Using Key Performance Indicators (KPIs) to Drive Service Operations Improvement

The concept of Key Performance Indicators (KPIs) has been around for as long as many of us have been working in the services sector. However, each of our organizations may have a different understanding of their importance and use. Generally, the first hurdle for many service managers is gaining the proper understanding of exactly what KPIs are, and what they can do to help them run their service operations more efficiently.

In fact, 52 percent of the services organizations participating in Strategies For Growth’s (SFG’s) 2014 Field Service Benchmark Survey cite the need to develop/improve metrics, or KPIs, used to measure field service performance as the top rated strategic action currently being taken (up from 45 percent in 2011). Another 40 percent plan to develop/improve their KPI utilization over the next 12 months. This clearly demonstrates that, for a majority of services organizations, the utilization of a targeted KPI measurement and tracking process is a prerequisite for their ability to manage – and improve – overall service performance.

But, how should your organization choose the most appropriate KPIs to measure?

Basically, KPIs are tools that may be used by an organization to define, measure, monitor, and track its performance over time toward the attainment of its stated organizational goals. KPIs are quantifiable metrics, or measurements, that relate to specific success attributes that reflect the organization’s performance. As such, the selection of the specific KPIs to be used may differ widely from one organization to another – or even between and among departments within the same organization. However, in order for a KPI to have maximum value, it must be clearly defined, quantifiable, and relatively easy to measure. Metrics that are vague in definition; qualitative or subjective in nature; and next to impossible to collect, interpret and analyze will not serve as a good basis for a KPI.

KPIs should also be directly linked to the critical factors that drive the performance of the organization. If the metric is not directly linked to a critical organization success factor, it will probably not be worth the resources and dollar expenditures to collect and process. In the world of KPIs, there is a big difference between “need to know” and “nice to know”. In the former, the resources required to collect, analyze, interpret, and distribute the KPI information will almost certainly be worth the effort. This “need to know” data and information is what management will ultimately use to make its decisions for moving forward. However, “nice to know” data and information is really not worth the expense, and will typically use up many of the scarce resources that might otherwise have been used to generate the more important “need to know” data and information.

Regardless of how your organization defines KPIs, the following factors should always be taken into account: The KPIs must …

  • Reflect, and relate directly to, the organization’s goals.
  • Be quantitative and quantifiable.
  • Be linked directly to the measurement of the organization’s success.

The KPIs you use must also be quantitative and quantifiable. The standard rule of thumb is “if you can’t measure it, you can’t manage it.” What this means is that it may be extremely difficult to measure your success if your targets are not quantitative in nature. For example, if your goal is to improve customer satisfaction from “good” to “very good”, it may be difficult to objectively distinguish one level from the other. However, if your goal is to improve an existing customer satisfaction rating of 85% to 88%, you will know in absolute terms whether or not you have met your goal if at the end of the period you have improved to either 87% (i.e., a point below) or 89% (i.e., a point above). In the first case, you have not met your goal; but, in the second case, you have. Only by quantifying the KPI used to measure performance in this case, are you able to determine whether you have succeeded or not.

KPIs must also be linked directly to the specific measures of the organization’s success. Simply tracking data over time, and reporting it back to management, is not useful if the data itself is not meaningful to the measure of success. For example, using KPIs to track employee attendance may be of use to your Human Resources department, but may not be directly relevant to the measure of your service engineer performance in the field. While these KPIs may be important to HR, there are far more that you should be using instead to measure field service performance (e.g., field engineer productivity/utilization, customer satisfaction, etc.).

Many organizations are also in various stages of developing or implementing CRM or ERP systems within the organization. In these situations, it is typically far better to build in the required KPI data collection processes before the system is implemented in order to save time, money – and anxiety – before the systems are set in stone.

In any event, before embarking on an KPI development initiative, it will be important to set the stage properly by first:

  • Agreeing on the appropriate metrics to measure as KPIs (i.e., “need to know” vs. “nice to know”).
  • Setting up all the measuring, monitoring, and tracking systems in advance to support the initiative.
  • Integrating KPIs with companywide CRM or ERP systems wherever possible.
  • Establishing a formal process for the ongoing collection of key performance data and information on an automated basis.

Without a formal set of objective, realistic, quantifiable, and actionable KPIs, your organization may never be able to accurately assess its performance over time. However, by using the proper mix of KPIs, both the organization, and each of its key departments and divisions, will be able to measure their success – or lack thereof – on an ongoing basis, with the ability to identify problems, cultivate opportunities, and make improvements, as necessary, all along the way.

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