Key Performance and Non-financial Indicators (KPI's): My Final Checklist

Photo at blog from webmaster - 24/10/2010 - 08:44

Mattison has created an impressive overview of key performance and non-financial indicators (KPI's). He calls it a Guide to Performance Measurement and Non-Financial Indicators. Curious? This is my selection, forming a very complete checklist.

Introduction

A KPI is used to measure a business process as well as it sresults, and to manage it as a valuable business resource according to the reference value. You will find a lot of KPI material in the Results2Match blogs. With this selection from an article of Mattison I think you have enough ideas to cover almost any situation.

Some KPI implementation suggestions though:

  1. It is mandatory to present KPI's in the form of an actionable dashboard. Otherwise KPI's will not work.
  2. Be sure to limit the number of different KPI's, otherwise they will be unmanageble.
  3. Replace obsolete KPI's with relevant ones regularly, depending on your changing business needs.

Management Process Guidance Checklist

This checklist helps management to ensure a sound business view by taking non-financial indicators seriously:

  • Products move smoothly and swiftly through the production cycle
  • Warranty repairs are kept to a minimum and turned round quickly
  • Suppliers' delivery performance is constantly monitored
  • Quality standards are continually raised
  • Sales orders, shipments and backlog are kept to a minimum
  • There is overall customer satisfaction
  • Labor turnover statistics are produced in such a way as to identify managerial weaknesses
  • R&D costs do not escalate
  • The accounting and finance departments really understand the business
  • No one indicator should be over emphasized and no one indicator should reign supreme for long in the corporate consciousness of executives or management gurus.

Checklist for Non-Financial Indicators

Non-financial indicators relate to the following business functions:

  1. Manufacturing and production
  2. Sales and marketing
  3. People
  4. Research and development
  5. The environment

Looking at each of these areas in turn, the following non-exhaustive list of performance measures is relevant.

1. Manufacturing and Production Indicators

The sheer volume, variety and complexity of managerial issues surrounding the production process makes this area of corporate activity a particularly rich one for non-financial indicators. Performance indicators can be devised for all operational areas.

1.1 Production process

  • Indicators deriving from time and motion studies
  • Production line efficiency
  • Ability to change the manufacturing schedule when the marketing plan changes
  • Reliability of component parts of the production line
  • Production line repair record
  • Keeping failures of finished goods to a minimum
  • Ability to produce against the marketing plan
  • Product life cycle

1.2 Controlling production quality (right first time)

  • Measurement of scrap
  • Tests for components, sub-assemblies and finished products
  • Fault analysis
  • "Most likely reasons" for product failures
  • Actual failure rates against target failure rates
  • Complaints received against the quality assurance testing program
  • Annualized failures as a % of sales value
  • Failures as a % of units shipped
  • Various indicators of product / service quality
  • Various indicators of product / service reliability

1.3 Purchasing department's external relationships with its suppliers

  • Inventory levels and timing of deliveries
  • "Just in time" inventory control measurements
  • Stock turnover ratio
  • Weeks stocks held
  • Suppliers delivery performance
  • Analysis of stock-outs
  • Parts delivery service record
  • % of total requests supplied in time
  • % supplied with faults

1.4 Sales delivery and service

  • Shipments vs. first request date
  • Average no. of days shipments late
  • Response time between inquiry and first visit

2. Sales and Marketing

  • Measurements based on "staying close to the customer"
  • Complaints re manuals
  • Complaints re packaging / ease of opening
  • Quality of packaging materials
  • Customer satisfaction analysis
  • Price of products comparisons
  • Check on unsuccessful visit reports
  • Monitoring repeated lost sales by individual salesmen
  • Sales commission analysis
  • Monitoring of inquiries and orders
  • Sales per 100 customers
  • "strike rate" - turning inquiries into orders
  • Analysis of sales by product line
  • By geographical area
  • By individual customer
  • By salesmen
  • Matching sales orders against sales shipments - the trend from the mismatch
  • Backlog of orders analysis
  • Flash reports on sales
  • Publication of sales teams performance internally
  • Analysis of basic salaries and sales commissions
  • Share of the market against competitors
  • Share of new projects in the industry
  • New product / service launch analysis
  • Time to turn round repairs
  • Delays in delivering to customers (customer goodwill)
  • Value of warranty repairs to sales over the period

3. People

  • Head count control
  • Head count by responsibility
  • Mix of staff analysis
  • Mix of business analysis vs. staff personnel needs
  • Skilled vs. non skilled
  • Management numbers vs. operations staff
  • Own labor / outside contractor analysis
  • Workload activity analysis
  • Vacancies existing and expected
  • Labor turnover
  • Labor turnover vs. local economy
  • % of overtime worked to total hours worked
  • Absence from work
  • Staff morale
  • Cost of recruitment
  • Number of applicants per advert
  • Number of employees per advertising campaign
  • Staff evaluation techniques
  • Evaluation of staff development plans
  • Monitoring of specific departments, eg. accounting
  • Speed of reporting to internal managers vs. HQ
  • Accuracy of reporting as measured by mis-allocations and mis-postings
  • Queries re what reports mean
  • Monitoring of departments performance long term
  • Pay and conditions vs. competition

4. Research and Development

  • Evaluation vs. basic R&D objectives, strategic objectives and project objectives
  • Product improvement against potential market acceptance
  • R&D against technical achievement criteria, against cost and markets
  • R&D priority vs. other projects
  • R&D vs. competition
  • R&D technical milestones
  • Analysis of market needs over the proposed product / service life of R&D outcome
  • Top management audit of R&D projects
  • Major program milestones
  • Failure rates of prototypes
  • Control by visibility - releases, eg. definition release, design release, trial release, manufacturing release, first shipment release, R&D release

5. Environment

  • Work place environment yardsticks
  • Cleanliness
  • Tidiness
  • Catering facilities vs. competition
  • Other facilities vs. competition

We welcome your feedback! Are you missing any important areas? Do you want help with the assessment of your situation? Do you want help with with implementation suggestions? Contact Hans Lodder now!

Do you want your people to be able to perform KPI assessments and implementations on their own? Let Hans Lodder train and coach your employees, and do KPI management yourself from now on!


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