Quality Progress - January 2014 - 8

EXPERTANSWE Selecting and developing KPIs guishing between measures and indicators. Q: How should process improvement For an indicator, measurement relates to teams select and develop key performance performance and is not a direct measure.1 recommends that the measures be deployed There are some guidelines for select- down and across the organization: "Having a indicators (KPI) to measure performance in metrics the performance team can act on. To reinforce this idea, author Duke Okes ing indicators. One item to consider is lag, high-level metric that does not have support- which refers to how far the measure is ing metrics existing in the right processes A: I would begin by understanding the objec- removed from real-time performance of a will not add value other than letting manage- tives of the process improvement team. process, and how soon you may react to it. ment know that things aren't going well."4 Usually, the process improvement objectives Indicators with short lag (the measure is not are derived from the broader organizational far removed from real-time performance Teams and Other Hard-to-Measure Work,"5 strategic objectives. Examples may include of a process and you may be able to react Jack Zigon provides a structured approach improving the market share in specific prod- quickly) are preferred for the team directly to developing performance measurement: uct segments or geographical locations by a managing the improvement. 1. Review the organizational measures. the short and long term? certain percentage, increasing the number Author Richard J. Schonberger suggests In his article, "Measuring the Hard Stuff: 2. Define measurement starting points. of differentiated innovative products or re- you should "react often to short lag-time ducing the operation expenses by a certain metrics, less often to those with intermedi- percentage. After you understand which ate lag and seldom for metrics with long lag 4. Develop performance measures. of the strategic objectives the process time. Contrarily, business scorecards tend to 5. Develop performance standards. improvement team maps to, you can deter- display metrics intermixed as to lag times, 6. Decide how to track the performance. mine appropriate KPIs for the process. and managers tend to react to them, with For example, for a process improvement 3. Weight the results (based on relative importance). In general, do not select measures and goals and corrective assignments, at a fixed indicators that are irrelevant to the improve- team mapping to the objective of reducing time interval, typically monthly."2 Schonberg- ment objective. This will waste the team's operation expenses by X%, KPIs may include er suggests using three levels of indicators: time in driving actions that have no impact. items such as first pass yield, throughput, 1. Indicators with short lag times for the Also, ensure that the measures are not number of engineering changes post production release, equipment uptime, training hours per employee and per process, and lost hours from accidents and safety incidents. An direct team management. 2. Indicators with monthly or quarterly lag times for middle management. 3. Indicators tracked on an annual basis for redundant, such as measuring yield and internal failure costs. If the internal failure cost has more failure components, break down the details into separate measures. Ensure improvement team from a service function senior management.3 the data are from a reliable source and are mapping to an organizational objective may The indicator should get broader as it verified periodically for integrity. have different KPIs than a team working in gets to the third level. For example, percent- the manufacturing environment. Examples age of nonconformances may be a first-level of service KPIs may include transaction dura- measure for a performance improvement tion, transactions on time and transaction team; cost of poor quality may be a second- error defects per million opportunities. level measure for middle management; and It is difficult to exactly identify appropri- operation expenses may be a third-level ate KPIs until you know the larger organi- measure for senior management. Second zational objectives your process relates to. level or third-level measures cannot exist Also, note in this response I am not distin- by themselves without supporting first-level ASKED AND ANSWERED Have a quality problem? Submit your question at www.qualityprogress.com, or send it to editor@asq.org, and our subject matter experts will help with a solution. 8 QP * www.qualityprogress.com Govind Ramu Director, quality assurance SunPower Corp., San Jose, CA REFERENCES 1. National Institute of Standards and Technology, 2013-2014 Baldrige Criteria for Performance Excellence, Measures and Indicators, p. 47. 2. Richard J. Schonberger, "Time-Relevant Metrics in an Era of Continuous Process Improvement: The Balanced Scorecard Revisited," Quality Management Journal, July 2013, pp. 10-18, http://bit.ly/qmjmetrics. 3. Ibid. 4. Duke Okes, Performance Metrics: The Levers for Process Management, ASQ Quality Press, 2013, pp. 29-40. 5. Jack Zigon, "Measuring the Hard Stuff: Teams and Other Hardto-Measure Work," 1998, http://asq.org/forums/teamwork/ proceedings/2000/Proceed/00025.html (case sensitive). http://www.bit.ly/qmjmetrics http://www.qualityprogress.com http://asq.org/forums/teamwork/proceedings/2000/Proceed/00025.html http://www.qualityprogress.com

Table of Contents for the Digital Edition of Quality Progress - January 2014

Up Front
LogOn
Expert Answers
Keeping Current
Mr. Pareto Head
Breaking Down Barriers
Follow the Fundamentals
Fresh Perspective
Back in Service
Quality in the First Person
Career Corner
Innovation Imperative
Statistics Roundtable
Standards Outook
QP Toolbox
QP Reviews
One Good Idea

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