the organisation as a system an information management framework the performance organiser...

The Organisation As A System

An information management framework

The Performance Organiser

Information Delivery – KPI’s

http://www.jit-software.com/infmantrg.htm

Key Performance Indicators


Some Concepts

KPI’s are not “Indicators” until they are linked to objective(s) and are used cumulatively to show progress towards meeting it/them. Until then, they are merely measurement metrics

•Indicators are used to provide measurements of the defined priority and key success factors of a project or system

•KPIs measure the quantifiable performance of an activity that is critical to the success of an organization

•A properly defined and designed scorecard and KPI mechanism forms the basis of one of the strategic information management dimensions of the organisation



The Purpose of KPI’s

The primary purpose of a KPI is to detect, monitor and illustrate variance in behaviours in processes, with a view to reducing variance to acceptable limits.

At the point at which variance is reduced or eliminated, then the process that a KPI is monitoring should be running at optimum efficiency.

However, they are “INDICATORS” not the sole authoritative source of information. Therefore, they should trigger investigation as to why extremes of behaviour have been transgressed.




KPI’s Are Not...

•Performance targets

•Objectives

•Strategy




KPI’s

•Are decision support aids

•Should be evidence based using supporting data where such data exists

•May be related to each other both top down and laterally

•Should be capable of being linked to each other to present perspective based view of organisational performance that are not necessarily based on the organisation management structure




KPI’s •KPI provide objective evidence related to the probability of the achievement of Vision and Mission based objectives. •KPI’s provide one of the most significant links available to an organisation between strategy and process•Part of the descriptive attributes of a KPI should be the means to link a KPI to other information dimensions the organisation may have identified.•KPI Data collection should be as unobtrusive as possible, where data collection does intrude on normal operations, it should require minimum additional effort to complete satisfactorily



KPI’s •KPI provide objective evidence related to the probability of the achievement of Vision and Mission based objectives. •KPI’s provide one of the most significant links available to an organisation between strategy and process•Part of the descriptive attributes of a KPI should be the means to link a KPI to other dimensions the organisation may apply.



KPI Measurement Principles




Principles of Measurement

•Two classes of measurement•Quantitative (the number of things produced)•Qualitative (fitness for purposes)

• For each class of measurement, there is a need to determine the achievable mean value that a process being monitored is expected to deliver.•There will be several types of variance that can be applied to the mean:

•Better than average behaviour•Worse than average behaviour•Because of the impact of “better than” or “worse than” behaviour, changes to the achievable mean over time.

•Measurement will reflect some form of reporting cycle, typically, though not always, articulated in some sort of time based form.



Data collection and integrated coherent and coherent analysis tools





ProcessInputs Outputs

•Data collection for KPI’s occurs at the process level•KPI data should support the identification of changes in the maturity state of goods or services being developed or delivered in the process under review when using the resources allocated to it. •Changes in maturity are the measurable transaction points at which data can be collected.




ProcessInputs Outputs

Input change state at the point of entry into a

process

Output change state at the point of exit from a

process

Internal changes brought about by

work carried out in process related

procedures and tasks

Measurable transaction points




Achievable mean

Best behaviour

Worst behaviour

Time

Qua

litat

ive

or Q

uant

itativ

e S

cale

Triggers best practise investigation

Triggers worst practise investigation

Process optimisation

Moving Range Performance Measurement




Distribution Performance Measurement

Qua

litat

ive

Quantitative

-ve +veAchievable mean

1 sd2 sd3 sd 1 sd 2 sd 3 sd

SD = Standard Deviation

ExtremeFailure

ExtremeSuccess




Rolling averages..

•A kpi date set, with a reporting cycle, will generate a continuous data set over time•If the cycle can be identified, then over time, to resolve issues associated with “spikes”, it is necessary to average out observation results so that the overall trend can be observed•Divide the reporting cycle into segments of equal duration in the cycle•For each segment, calculate the average•Plot the average of each segment to identify trends




Reporting Cycle = one year.

J F M A M J J A S O N D

12 36 12 45 23 12 11 36 12 88 23 12

Score for each month

Rolling Averages Example

Current Achievable mean = 22Rolling average cycle = 3 monthsFirst rolling average calculation takes place in MarchAnd consists of the average of the count for January, February and March ((12 + 36 + 12)/3) = 20Carry out similar calculations for each cycle segment


12 36 12 48 23 12 11 36 12 88 23 12

16 32 27 27 15 19 19 45 41 41

Possible achievable mean is the average of the rolling averages which is 28.2

The achievable performance target therefore can be raised based on objective evidence

Quarterly rolling average





12 36 12 48 23 12 11 36 12 88 23 12

16 32 27 27 15 19 19 45 41 41Quarterly rolling average

Attach “Red”, “Amber”, “Green” tolerances to rolling averages to give flag state indicators. The aim is to detect variance in average values.




Achievable mean

Best behaviour

Worst behaviour

Time

Qua

litat

ive

or Q

uant

itativ

e S

cale

Triggers best practise investigation

Triggers worst practise investigation

Process optimisation

Moving Range Performance Measurement

Moving Av




Plotting the rolling average should indicate the general trend of performance measurements towards process optimisation.

The advantage this brings is that while spikes in performance must be indicated and investigated, it is likely that they are the result of short term issues the reasons for which must be resolved. However, they should not affect the overall progress toward process optimisation. The primary purpose of calculating the rolling average is to confirm that the aims of issues resolution, process optimisation, are being met.


Dashboard based information delivery




Board

Senior Management

Middle Management

Shop Floor

Strategy

Action

The purpose of dashboards is to provide in context views of organisation performance



Economic(Accounting Measures)

Efficient(Internal, best use of

Resources“Assurance”)

Evolution(Legislation,

Modification Programmes)

Effective(are customer needs

being met.“Quality”)

Identify performance related perspectives or views of organisation activity




Typically, groupings of indicators are described as “dashboards” or “balanced scorecards”. There are normally four perspectives, with quality assurance being deliberately broken out so that the concept of fitness for purpose can be addressed both internally and externally.

It should be noted that conceptually, there is no balance….. The purpose of a dashboard is to facilitate balanced and informed decision taking.



Specify KPI’s so that they support a single perspective

No of widgets Produced

No of widgets unfit for purpose

Qualitative and Quantitative pairs



Identify Cross Perspective Links (supportive or dependent)



Cost of raw materials



Board

Senior Management

Middle Management

Shop Floor

Strategy

Action

Identify top down composition of reporting needs which gives the means to identify the level of detail required at each organisational level



For each indicator provide drill down into single kpi dashboards




Single KPI Dashboard

Key Performance IndicatorsQ

ualit

ativ

e

Quantitative

Achievable mean

Achievable

Best

Worst

Time

Qua

lita

tive

or

Qu

an

tita

tive

Sca

leJ F M A M J J A S O N D

12 36 12 48 23 12 11 36 12 88 23 12

16 32 27 27 15 19 19 45 41 41

Current achievable mean = 22Achievable mean = 28Flag state = RED

For each indicator provide additional documentary evidence


To optimise the process, the achievable mean can be moved toward the upper tolerance limit and the lower tolerance can be raised too

Key Performance IndicatorsQ

ualit

ativ

e

Quantitative

Achievable mean

Achievable

Best

Worst

Time

Qua

lita

tive

or

Qu

an

tita

tive

Sca

leJ F M A M J J A S O N D

12 36 12 48 23 12 11 36 12 88 23 12

16 32 27 27 15 19 19 45 41 41




A factor often overlooked in scorecard design is to support dashboards with additional documentary evidence. Provision of supporting evidence is essential to the coherent use of KPI’s. KPI’s are INDICATORS that prompt investigation and must therefore be supported by additional evidence where such evidence is can be acquired.




It follows then, that performance dimensions, from an architectural perspective, are a sub set of the organisations IM dimension design. It is therefore good design to include performance perspectives in an IM dimension matrix which in turn forms part of the meta data descriptive attributes of documents and databases.




Key performance indicators are the performance monitoring and reporting requirements of an information management framework.

KPI’s should be specified so that they identify where in the organisation data can be sourced, how data once collected is to be manipulated to produce information and how and with what frequency the resulting information is delivered.

KPI’s trigger investigation, but are not normally performance targets.

About The Performance Organisers


This is one of a series of slide shows, the purpose of which is to explain some of the theory that should be understood in order to properly support business driven decision support on an enterprise wide architectural basis.

If you would like to know more about the slides and other services we offer, contact us using any of the means set out below:

[email protected] (+44) 07780 568449Skype: apw808Web: www.jit-software.com or www.performanceorganisers.com or www.jitsoftware.com

the organisation as a system an information management framework the performance organiser...

Documents

performance organiser

quantifiable performance

organisation slide

measurement metrics

process level kpi data

kpi data collection

class of measurement

system kpis