Key Performance Indices in Service Companies

[Marla Diaz]

Hi. I would like to know how other service companies implement/ go about their key performance indices program. This would be more on the intra-department activities.

What we have now is our "Key Result Areas" which monitors the internal customer-supplier performance (inter-department).

Thanks,
Marla

[Mike S.]

There are probably lots of good ways to do this. While not a service company, here is how we handled some of the intra-departmental indices in the past.

First, to determine what the indices are, we ask our internal customer(s) what is important to them.

Once indices are agreed-upon, we determine how we are gonna measure the indices, which is sometimes on a 100% basis, sometimes by random sampling.

Then we determine how and how often we are gonna report on our status.

Once we get a baseline, we determine how we are gonna improve if/when we fall below agreed-upon targets.

One pitfall is making sure your efforts are worth doing. Measuring something just to show a pretty chart does not give a ROI. Make sure the effort brings rewards or drop it and try something else.

Does this help any?

[Mike S.]

skullsike said:

By internal nonconformance reporting you can measure performance.

How would you measure, say, cycle-time if you only look at NC's?

[Mike S.]

skullsike said:

By internal nonconformance reporting you can measure performance.

How would you measure, say, cycle-time if you only look at NC's?

[Marla Diaz]

Thanks for you inputs. Let me explain further...

What we would like to establish is how to monitor employees performance within the department. It could be based on his/her job description but how to go about it is the problem.

Thanks again!

[Marla Diaz]

Jim,

Thanks for the correction. Your right, we haven't decided yet what to monitor so it should be "measure".

Marla

[Kevin Mader]

Just an opinion:

Jim’s request for clarification is a good question. Are we monitoring a process that a person is part of or are we measuring an individual’s performance?

Dr. Deming’s mathematical representation accurately describes the job of trying to separate an individual’s contribution to an outcome. He stated it like this: x + xy = 1. The problem can’t be solved by itself. As such, the measurement of an individual’s contribution cannot be accurately measured. If this be the case, then why do it?

I like the idea of measuring indices as Mike S. points out. I’ve used it successfully in the past/present to improve process/system performance. Ultimately, we want to improve the whole, not just an individual. Determining what is critical to your organization’s success is the key. Give this careful consideration.

In a company I worked for, we had a throughput problem with incoming materials. It averaged 3.32 days for a job to be received and inspected before Production could use the parts. I tracked receipts/inspections with run charts to determine the flow. After determining that I had stable and predictable receipt/inspection processes, I began to investigate for process improvements by determining what obstacles were in the way. Bottlenecks in the Warehouse accounted for the largest delays since materials could not flow through my areas because of backups in putting away the product. By studying the causes to this and by running charts on the activities there, we determined that although their process of putting materials was statistically in control, it wasn’t very efficient. By removing those obstacles, the throughput in the Warehouse was optimized, thus improving the throughput in my two areas. The net result was that inbound materials, those needing inspection, averaged under 20 minutes (including a few other second order changes). Likewise, the warehousing of materials was also reduced to a similar number. Two positions were dissolved but reappeared as two new ones. But more importantly, my internal customer was delighted by the quick service we now offer.

All of this was done without measuring a single person’s performance. The answers we seek are buried in the process.

Regards,

Kevin

[Marla Diaz]

Hi Jim, here’s an example of our KRA between the Finance and Import Brokerage Department.

Import Brokerage (supplier) must submit approved liquidation of expenses incurred in processing/releasing of shipments for check preparation and billing. Timeframe is within 3 days after transaction/release date except Sundays and Holdiays; scoring method is per transaction.

Import Brokerage’s infractions must not exceed the established norm of 32 for this criteria. If a supplier gets 0 infractions for 6 months, then that criteria would be dropped and a new one is established. We monitor our KRAs on a monthly basis.

Thanks,
Marla