Key Performance Indices in Service Companies

[Marla Diaz]

Key Performance Indices

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.]

Re: Measured

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.]

Re: Measured

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

 

[Randy Stewart]

Audit the system

I strongly agree with Kevin and Jim. If you prove your system and processes the rest is low hanging fruit (BINGO again?).
The union will not let us time or measure (time) personnel performance in any manner. So this was the first step in getting processed based for us. If the operators can not follow the process, for whatever reason, the first item of business is to evaluate the process. The old garbage in garbage out. Ensure your process is capable of producing what is required. Then look at ease of use, basically how hard is the process to follow. Then you can get into the root cause analysis.
I can't remember the name of the phenomenon or effect - Kevin can probably help out here. But when you start monitoring your people they will pay closer attention to what they are doing and that hides the real issues.
With your given example have you broken down the causes of higher (or lower) scores. Have you identified the frequency of problems? Have you identified what the high performance people are doing? Now you're getting into process improvement.

 

[Mike S.]

Maybe my memory is bad, and I did not have time to read the links, but I thought at least some of the experiments into the "Hawthorne effect" involved groups of employees, as in if you either brighten or dim the lights from the normal you get a short-term increase in productivity. Anyway...

Catching people doing things right and praising their work, and talking to them and getting their opinions and in general having frequent and open communication, is just common decency and good business sense to me, although guys like Blanchard included it in their books, I believe, because so many so-called Managers and Leaders don't exercise common decency and good business sense! It is amazing to me sometimes.

Although I agree the problem is often the system (perhaps the majority of the time) and this is where to look first, sometimes it IS the individual employee that is the problem, IMO, and one individual can have a severe negative effect on the overall business. I've seen it too often, and don't buy the thinking that somehow it always goes back to the system.

My personal management philosophy as it relates to employees is to simply treat them as I would like to be treated in the same situation. I can usually think about a situation for a few minutes and know what I should do. Overly simplistic? Not really, IMO, -- this thought process covers over 95% of the situations I ever had to deal with. The exceptions I seek help on. So, I do believe in measuring to some degree the performance of individuals. A search will turn-up a long thread we had on this subject about 6 months ago on the subject of employee reviews and performance rating. Some experts say trashcan employee reviews altogether, a process I cannot yet agree with. I don't mind being measured -- I expect it -- as long as the measure is a fair one. An unfair measure can have a more negative effect than no measure at all, but a good and fair measure is the best situation IMO.