KPI should be the means to link a KPI to other dimensions the organisation may apply. The Performance Organiser

Key Performance Indicators KPI Measurement Principles The Performance Organiser

Key Performance Indicators Principles of Measurement Two classes of measurement Quantitative (the number of things produced) Qualitative (fitness for purposes) For each class of measurement, there is a need to determine the achievable mean value that a process being monitored is expected to deliver. There will be several types of variance that can be applied to the mean: Better than average behaviour Worse than average behaviour Because of the impact of “better than” or “worse than” behaviour, changes to the achievable mean over time. Measurement will reflect some form of reporting cycle, typically, though not always, articulated in some sort of time based form. The Performance Organiser

Key Performance Indicators Data collection and integrated coherent and coherent analysis tools The Performance Organiser

Key Performance Indicators Principles of Measurement Process Inputs Outputs Data collection for KPI’s occurs at the process level KPI data should support the identification of changes in the maturity state of goods or services being developed or delivered in the process under review when using the resources allocated to it. Changes in maturity are the measurable transaction points at which data can be collected. The Performance Organiser

Key Performance Indicators Principles of Measurement Process Inputs Outputs Input change state at the point of entry into a process Output change state at the point of exit from a process Measurable transaction points Internal changes brought about by work carried out in process related procedures and tasks The Performance Organiser

Key Performance Indicators Principles of Measurement Time Qualitative or Quantitative Scale Triggers best practise investigation Best behaviour Achievable mean Process optimisation Worst behaviour Triggers worst practise investigation Moving Range Performance Measurement The Performance Organiser

Key Performance Indicators Principles of Measurement 1 sd 2 sd 3 sd SD = Standard Deviation -ve +ve Achievable mean Qualitative Quantitative Extreme Success Extreme Failure Distribution Performance Measurement The Performance Organiser

Key Performance Indicators Principles of Measurement Rolling averages.. A kpi date set, with a reporting cycle, will generate a continuous data set over time If the cycle can be identified, then over time, to resolve issues associated with “spikes”, it is necessary to average out observation results so that the overall trend can be observed Divide the reporting cycle into segments of equal duration in the cycle For each segment, calculate the average Plot the average of each segment to identify trends The Performance Organiser

Key Performance Indicators Principles of Measurement Rolling Averages Example Reporting Cycle = one year. J F M A S O N D 12 36 45 23 11 88 Score for each month Current Achievable mean = 22 Rolling average cycle = 3 months First rolling average calculation takes place in March And consists of the average of the count for January, February and March ((12 + 36 + 12)/3) = 20 Carry out similar calculations for each cycle segment J F M A S O N D 12 36 48 23 11 88 16 32 27 15 19 45 41 Quarterly rolling average Possible achievable mean is the average of the rolling averages which is 28.2 The achievable performance target therefore can be raised based on objective evidence The Performance Organiser

Key Performance Indicators Principles of Measurement J F M A S O N D 12 36 48 23 11 88 16 32 27 15 19 45 41 Quarterly rolling average Attach “Red”, “Amber”, “Green” tolerances to rolling averages to give flag state indicators. The aim is to detect variance in average values. The Performance Organiser

Key Performance Indicators Principles of Measurement Time Qualitative or Quantitative Scale Triggers best practise investigation Best behaviour Achievable mean Moving Av Process optimisation Worst behaviour Triggers worst practise investigation Moving Range Performance Measurement The Performance Organiser

Key Performance Indicators Principles of Measurement Plotting the rolling average should indicate the general trend of performance measurements towards process optimisation. The advantage this brings is that while spikes in performance must be indicated and investigated, it is likely that they are the result of short term issues the reasons for which must be resolved. However, they should not affect the overall progress toward process optimisation. The primary purpose of calculating the rolling average is to confirm that the aims of issues resolution, process optimisation, are being met. The Performance Organiser

Key Performance Indicators Dashboard based information delivery The Performance Organiser

Key Performance Indicators Board Senior Management Middle Management Shop Floor Strategy Action The purpose of dashboards is to provide in context views of organisation performance The Performance Organiser

Key Performance Indicators Economic (Accounting Measures) Efficient (Internal, best use of Resources “Assurance”) Evolution (Legislation, Modification Programmes) Effective (are customer needs being met. “Quality”) Identify performance related perspectives or views of organisation activity The Performance Organiser

Key Performance Indicators Principles of Measurement Typically, groupings of indicators are described as “dashboards” or “balanced scorecards”. There are normally four perspectives, with quality assurance being deliberately broken out so that the concept of fitness for purpose can be addressed both internally and externally. It should be noted that conceptually, there is no balance….. The purpose of a dashboard is to facilitate balanced and informed decision taking. The Performance Organiser

Key Performance Indicators No of widgets Produced Qualitative and Quantitative pairs No of widgets unfit for purpose Specify KPI’s so that they support a single perspective The Performance Organiser

Key Performance Indicators Cost of raw materials No of widgets Produced No of widgets unfit for purpose Identify Cross Perspective Links (supportive or dependent) The Performance Organiser

Key Performance Indicators Board Senior Management Middle Management Shop Floor Strategy Action Identify top down composition of reporting needs which gives the means to identify the level of detail required at each organisational level The Performance Organiser

Key Performance Indicators No of widgets Produced No of widgets unfit for purpose For each indicator provide drill down into single kpi dashboards The Performance Organiser

Key Performance Indicators Single KPI Dashboard Qualitative Quantitative Achievable mean Achievable Best Worst Time Qualitative or Quantitative Scale For each indicator provide additional documentary evidence J F M A S O N D 12 36 48 23 11 88 16 32 27 15 19 45 41 Current achievable mean = 22 Achievable mean = 28 Flag state = RED The Performance Organiser

Key Performance Indicators To optimise the process, the achievable mean can be moved toward the upper tolerance limit and the lower tolerance can be raised too Qualitative Quantitative Achievable mean Time Qualitative or Quantitative Scale Best Achievable Worst For each indicator provide additional documentary evidence J F M A S O N D 12 36 48 23 11 88 16 32 27 15 19 45 41 The Performance Organiser

Key Performance Indicators For each indicator provide additional documentary evidence A factor often overlooked in scorecard design is to support dashboards with additional documentary evidence. Provision of supporting evidence is essential to the coherent use of KPI’s. KPI’s are INDICATORS that prompt investigation and must therefore be supported by additional evidence where such evidence is can be acquired. The Performance Organiser

Key Performance Indicators For each indicator provide additional documentary evidence It follows then, that performance dimensions, from an architectural perspective, are a sub set of the organisations IM dimension design. It is therefore good design to include performance perspectives in an IM dimension matrix which in turn forms part of the meta data descriptive attributes of documents and databases. The Performance Organiser

Key Performance Indicators Key performance indicators are the performance monitoring and reporting requirements of an information management framework. KPI’s should be specified so that they identify where in the organisation data can be sourced, how data once collected is to be manipulated to produce information and how and with what frequency the resulting information is delivered. KPI’s trigger investigation, but are not normally performance targets. The Performance Organiser

About The Performance Organisers This is one of a series of slide shows, the purpose of which is to explain some of the theory that should be understood in order to properly support business driven decision support on an enterprise wide architectural basis. If you would like to know more about the slides and other services we offer, contact us using any of the means set out below: allenwoods@jit-software.com Tel (+44) 07780 568449 Skype: apw808 Web: www.jit-software.com or www.performanceorganisers.com or www.jitsoftware.com The Performance Organiser