Setting KPIs
Key performance indicators (KPIs) are an invaluable tool for monitoring whether you are on track to achieve your goals and identifying issues before they become big issues.
The great thing with KPIs is that you can measure all sorts of things that impact success. An example of this might be a factory production line. Let's say your goal is:
- Goal: Increase output by 15% by Dec 2019
To set KPIs for this goal, you'd probably start with the most direct and have a measure of daily output...
- KPI #1 - Quantity of units produced per day
But there's also other things you could measure. A key part of the process is that your machines are functioning well - every time they breakdown, your output drops. So you might also want to measure machine inactivity...
- KPI #2 - Hours/minutes of machine inactivity per day
Another part of the process that is critical to your success is the defect rate. As defects increase (i.e. units that don't meet quality standards), output goes down. So you might also want to measure the defect rate...
- KPI #3 - Defect rate (% of total output)
Tips for setting KPIs
There are two things that you need to decide on when setting KPIs:
- What are the key areas that I need to measure? - determine which areas significantly impact performance. You don't need to measure everything, just the key areas. For examples, see below.
- What does success look like? - determine what needs to be achieved in that particular area and over what time period (i.e. daily, weekly, monthly, quarterly). Just remember that the shorter the measurement period, the quicker you can take corrective action.
Examples:
Below are a number of examples of KPIs for various departments and industries.
Customer service
- Average queue time of incoming phone calls
- Inbound abandon rate
- Inbound availability rate
- Inbound average talk time
- Inbound calls handled per handler per hour
- Number of complaints
- Percentage of customer service requests answered in given timeframe
- Percentage of calls transferred
- Total calling time per day/week/month
Human resources
- Actual vs budgeted cost of hire
- Voluntary employee turnover rate
- Average length of service of all current employees
- Average number of training hours per employee
- Average time to competence
- Cost per hire Hiring manager satisfaction
- Job vacancies as a percentage of all positions
- Percentage of new hire retention
- Return on investment (ROI) of training
- Time to fill
Sales
Average number of activities (calls, meetings, etc.) to close a deal
- Average deal size
- Closing ratio
- Customer acquisitions costs as a percentage of sales value
- Customer purchase frequency
- Customer satisfaction
- Gross margin per sales person
- Percentage of converted opportunities
- Pipeline by sales stage
- Qualified leads
- Qualified opportunities
- Revenue per sales person
- Sales capacity
- Sales cycle time
- Sales person turnover
- Unweighted sum of deal size in sales pipeline
- Value of sales lost
- Win/loss ratio percentage
Manufacturing
- Asset utilisation
- Cycle time
- Faults detected prior to failure
- Forecasts of production quantities, etc. Increase/decrease in plant downtime
- Maintenance cost per unit
- Manufacturing cost per unit
- Mean time to repair
- Number of production assignments completed on time
- On-time orders
- On-time shipping
- Percentage increase in productivity
- Percentage reduction in defect rates
- Percentage reduction in downtime
- Productivity
- Quality improvement
- Time from order to shipment
- Time on floor to be packed
