Key Performance Indicators (KPIs) – Page 2

Balanced Scorecard and Dashboard Reporting

Balanced Scorecard

A very common way to manage and monitor performance indicators is to apply a management framework such as the balanced scorecard. A scorecard is simply a report that displays a collection of performance indicators. The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. It helps align business activities to the vision and strategy of the organization and monitor performance against strategic goals.

Performance dashboards are used to easily monitor the performance in an organization. They are often a series of graphics, charts, gauges and other visual tools that can be easily interpreted and analyzed. They allow to see if the performance indicators are being met based on the goals in place. If not, they will visually alert that corrective actions should be made. They are typically limited to show summaries, comparisons and trends. A good dashboard:

  • Is simple and easy to understand.
  • Conveys important information at a glance.
  • Contains minimal distractions and visually appealing.
  • Displays real-time information.
  • Should be displayed on the shop floor using a screen or a bulletin boards.

My 99 Preferred Performance Indicators:

Manufacturing / Production Purchasing and Inventory Sales, Marketing and Shipping
Spoilage / Rejection Rate
Re-work Rate
Time Spent on Product Re-work
Total Units Manufactured
Units per Day
Units Per Labor Hour
Line Efficiency
Production Capacity
Capacity Utilization
First Time Right Ratio
Rolled Throughput Yield (RTY)
Average Change Over Time
Material Usage
Cancelled Purchase Requests
Purchase Orders Completed
Purchase Order Cycle Time
Emergency Purchase Rate
Rejected Receipt Rate
Late Deliveries from Suppliers
Changes in Approved Suppliers
Unloading Time
Stock Level
Inventory Days Coverage
Re-work on Procured Inventory
Time to Process Customer Orders
Time to Resolve Customer Claims
Visits to Key Customers
New Customers Rate
Customer Retention Rate
Sales Forecast Accuracy
Market Share Growth
Marketing Expenses
Product Availability
Loading Time
Not On-Time In-Full (NOTIF)
Finance and Accounting Maintenance Human Resources
Net Profit Margin
Cost of Goods Sold
Operating Income
Cost per Unit
Working Capital
Accounts Receivable Turnover
Inventory Turnover Ratio
Return on Investment (ROI)
Budget Variance
Capital Expenditure (CAPEX)
Monthly Department Expenses
Response Time to Breakdown
Mean Time Between Failures
Mean Time to Repair
Spare Parts Inventory Turnover Ratio
Work Orders Completed
Preventive Maintenance Completed
Repair Cost
Repair Cost per Unit
Maintenance / Repair Downtime
Staff Turnover Ratio
Employee Satisfaction Index
Exit Interview Satisfaction Ratio
Internal Promotion Rate
Labor Utilization Rate
High Performing Employees
Training Hours Ratio
Training Attendance Ratio
Absenteeism Rate
Part-Time Employees
Disabled Staff Ratio
Health, Safety and Env. Quality Lean
Recorded Safety Observations
Workplace Inspection Audits
Risk Assessments Implemented
Lost Work Days
Significant Injury Cases
Near Miss Cases
First Aid Treatment Cases
Environmental Incidents
Safety Circles Conducted
Satisfaction with Ergonomics
EHS Training Hours
Customer Complaints
Returns from Key Customers
Customer Satisfaction Index
Customer Surveys Conducted
Defects at Customer Site
Defects per Million Opportunities
Defects per Unit
Cost of Non Quality
Quality Personnel to Total Personnel
Quality Circles Conducted
Audits Performed on Schedule
Value Added Time
Takt Time
Operator / Machine Cycle Time
Order Processing Cycle Time
Net Available Time
Work in Process Time
Value Stream Ratio
Process Cycle Efficiency
Uptime Ratio
Overall Equipment Effectiveness
Muda-Free Cost

KPIs and Continuous Improvement:

Performance indicators are key to the continuous improvement process. They are used to establish improvement priorities and track the progress of improvement projects. The following are examples of indicators that are used to measure continuous improvement activities:

  • Chartered improvement projects
  • Project charters approved and signed off
  • SOPs developed after improvement projects
  • Completed improvement projects
  • Financial department involvement in improvement projects
  • Processes perform at 4.5 Sigma or higher
  • Staff trained in Lean Six Sigma
  • Savings resulting from improvement implemented by employee suggestions
  • Time to respond to suggestions
  • Idea conversion rate
  • Kaizen events conducted
  • Cross-industry benchmarking studies conducted

Operational Definitions:

An operational definition is a clear and detailed description of a performance indicator. The need for operational definitions is fundamental when collecting data. The data collection will be meaningless if there is an inconsistency in understanding a measure, a specification, a requirement, or a procedure. Operational definitions ensure consistent data collection, eliminate ambiguity, and ensure standards are applied in the same manner.

The following is an example of a form that can be used to present the operational definitions of performance indicators.

Utilizing Performance Indicators:

The following steps will help you understand how to establish and best utilize your winning performance indicators:

  • Review the quality of the current data collection methods (are you collecting data unnecessarily?).
  • Train staff on CTFs, KPIs, empowerment and process improvement methods.
  • Start by a few easily understood performance indicators.
  • Relate to critical success factors and reflect the voice of the customer.
  • Allow teams to define and select their own performance indicators.
  • Have your performance indicators approved by senior management.
  • Measure and report only what matters.
  • Monitor performance using dashboards.
  • Display at workplace (on screens or public display boards).
  • Use performance indicators as a basis for team meetings and decision making.
  • Identify and pursue improvement goals.
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