Bad Systems Beat Good People

Effective KPIs should be clear communicators of your strategy. When developing a KPI, use the SMART acronym.

Q: Do you have metrics or KPIs?

A: Metrics are detailed measures that feed and supplement KPIs (key performance indicators), which are the difference makers that drive your strategies and improve your business. KPIs can be a performance measure from an individual, group, department, or company. They show your current status, the end goal, and the gap (with actions needed to fill the gap).

The main difference between a KPI and a metric is that a KPI explains what is being measured, while a metric is the numeric value of the measure itself. A good way to start is to state that “all KPIs are metrics, but not all metrics are KPIs.” Most medium-to-large companies have more than a hundred metrics. However, many of them do not always have a clear (line-of-sight) relationship to their KPIs. When the metrics are aligned to your key business initiatives you can gain competitive advantage through your KPIs.

It doesn’t mean that all of the other metrics are not worthwhile. Metrics help explain variations/changes in KPIs. They tabulate the ongoing activities of operations and maintenance to provide an indication of how well things are working. It’s paramount to establish a clear process/system. As W. Edwards Deming emphasized in meetings/training and has been referenced as saying, “A bad system will beat a good person every time.” It’s critical to set up the correct process with supporting metrics and KPIs. It’s equally important to understand what should go on the scorecards, dashboards, and executive reports.

KPIs should be:

• easily understood, attainable, and believable.

• factors that drive key organization values, with a focus on quantifying and accomplishing the vital few that matter

• standardized to enable relevant comparisons between involved groups/organizations.

• audited and dynamically/continually improved, based on changing business needs.

• aligned from the top to the bottom of the organization (business-plan deployment). It’s important that people at each level in an organization understand what they need to do to make a difference. Also, the workforce needs to be empowered and enabled to act on KPIs.

• attached to key business needs, i.e., leading indicators. Factors such as financial metrics and safety are lagging indicators.

• reflective of what is actually happening on the plant floor and relevant to the people/groups that are affected.

• tied to a specific time frame for reporting and attainment.

• clear communicators of your strategy. Many companies refer to the SMART acronym that describes KPIs (specific, measurable, attainable, relevant, and timely).

• highly visible to the workforce to communicate direction and increase engagement. Keep the KPI description simple for easy understanding.

Follow this process to use metrics that support KPIs and lead to a continuous-improvement culture.

Some of these attributes are also present in metrics. However, all (or at least most) of these characteristics should be present in good KPIs.

It’s often been stated that you can only improve what you measure. Thus, it’s vital that there be sufficient maintenance metrics to properly track progress. Which metrics are deemed to be KPIs depends on what you are trying to accomplish, your company’s goals, and what you can actually control or influence. Analyze, choose, and focus on metrics and KPIs that matter. It could be such things as unscheduled downtime, PM compliance, maintenance work-order backlog, spare-parts inventory turns, and PM work orders initiated by operators. Some should be leading indicators to help explain what’s happening.

It’s critical that needed behaviors be supported to enable desired KPIs. Leadership needs to identify and demonstrate the guiding principles that illustrate the new paradigms and KPIs. Too often I see KPI values that are not representative of what I see on the factory floor. Although it’s not always a simple resolution, it’s an indication that incentives are getting in the way of real progress.

You don’t need to look far to see it. Just a few weeks ago, we ordered a ping-pong table. The promised delivery date was changed twice. Following up, we were told that the customer changed the delivery date. Since we knew that wasn’t true, we persisted and were eventually told that “it’s what we put down when we can’t deliver on time.” That surely helps the on-time delivery KPI and maybe incentivized financials. Similarly, top-quartile PM compliance values on progress walls don’t always reflect witnessed plant- floor maintenance practices. Far too many operations report OEE (overall equipment effectiveness) exceeding 85% because that’s been stated as a best practice value and incentivized. With lots of adjustments most get more than 85%.

George Harrison said it best in his song Any Road: “If you don’t know where you’re going, any road will get you there.”

But what happens when you get there? EP

Based in Knoxville, Klaus M. Blache is director of the Reliability & Maintainability Center at the Univ. of Tennessee, and a research professor in the College of Engineering. Contact him at kblache@utk.edu.