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August 6, 2018
Ask ACE

Here's how to identify and use 'key performance indicators' to improve your business

Steve Musica, president of Lean East, specializes in process improvement and developing high performance organizations. Contact him at steve@leaneast.com

Do you have a question for an ACE expert? Contact Jim Milliken at jim@millikenproject.com.

The Association for Consulting Expertise (ACE) is a non-profit association of independent consultants who value "Success through Collaboration." The public is welcome to attend its regular meetings to share best practices and engage with industry experts. For more information go to www.consultexpertise.com.

Q: How can our team identify and use Key Performance Indicators?

ACE advises: Key Performance Indicators define success for a process based on what customers value — low cost, high quality and service and flexible terms. The process needs to be safe and profitable in a sustainable work environment.

There are no set rules for selection and balance, but KPIs typically form a balanced scorecard in four areas: productivity and financial (output), customer service, process quality and organizational capacity.

Balanced scorecards can help teams improve in multiple (and sometimes opposing) areas. Balancing a productivity KPI with a quality KPI ensures that improving your output doesn't impact the value of the work. If you push people (or machines) harder and harder, will you damage quality or negatively impact output or service? Is it okay to take longer to satisfy a customer need at the expense of productivity? Does making short-term productivity goals create a stressed-out staff that experiences burn-out or may even quit? A good organization will balance KPIs to ensure that success in one area doesn't cause issues in another.

We recommend that teams identify their own KPIs, but keep control of the result. For example, "number of claims processed" may depend on customers' submissions. Instead, measure "time to process a claim."

Show KPIs on a trend chart to see changes from period to period. Shorter measurement periods are better — and daily measurement is better than monthly. Be sure the KPIs are easy to track and supportive of desired behaviors. People will still do what they are rewarded for.

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