blog KPI 1 - How To Define KPIs In Your Company?

How To Define KPIs In Your Company?

When you want to implement a quality management system as in the ISO 9001 Standard, it’s an essential requirement to measure the performance of all the company’s processes (via Key Performance Indicators) to know if it’s reaching its particular objective and those of the organization.

Obtaining data and knowing the performance of processes helps us both in decision-making and in continuous improvement, since in case of non-compliance we must take corrective actions.

For this, we must determine one or more Key Performance Indicators or KPIs for each process, and thus be able to know if we must adjust the strategy to ensure the fulfillment of the objectives of the company.

In this article I’ll tell you what you have to do to correctly define the key performance indicators for each process as well as its goals:

1- Define the Key Performance Indicators with the leaders of all the processes.

If you haven’t already defined the processes that intervene in your organization, I recommend you to do it before continuing. Working under a process-based approach will give you great clarity when it comes to understanding the objectives and capabilities of each one, as well as defining their limits and responsibilities.

It’s important that when defining the key performance indicators, you have the participation of the leaders of all the processes to maintain alignment in the general and particular objectives, since what happens in a process affects others and the idea is that each indicator adds value both to the process itself and to others if possible.

It’s recommended that you have a dynamic or workshop with all the leaders where you first explain the objective of implementing the KPIs and how they will be defined, then let each one work on the definition of their own process and at the end make a review with all the participants  so everyone can have an opinion on all the indicators either by adding necessary indicators or eliminating those that do not add value.

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2- Include all the necessary KPIs.

Most cases, a single key performance indicator won’t be enough to adequately measure a process, it’s like when you start an exercise and diet regimen and only measure your weight, with that value by itself, you won’t be able to define if you are really doing well, you must also take into account the percentage of fat or the body mass index among others.

The same thing happens in the processes, the simple fact of measuring production time, for example, won’t be enough, you will also have to measure the percentage of rejections, perhaps, to be able to give you a clear idea of ​​whether it’s having an adequate performance or not. In the case that you are implementing an ISO 9001 quality management system, you will have to define quality indicators.

Don’t fall either into the situation of having too many indicators for a single process because afterwards it will be very difficult to keep track of each one and the review meetings will last forever.

When defining each KPI, try to answer the following questions to see if it is really worth establishing:

  • How is it going to be measured?
    Sometimes it is very difficult to obtain the information and the cost – benefit is not adequate.
  • Why does it have to be measured?
    Analyze if knowing that data really adds value to this or another process.

💡 You may be interested in: 5 Reasons why you DO NOT reach your Key Performance Indicators or KPI’s goals

3- Establish the goals of the Key Performance Indicators with the SMART method.

To be able to say that the process is being effective or performing well, it is necessary to establish goals for each key performance indicator.

You can set goals where you have to reach a minimum value, be below a maximum value, or stay within a specific range.

Whatever the case, the ideal is to follow the SMART method to define your goals:

  • Specific: Be specific, example: “Maintain a maximum of 5% of rejected product”
  • Measurable: Always use numerical values ​​such as percentages, grades, quantities, etc.
  • Achievable: The goal must provide a challenge for the process but at the same time it must be achievable to avoid generating demotivation in the personnel involved.
  • Relevant: This goes hand in hand with the question of Why does it have to be measured? If it is not important there is no point in keeping it.
  • Time-Oriented: Define the period of time in which you will review the data returned. (monthly, semi-annual, annual, etc.)

4- Validate the KPIs with top management.

Although the reality is that top management also counts as a process and the ideal is to have their participation in the entire KPIs definition process in order to also get their commitment regarding the achievement of the goals by supporting the implementation of corrective actions in breaches, you may have to carry out the activities without their presence.

In this case, once you have finished with the definition of the key performance indicators of all the processes (it’s an activity that can take you several days) you must present them to the top management so they can give you their validation adjusting what is necessary according to the overall business strategy.

In a quality management system such as ISO 9001, the participation of top management in the reviews of the results is a specific requirement, so you should pay special attention to this if you are looking for an implementation of this type.

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5- Communicate these indicators to everyone involved.

This point is essential, all company’s personnel must know how their processes will be evaluated and the frequency. This also includes communicating the results that are being obtained to them.

When you involve all the staff, you generate greater commitment to reach the established goals and also greater participation when taking corrective actions in case of non-compliance.

You can install information boards in each area and paste the graphs of the KPIs results there, so everyone has them constantly in view if they are reaching the goals and the trends that are being obtained.

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Making use of some software for the development and monitoring of indicators will make the whole task much easier since it will give you a guide to the information that you must take into account to define them, and will help you to give adequate monitoring by taking corrective actions if necessary.

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