8/3/2019 Selecting the Right Key Performance Indicators
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Selecting the Right Key Performance Indicators
An effective set of interlocking indicators provides feedback to
individuals, groups, and the
enterprise, directing the behavior of all.
By Anthony McNeeney, Meridium
Measures of performance have been used by management for
centuries to review current operationalcapabilities. Such measures
have been used to assess both departmental and corporate
performance, as
well as trend performance achieved against plan.
In many industrial facilities, these measurements are related to
safety (number of incidents), environmental
(number of releases), costs (percentage of departmental budgets
used), and production (comparison of
actual vs targeted production output). These measures are needed
in order to determine not only if
resources and costs have been managed for the production
achieved, but also whether the assets or plant
remain in good health. Clearly, these measures provide assurance
that asset policies in place today do not
limit capabilities for tomorrow.
In order to define a complete set of performance measures,
companies must ensure that simple, workablemeasures are in place.
The real challenge is not only to select those indicators that
satisfy budgetary goals,
but also to build the activities needed to meet the levels of
asset performance required to meet strategic
goals.
Selecting the right measures is vital for effectiveness. Even
more importantly, the metrics must be built into a
performance measurement system that allows individuals and
groups to understand how their behaviors and
activities are fulfilling the overall corporate goals.
BUILDING AND TESTING PERFORMANCE INDICATORS
As with many management issues, it is often best to build a
solution in stages. Suggested stages for
performance indicators are:
1. Define the links between corporate goals and major
operational perspectives.
2. Map these strategic links to required processes in each
perspective area.
3. Define a set of near-term and medium-term metrics which drive
the new outcomes in each perspective.
4. Define the gaps and dependencies across the organization
which will need to be bridged to result in
corporate success.
5. Implement the metrics as individual and group scorecards and
monitor to secure the strategic results.
Use the SMART test
S = Specific: clear and focused to avoid misinterpretation.
M = Measurable: can be quantified and compared to other
data.
A = Attainable: achievable, reasonable, and credible under
conditions expected.
R = Realistic: fits into the organization's constraints and is
cost effective.
T = Timely: doable within the time frame given.
Key performance indicators should be trendable, observable,
reliable, measurable, and specific.
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