A key performance indicator (KPI) is just one of many types of metrics, but the phrase is wildly overused. KPIs should be measures critical to the success of the enterprise. If a business has a good KPI, it will typically be successful. An organization should only have a few KPIs (not a dozen, or even more) since it is tough to manage more than five or so.
I remember a heavy equipment fleet meeting that concerned the team's performance measured by some standard metrics. The company maintained large haul trucks, excavators, bulldozers, and a variety of smaller pieces. In the meeting, fleet managers were reviewing performance month-over-month and discussing longer-term trends.
This fleet, like every large organization, uses metrics for a variety of reasons.
- The metric might be globally important, such as ton-mile or cost per ton.
- The metric might measure improvement, such as a positive trend in preventive maintenance (PM) compliance.
- Metrics might be an input to a bonus scheme.
- Metrics might rate the location on its mission to "do no harm" (measure: lost time).
Metrics are essential in a large business for all types of measurements. A shop manager will use metrics to alert them that the backlog is getting too large so they can intervene before the operators notice the problem. All kinds of profitable business practices are based on metrics.
Humans can be brilliant when it comes to manipulating measures to make ourselves look good.
Some people play to win the KPI game by running around at the end of the period trying to complete every overdue PM, or by placing orders for every out-of-stock item. That is not a problem, though. KPIs are designed to set people in action in the right direction.
There is a dark side to metrics, however. The dark side is when the metrics are manipulated to show something that is not true or display improvement in something that is not improved.
Another conversation at the fleet meeting was about how to calculate a particular KPI. One of the computer-savvy people in maintenance reported that she looked at the script and saw that many numbers were added together and divided by the hours. The discussion then veered off in what seemed like an unhealthy direction.
They were changing some of the KPI inputs to make them look better without any real improvement. Some of the information can be changed easily and without consequences; this appeared to be a win-win situation, but in reality is gaming the number. KPIs can be gamed by increasing or decreasing an extraneous factor that improves performance without anything having been done better.
An example is schedule compliance. It is supposed to measure how much of the scheduled work was completed during the scheduled period. This is calculated by adding up the earned hours for scheduled jobs completed, then dividing by the number of hours scheduled.
If someone plays with the hours scheduled (the denominator) by claiming more emergency hours, compliance can appear to improve without actually improving anything.
The whole point of KPIs is to create an opening for action. Don't render them useless, or worse – render them incorrectly.
This article originally appeared on Fleet Maintenance.