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Are KPIs Really the Key to Continuous Improvement? Say Hello to KEIs

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Editor Coda
Jul 23, 2013

Earlier this week, hosted a fascinating webinar with Dan French, CEO of Consider Solutions. We were considering how, in shared services organizations, once you’ve centralized, standardized and automated, you can keep driving further savings.

In an age where the majority of organizations with shared service centres or global business services are running more mature operations, continuous improvement is on the agenda of many. Most of us have classically used key performance indicators (KPIs) as a way of measuring the performance of our processes.

But do KPIs actually drive improvement behaviours?

Firstly, most KPIs can only provide us with after-the-event information. In other words, these KPIs are ‘lagging’ as they only measure past actions and are not preventative. Secondly, when KPIs only measure process steps, rather than the desired outcome, we can become too reliant on them and therefore fail to spot the potential risks.

Let me explain what I mean, using the above image as a prime example. It shows the entrance to a “secure” car parking facility. The entrance to the car park is protected by a barrier, which is opened when an authorized employee swipes his card. The barrier – or the ‘process’ – is regularly tested and maintained by an engineer to ensure it is still functioning, and performing it’s intended role. At first glance, all seems to be in working order and going according to plan. However, when the snow falls, tracks around the barrier are revealed. Drivers have found a ‘work around’ in order to avoid the process step. This puts into question the role of such a barrier.

What’s the alternative?

By utilising key exception indicators (KEIs), we can measure exactly how well our processes are – or are not – driving behaviour towards the desired outcome. Unlike KPIs, this will also help us to identify the root causes of deviation from the standard process, and thus drive behaviour towards fixing this cause. Essentially, KEIs help us measure the why, not the how.

Take call centres, for example, such as those in accounts payable for supplier queries. The desired outcome is that queries are received and resolved in a timely manner. Typically, the department will be measured on the number of calls received or made per day or per full time equivalent, and the average time per call. However this only encouraged staff to get these numbers down, and as a result, would hang up on callers after a certain period of time. The KPIs were looking good, but the reality was an unsatisfying experience for the customers. By instead measuring number of queries resolved, or popular query issues, we could identify which topics require further staff training.

Continuous improvement through marginal gains

Dave Brailsford, Team GB’s cycling team Director of Performance, said that continuous improvement is all about the “the aggregation of marginal gains”, after his team’s tremendous success at the 2012 Olympics in London. Dave proved that constant monitoring and a succession of apparently small adjustments in many areas can make a huge difference to overall performance. If we apply the same thinking to the elements of our key processes in shared services – finding the exceptions and outliers, understanding why they occur, then make adjustments by eliminating, refining or standardizing them – we too can benefit from the aggregation of marginal gains.

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