This document provides an overview of developing and implementing key performance indicators (KPIs) at both the organizational and operational levels. It discusses establishing KPIs through a top-down process to identify organizational KPIs aligned with critical success factors and strategic perspectives. It also describes a bottom-up process using process mapping to identify operational KPIs linked to organizational KPIs and critical success factors. The document outlines a 5-step approach for developing each type of KPI and provides examples of KPIs for different perspectives.

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KPIKPI
Key Performance IndicatorKey Performance Indicator
Introduction
Implementation
Integration

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Training ObjectivesTraining Objectives

Participants will have the following
opportunities :
 Understood the step to develop KPIs
Organizational KPI
Operational KPI
 Identify Critical Success Factor for both levels
of KPIs
 Learn how Process Mapping technique can be
used to identify the Operational KPIs

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BX-KPI-E-DN-
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AgendaAgenda

Introduction

Deployment Option

Organizational KPI

Operational KPI

Process Mapping

Measuring Baseline & Objective
Setting

Using KPI

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Opening ActivityOpening Activity
Identify Current Performance Measures

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Introduction to KPIIntroduction to KPI

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What is KPI?What is KPI?

A set of measures focusing on
 The aspects of organizational
performance that
 are most critical for the current and
future success of the organization

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BX-KPI-E-DN-
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Common Application of KPICommon Application of KPI

Process Improvement

Benchmarking

Strategic and business planning

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When to use KPI technique?When to use KPI technique?

You are small company.

You do not have Strategic/Business
Planning Process.

You have to many management layers
in your organization.

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BX-KPI-E-DN-
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2 Levels of KPIs2 Levels of KPIs

Organizational-Level KPI
 Organizational alignment
 Tracking Strategic Action Plan

Operational-Level KPI
 Tracking Daily Operation

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Deployment OptionDeployment Option
Organizational KPI – Top Down
Operational KPI – Bottom Up

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Organizational KPIOrganizational KPI

Top Down

Focus on:
 Strategic Alignment
 Leadership Direction

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Top Down KPITop Down KPI
Determine
Stakeholder Identify CSFs
Determine
Perspective
Organization KPIs
Organizational Level
2
3
1
Measure Baseline & Set Objectives
Monitor, Review, Keep Current5
4

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Operational KPIOperational KPI

Bottom Up

Focus on:
 Empowerment
 Employee Involvement

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Bottom Up KPIBottom Up KPI
Organizational
CSF
Process
Perspective
Organizational
KPIs
Process
CSFs
Operational
KPIs
Organizational Level Operational Level
1
3
2
A
Measure Baseline & Set Objectives
Monitor, Review, Keep Current5
4

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I. Organizational KPII. Organizational KPI
High-Level KPI

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High-level KPIHigh-level KPI

Organizational KPIs is
 30,000 feet level
 Overall Organizational Performance
Finance
External Customer
Overall Resource
 Difficult to deploy to operator-level

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BX-KPI-E-DN-
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5 Steps for Developing Organizational KPI5 Steps for Developing Organizational KPI

Step 1:
 Analyze Stakeholders and Determine Strategic
Perspectives

Step 2:
 Identify Critical Success Factors

Step 3:
 Develop Organizational & Operational KPIs

Step 4:
 Measure Baseline & Set Objective

Step 5:
 Monitor, Review, and Keep Current

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Step 1: Analyze Stakeholder &Step 1: Analyze Stakeholder &
Determine Strategic PerspectiveDetermine Strategic Perspective
Organizational KPI

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Purpose of Step 1Purpose of Step 1

Determine Key Strategic Perspective
 To align, link, and balance all KPIs from
Organizational Levels
 To ensure that all KPIs are balancing
value for all key stakeholders

Most organization use the Four
Perspectives from Balanced Scorecard

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Balanced ScorecardBalanced Scorecard
4 Perspective Grouping4 Perspective Grouping

BSC methodology groups those KBFs
into 4 Perspectives
 Financial Perspective
 Customer Perspective
 Internal Business Process Perspective
 Learning & Growth Perspective

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4 Perspectives of BSC4 Perspectives of BSC

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How to set the Perspective?How to set the Perspective?

It depends on type of your
organization.
 Not-for-profit organization
 Production and ship to mother company
 Etc.

Set by grouping from
 Key Stakeholder
 Business Results
 BSC methodology

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Key StakeholdersKey Stakeholders

Key Stakeholders include:

According to Baldrige Criteria and Thailand Quality
Award Criteria,
Customers
Employees,
Partners/Suppliers,
Stockholders, and
Local/Professional
Communities

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Stakeholder AnalysisStakeholder Analysis

What are the needs of business?

What are the needs of key stakeholders?

How to balance those needs?
 How do business needs impact the key
stakeholders?
 How do stakeholders’ needs impact our
business?
 How do stakeholders’ needs impact each
other?

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Key Areas of Business ResultsKey Areas of Business Results

These business results are aligned with the
key stakeholders
1 Customer-Focused Results
2 Product and Service Results
3 Financial and Market Results
4 Human Resource Results
5 Organizational Effectiveness Results
6 Governance and Social Responsibility Results

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Four Perspectives!Four Perspectives!
Are they too few or too many?Are they too few or too many?

A template, not a must.
 Depending on business circumstances &
strategy

Focus on shareholders and customers,
 Employee is part of learning & growth.
 If supplier relationships are part of the
strategy
should be part of internal-business-process
 Environment, Laws and Regulations may be
important
but they are not the basis for competitive
advantage

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Step 2: Identify CSFStep 2: Identify CSF
Organizational KPI

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CSFCSF

Critical Success Factors
 CSFs represent set of objectives or
strategies focusing on the perspectives
of organizational performance that are
most critical for the current and future
success of the organization.
“Each KPI has to align with at least one CSF”

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BX-KPI-E-DN-
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AlignmentAlignment
Perspective 1
CSF 1.2
CSF 1.1
KPI 1.1.2
KPI 1.1.2
KPI 1.1.3
Perspective 2
CSF 2.2
CSF 2.1
Perspective 3

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BX-KPI-E-DN-
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CSFsCSFs

Factors that provide context
 Strategic Direction chosen by
Organization
 Competitive Situation
 Legal & Regulatory Environment
 Key Customer Requirements
 Stated Organizational Values

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Where can we get CSFs?Where can we get CSFs?

Identify CSF from:
Mission/Vision/Values
Situation/Market Analysis
Competitor Analysis
SWOT Analysis

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CSF and PerspectivesCSF and Perspectives

Do not forget that all CSFs have to
align with key Perspectives identified
in Step 1.

A company should not have too many
CSFs !!
 Between 15-20 CSFs

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BX-KPI-E-DN-
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Cause & Effect of CSFsCause & Effect of CSFs
Improve Returns
Broaden Revenue
Mix
Increase Customer
Confidence in Our
Financial Advice
Understand
Customer
Segments
Develop
Strategic skills
Develop
New
Products
Cross -Sell
The Product
Line
Shift to
Appropriate
Channel
Minimize
Problems
Provide
Rapid
Response
Increase
Employee
Productivity
Align personal
Goals
Access to
Strategic Inf.
Improve Operating
Efficiency
Increase Customer
Satisfaction Through
Superior Execution
The Revenue Growth Strategy The Productivity Strategy
Improve Returns

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CSFs for Financial PerspectiveCSFs for Financial Perspective

Increased sales

New business

Higher earnings per employee

Cash flow

Improved cost performance

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CSFs for Customer PerspectiveCSFs for Customer Perspective

Improved customer satisfaction
Customer focus

Improved product and service
delivery

Increased product and service
range

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CSFs for Internal Process PerspectiveCSFs for Internal Process Perspective

Development and maintenance of strategic
competitive

Innovation advantage

Focus on continuous improvement of all
key processes

Improved product and service
performance

New products in new markets

Improved performance in key internal
processes

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CSFs for Learning/Growth PerspectiveCSFs for Learning/Growth Perspective

Achievement of a real partnership

Maximization of the potential of the
organization's employees

Creation of a world-class team

Safe and interesting work environment

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Step 3: Develop Organizational KPIStep 3: Develop Organizational KPI
Organizational KPI

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How to?How to?

Identify KPIs from:
Critical Success FactorsCritical Success Factors
listed in previous step

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Align KPIs to the Key PerspectivesAlign KPIs to the Key Perspectives
Financial Perspective
Internal Business
Process Perspective
Learning & Growth
Perspective
Customer PerspectiveKPIs

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ExamplesofExamplesof
OrganizationalKPIOrganizationalKPI
Critical Success Factor
Organizational KPI

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II. Operational KPIII. Operational KPI
Lower-Level KPI

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Why do we need Lower-Level KPIs?Why do we need Lower-Level KPIs?

Organizational KPIs (high-level) just
cover overall company health and
performance
 They do not cover process and sub-
process performance

Without the Operational KPIs, front-
line operators will loss direction and
focus.

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5 Steps for developing Operational KPI5 Steps for developing Operational KPI

Step A:
 Review Organizational CSFs and Organizational KPIs
 Adopt related CSFs and KPIs

Step 1:
 Identify Key Processes and Process Perspective

Step 2:
 Determine Process CSFs for the Key Processes.

Step 3:
 Analyze and Develop KPIs for the Key Processes

Step 4:
 Measure Baseline & Set Objective

Step 5:
 Monitor, Review, and Keep Current

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Levels of Operational KPILevels of Operational KPI

Depends on size of an organization
 Department Level
 Team Level

Note:
 Some Organization KPIs can be used as
Operational KPIs.
 Some Organizational CSFs can be used
as Operational CSFs.

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Step 1: Identify Key ProcessesStep 1: Identify Key Processes
& Perspectives& Perspectives
Operational KPI

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Step 1: Identify Key Processes and PerspectivesStep 1: Identify Key Processes and Perspectives

Focus on
 Value Creation Processes
 Support Processes

Recommended Tools:
 Process Mapping
SIPOC Map
Detailed Functional Map

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BX-KPI-E-DN-
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Value Creation ProcessesValue Creation Processes

Critical internal processes in which the organization
must excel.

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Support Processes Might IncludeSupport Processes Might Include

Support processes might include:
 Finance and accounting
 Facilities management
 Administration
 Legal
 Human Resource
 Project Management

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BX-KPI-E-DN-
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Key PerspectivesKey Perspectives

Team has to determine what
perspectives should be used with those
key processes.

Recommended perspective:
 Quality
 Cost
 Time
 Inventory
 Etc..

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Step 2: Identify Process CSFsStep 2: Identify Process CSFs
Operational KPI

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Identify Process CSFIdentify Process CSF

For each key process selected
 Determine key objectives (CSFs)
 For example:
Reduce lead time of changing
jig/fixture
Reduce WIP at machining process

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BX-KPI-E-DN-
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CSF vs. VOCCSF vs. VOC

Voice of Customer can be used as CSF

Every process has to have its own
customer – person or processes that
receive the output.

Identify the customers and interview
what they need may be a good point to
start.

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Deployed from Higher-LevelDeployed from Higher-Level

Some process CSFs may be directly
deployed from Organizational CSFs

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Step 3: Identify KPIStep 3: Identify KPI
Operational KPI

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Step 3: Identify & Select KPIsStep 3: Identify & Select KPIs

Operational KPI
 Identify by using Process Mapping
technique
 Deployed from Organizational KPI
 Align with Process CSFs (VOC)
 Cover all key process Perspectives

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BX-KPI-E-DN-
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S-I-P-O-CS-I-P-O-C
High-Level Process MapHigh-Level Process Map
Input
Internal/External
Suppliers
Output
Internal/External
Customers
DefectsMeasures/Indicators
Feedback/Information/Specification

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IPO MeasuresIPO Measures
Input
Measures
Process
Measures
Output
Measures
•Time
•Quality
•Cost
Suppliers Internal
Customers
External
Customers
•Time
•Quality
•Cost
•Time
•Quality
•Cost

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BX-KPI-E-DN-
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Functional Process MapFunctional Process Map
Acquire CCR Produce Delivery Evaluate
Customer
Front Office
Back Office
Support

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Measures for Detailed Functional MapMeasures for Detailed Functional Map

From Value & Cycle Time Analysis
 Cycle Time
 Rework
 Reject
 Scrap
 Inspection
 Cost
 WIP
 Etc..

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BX-KPI-E-DN-
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Example of Operational KPIExample of Operational KPI
Maintenance Process
Perspective CSF KPI
Cost Optimize the number of
spare-parts
Cost of spare-
parts
Time Improve repair process Mean Time to
Repair-MTTR
Quality Reduce machine
breakdown
% M/C
Downtime

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Step 5:Step 5:
Measure Baseline & Target SettingMeasure Baseline & Target Setting
Last Step before Deployment

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Measuring BaselineMeasuring Baseline

What to look for when measuring
current performance..
1. Key
2. Levels
3. Trends
4. Relevant Comparisons

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TrendTrend
1999 2000 2001 2002199
8
2003
+
%ROS

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LevelLevel
1999 2000 2001 2002199
8
2003
+
%ROS
0
(+)
(-)

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ComparisonsComparisons
1999 2000 2001 2002199
8
2003
+
%ROS
Best In Class
Competitor A
Industry Avg.

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Relevant ComparisonsRelevant Comparisons

The purpose of comparisons is to help
team evaluate our performance against
norms that represent leadership
position.

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Target SettingTarget Setting

Align with business direction

Target must be better than current
status (baseline)
 Short term target must be better than
this year.
 Longer term target must be better than
that of competitor, best-in-class, or
industry average.

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Target Setting & ProjectionTarget Setting & Projection
1999 2000 2001 20021998 2003
+
%ROS
Best In Class
Competitor A
Industry Avg.
2004 2006
x
x

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Step 6: Deploying KPIStep 6: Deploying KPI
Monitoring
Review
Keep Current

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Use of KPIUse of KPI

Management Review
 Department Review
Monthly
 Organizational Review
Monthly
Quarterly
Yearly

Data/Information Analysis

Benchmarking

Projection/Target Setting

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BX-KPI-E-DN-
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AnalysisAnalysis

Includes
 trends,
 projections,
 comparisons, and
 cause-effect correlations

intended to support
 performance reviews and
 the settings of priorities for resource use

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BX-KPI-E-DN-
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Improve KPI SystemsImprove KPI Systems
Improve Evaluate
Measures

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Any Questions?Any Questions?
sixsigma@robere.com
www.robere.com