Best Practices Field Service Organizations (FSOs) Use Targeted KPIs to Measure Their Industry-Leading Service Delivery Performance

(Drill-down Results from SFGSMs 2014 Field Service Management Benchmark Survey – Part 5)

Perhaps one of the greatest differences between Best Practices organizations and the general population is that the former place significantly more emphasis on the development of, and in most cases, the continuous improvement of, the KPIs and metrics they use to measure, monitor and track their field service performance over time. Presently, 61% of Best Practices organizations cite the development and/or improvement of the KPIs they use to measure field service performance as the number one strategic action currently being taken (as well as planned over the next 12 months). This compares with only 52% among the general population.

The top Strategic Actions currently being undertaken by Best Practices Field Service Organizations are:

  • 61% Develop/Improve Metrics, or KPIs to measure FS Performance
  • 42% Invest in Mobile Tools to support Field Technicians
  • 35% Integrate New Technologies into existing FS Operations
  • 30% Automate existing Manual FS processes and activities
  • 28% Provide additional Training to FS Technicians and Dispatchers
  • 24% Provide Enterprise-wide Access to important Field-collected data
  • 21% Increase Customer Involvement in Web-based Service Process
  • 20% Improve Planning & Forecasting with respect to Field Operations
  • 13% Hire additional Field Service Technicians and/or Dispatchers
  • 11% Outsource some, or all, Field Service activities to partners or vendors

Further, while current and planned investments in new technologies and mobile tools are cited fairly equally between the two categories of respondents, there are other key differences that give the Best Practices organizations an advantage over time. These include:

  • 30% of Best Practices organizations are currently taking steps to automate existing manual field service processes and activities, compared to only 26% for the general population); and
  • 21% of Best Practices organizations are currently increasing customer involvement in Web-based service processes, compared to only 18% for the general population).

While these relatively small differences may not look like much of a differential between the two groups, they do make a difference in the ongoing ability of Best Practices organizations to meet their customer’s expectations – and continually raising the bar – simply by doing so!

Planned strategic actions over the next 12-month period reflect an even more dynamic, rather than static, approach to the field services marketplace. For example, almost half (i.e., 49%) of Best Practices respondents plan to integrate new technologies, and another 43% plan to develop and/or improve their use of field service KPIs, or metrics, in the next 12 months.

Still another 35% plan to improve their planning and forecasting activities, and almost as many (i.e., 32%) plan to invest in the next generation of mobile tools to support their technicians in the field. Other key planned actions will be taken in areas relating to providing additional training for field technicians and dispatchers (28%), automating existing manual field service processes or activities (26%), increasing customer involvement in the service process via We-enabled self-help (i.e., call initiation, scheduling, visibility into call status, etc.) (25%), and providing enterprise-wide access to important field-collected data (22%).

What these data primarily show is that the Best Practices organizations recognize the need to take specific strategic actions to enhance and improve existing service operations, and that these actions begin first and foremost with the need to develop and/or improve the use of service metrics and KPIs for measuring and monitoring their overall service delivery performance. It also shows that FSOs recognize the need to invest in the right technologies and mobile tools to empower their resources both in the field, and in the back office, to improve existing processes, meet the evolving and growing needs of customers, and make greater contributions to the bottom line.

The survey findings also reveal that there are as many as 14 individual service performance metrics, or KPIs, presently being used by a majority (i.e., 50% or more) of the Best Practices organizations that participated in the 2014 Field Service Management Benchmark Survey (compared to only 5 among the general population). They include:

  • 90% Customer Satisfaction (up from 80% among the general population)
  • 78% Total Service Revenue (up from 72%)
  • 75% Total Service Cost (up from 69%)
  • 68% Service Revenue, as a Percent of Total Revenue (up from 52%)
  • 58% Mean-Time-to-Repair (MTTR) (up from 46%)
  • 57% On-site Response Time (up from 49%)
  • 54% Percent of Total Revenue Under SLA/Contract (up from 45%)
  • 53% Service Level Agreement (SLA) Compliance (up from 45%)
  • 53% Service Contract Renewal Rate (up from 42%)
  • 51% Field Technician Utilization (down from 59%)
  • 51% First Time Fix Rate (up from 47%)
  • 50% Service Parts Revenue, as a Percent of Total Service Revenue (up from 43%)
  • 50% Customer Retention (up from 43%)
  • 44% Field Technician Productivity (down from 48%)

As such, it appears that Best Practices organizations already have taken steps to keep field technician utilization and productivity in check, and – as a result – are using a multitude of other KPIs to measure, monitor and track their respective performance.

Next up (in Part 6) will be a discussion of which tools and technologies Best Practices FSOs are using to directly support their field techs and customers.

What Best Practices Field Service Organizations (FSOs) Are Doing to Differentiate Themselves from the Rest of the Pack

(Drill-down Results from SFGSMs 2014 Field Service Management Benchmark Survey – Part 4)

Overall, survey respondents meeting the requirements for Best Practices status (i.e., attaining both 90% or greater Customer Satisfaction, and 30% or greater Services Profitability) identify the following as the top factors, or challenges, that currently drive their desire to optimize field service performance:

  • 50% Customer demand for quicker response time
  • 43% Need to improve workforce utilization and productivity
  • 40% Internal mandate to drive increased service revenues
  • 40% Need to improve service process efficiencies

The data clearly reflect that those Field Service Organizations (FSOs) which have already attained Best Practices status appear to place somewhat more emphasis on key market drivers such as customer demand for quicker response time, and internal mandate to drive increased service revenues than their non-Best Practices counterparts. Therefore, it should come as no surprise that they are also attaining the highest levels of Customer Satisfaction and Service Profitability among the overall survey universe.

However, in order to effectively address these key challenges – and strive to maintain their Best Practices status – respondents then cite the following as the top strategic actions they are currently taking:

  • 61% Develop / improve metrics, or KPIs, used to measure field service performance
  • 42% Invest in mobile tools to provide field technicians with real-time access to required data and information in the field
  • 35% Integrate new technologies into existing field service operations (i.e., iPads, Tablets or other devices, etc.)

While the survey results reveal fairly similar patterns reflecting the integration of new technologies and investment in mobile tools to support the field force, the big difference is reflected in the percent of Best Practices services organizations that are currently developing and/or improving the Key Performance Indicators (KPIs) they will be using to measure their respective performance; i.e., cited as a top strategic action by 61% of Best Practices respondents, compared to only 52% for non-Best Practices respondents.

The remainder of this white paper provides additional insight into each of these and other related areas that may be influencing your organization’s drive to attain Best Practices, as well as highlighting those resources that the leading organizations currently have in place – or are planning to implement – that have already taken them to Best Practices status.

The survey results reveal that 81% of Best Practices respondent organizations currently operate service as an independent profit center (or as a pure, third-party service company), compared with only 66% among non-Best Practices organizations. Even so, there are just under one-in-five (18%) that still operate as cost centers – even though they are attaining high levels of customer satisfaction and overall services profitability. Nonetheless, there are only roughly half as many Best Practices organizations that are still running service as a cost center, compared to all others.

While there has not been a significant change in these percentages from similar surveys conducted over the past two years or so, this 4:1 ratio strongly validates the fact that profit centers now represent the dominant business model within the Best Practices services community.

It is noted, however, that the percentage of organizations running service as an independent profit center varies – sometimes significantly – by size of organization (i.e., based on annual revenue or turnover). The overall survey findings indicate that US$1 billion-plus organizations come in at 74%, while SMBs (i.e., Small and Medium-sized Businesses) report only 55%. Not surprisingly, organizations reporting total annual service profits of greater than 30% come in at 76% – one of the highest levels among all of the segments covered in the survey. As such, they are not only operating service as a profit center – they’re actually making a significant profit by doing so!

The Best Practices respondent base also clearly confirms that the predominant mode of Field Service Management (FSM) solutions currently being deployed is mainly off-the-shelf, either with some customization (40%), or basically right out-of-the-box with no customization (6%), comprising nearly one-half (46%) of the respondent base in total. This figure is just over 10% higher than that cited by non-Best Practices organizations.

More than a third of respondents (34%) are either using home-grown, or internally-developed automated systems (15%), or custom solutions developed by a systems integrator (19%). While this overall percentage appears similar to that cited by the general services community, Best Practices organizations are far more likely to deploy a custom solution by a systems integrator (i.e., 19%, vs. only 12% for non-Best Practices), but far less likely to develop their FSM solution internally (i.e., 15%, vs. 23% for non-Best Practices organizations).

However, the most perplexing statistic may be the fact that nearly one-in-five Best Practices organizations (18%) are still running their field service operations basically via a series of manual processes (and spreadsheets) – the same percentage attributable to the total respondent base!

The key drivers that most influence Best Practices organizations to improve the overall performance of their field service operations are similar to those cited by the general population, although, in a slightly different order – i.e., one that places somewhat more emphasis on the customer. For example, both sets of survey respondents cite customer demand for quicker response time and the need to improve workforce utilization and productivity as their top two market drivers.

However, while the general population focuses more on the need to improve service process efficiencies, the Best Practices organizations, having already done some work to improve this area, are able to turn their focus back to the customer, primarily with respect to meeting their demands for improved asset reliability – while, at the same time, also meeting internal management’s mandate to drive increased service revenues. Thus, for most Best Practices organizations, the need to improve internal service processes comes after these more immediate challenges that focus, first, on the customer; second, on productivity; and third, on driving service revenues – all key components that ultimately contribute directly to the bottom line.

While these market drivers may differ somewhat in intensity in each of the two surveyed populations, it is clear that the main focus remains squarely on the customer – particularly among the Best Practices organizations. They have already recognized that they could not initially attain – nor maintain – their elite status in the services community without having focused first on their customer’s needs and requirements; and, next, on improving the internal services operations necessary to meet their expectations.

As such, the common threads that tie all of these drivers together among Best Practices organizations may be best categorized into three groupings essentially comprising:

  • Customer demand for quicker response and improved asset availability;
  • Field technician utilization, productivity and efficiency improvement; and
  • An internal mandate to drive service revenues – and profits.

We also believe that it is a mistake to dwell only on the “top” factors that are driving the market – and the organization. In fact, there are several other factors that respondents cite as just “bubbling under the surface” with respect to their potential impact on the overall well-being of Best Practices organizations. These include:

  • 38% Competitive pressures / need for market differentiation
  • 21% Escalating field service operations costs
  • 13% Customer demand for more accurate service call scheduling
  •   6% Need to reduce / eliminate incidence of night / weekend work

It is noted, however, that while 6% (i.e., 1-in-sixteen) respondents in the general population cite the need to reduce dispatch-related problems, this factor apparently is not an issue among the Best Practices organizations.

Another key influencing factor revealed through the analysis of the survey findings is that 71% of the Best Practices services organizations surveyed have experienced some improvement in year-over-year field technician productivity (i.e., measured in terms of average calls completed per day), compared to 67% among the general population). However, more than half (i.e., 52%) have also experienced improvements in service revenue, per field technician during the same period. An even greater percentage (i.e., 61%) have also experienced improvements in their year-over-year service profitability.

In fact, these year-over-year increases have led the Best Practices organizations in attaining a mean average of 49.6% service profitability in the most recent reporting period, compared to only 38% among the general population. Further, at a mean average of 95%, Best Practices organizations currently enjoy customer satisfaction levels that are substantially higher than those attained by the general population (i.e., only 85%).

Each of these lofty levels of performance assure that most Best Practices organizations will likely retain their standing in the overall services community: first, through sheer momentum; and finally, by the fact that they already have, in most cases, addressed – and taken steps to improve – each of these key areas of performance, typically leaving them more able to focus on what originally took them to the top – the customer (and the bottom line).

Next up (in Part 5) will be a discussion of which KPIs Best Practices FSOs are using to measure their industry-leading service delivery performance.

Measuring Your Way To Greater Service Delivery Performance

(Topline Results from SFGSMs 2014 Field Service Management Benchmark Survey – Part 2)

Based both on the current survey findings and SFGSM’s ongoing research, it is not surprising that the field services community recognizes it will need to increase its investments in new technologies and mobile tools in order to compete in an expanding global marketplace. In addition, it also recognizes that it will need to develop and/or improve the Key Performance Indicators (KPIs), or metrics, it uses to measure the impact that these implementations, deployments and technology advances will actually have on the organization’s performance.

The top Strategic Actions currently being undertaken by Field Service Organizations (FSOs) are:

  • 52% Develop/Improve Metrics, or KPIs to measure FS Performance
  • 44% Invest in Mobile Tools to support Field Technicians
  • 34% Integrate New Technologies into existing FS Operations
  • 30% Provide additional Training to FS Technicians and Dispatchers
  • 29% Improve Planning & Forecasting with respect to Field Operations
  • 26% Automate existing Manual FS processes and activities
  • 25% Provide Enterprise-wide Access to important Field-collected data
  • 18% Increase Customer Involvement in Web-based Service Process
  • 15% Hire additional Field Service Technicians and/or Dispatchers
  • 14% Outsource some, or all, Field Service activities to partners or vendors

The ”new” global economy also demands that these investments be made in a certain balance that allows the newer technologies to support a “back to the basics” approach with respect to running a successful – and profitable – field services organization. In other words, services organizations need to embrace “new” technologies, but without forgetting that it is still “all about the customer.” Some of the basic strategic actions that between one-quarter and one-half of respondents also cite include training, planning and forecasting, service delivery automation and enterprise-wide access to important field-collected data.

Planned strategic actions over the next 12-month period reflect a more dynamic, rather than static, approach to the field service marketplace. For example, an additional 41% of respondents plan to develop and/or improve their use of field service KPIs, or metrics, in the next 12 months, and nearly as many plan to integrate new technologies (36%) and invest in the next generation of mobile tools (33%) to support their technicians in the field. Other key planned actions will be taken in areas relating to the automation of existing manual field service processes or activities (33%), improving planning and forecasting activities (32%), and providing additional training for field technicians and dispatchers (30%).

What these data primarily show is that the field service community recognizes the need to take specific strategic actions to enhance and improve existing service operations, and that these actions begin first and foremost with the need to develop and/or improve the use of service metrics and KPIs in measuring and monitoring their service delivery performance. In addition, it shows that FSOs also recognize the need to invest in the right technologies and mobile tools to empower their resources both in the field, and in the back office, to improve existing processes, meet the growing needs of customers, and make greater contributions to the bottom line.

The survey findings reveal that there are basically five service performance metrics, or KPIs, presently being used by a majority (i.e., 50% or more) of the FSOs that participated in the 2014 Field Service Management Benchmark Survey. They include:

  • 80% Customer Satisfaction (up from 70% in the 2011 Survey)
  • 72% Total Service Revenue (up from 66%)
  • 69% Total Service Cost (up from 51%)
  • 59% Field Technician Utilization (up slightly from 56%)
  • 52% Service Revenue, as a Percent of Total Revenue (not asked in 2011)

However, there are also an additional seven KPIs that are used by just under one-half of FSOs to help them measure their performance. These include:

  • 49% On-site Response Time (down from 51% in the 2011 Survey)
  • 48% Field Technician Productivity (down from 66%)
  • 47% First Time Fix Rate (down from 45%)
  • 46% Mean-Time-to-Repair (MTTR) (down from 49%)
  • 45% Percent of Total Revenue Under SLA/Contract (not asked in 2011)
  • 45% Service Level Agreement (SLA) Compliance (down from 48%)
  • 43% Service Parts Revenue, as a Percent of Total Service Revenue (not asked in 2011)

Thus, presented in this manner, it appears that the most commonly used service performance KPIs from two years back are even more commonly used by FSOs today.

Next up (in Part 3) will be a discussion of which Key Performance Indicators (KPIs), or metrics, FSOs are currently using to measure their service delivery performance.

Driving the Field Service Management Market to Improved Service Delivery Performance

(Topline Results from SFGSM’s 2014 Field Service Management Benchmark Survey – Part 1)

Each year, Strategies For GrowthSM (SFGSM) conducts a series of Benchmark Surveys among its outreach community of more than 45,000 global services professionals. Total responses for the 2014 Field Service Management Benchmark Survey are 1,104, representing a microcosm of the global services community.

Overall, survey respondents identify the following as the top factors, or challenges, that are currently driving their ability to optimize field service performance:

  • 52% Customer demand for improved asset availability
  • 47% Need to improve workforce utilization and productivity
  • 43% Need to improve service process efficiencies

In order to effectively address these challenges – and strive to attain best practices – respondents then cite the following as the most needed strategic actions to be taken:

  • 52% Develop / improve metrics, or KPIs, used to measure field service performance
  • 44% Invest in mobile tools to provide field technicians with real-time access to required data and information in the field
  • 35% Integrate new technologies into existing field service operations (i.e., iPads, Tablets or other devices, etc.)

The survey results reveal that nearly two-thirds (66%) of respondent organizations currently operate service as an independent profit center (or as a pure, third-party service company), compared with only 31% that operate as cost centers. While there has not been a significant change in these percentages over the past two years or so, this two-thirds ratio validates the fact that profit centers now represent the dominant business model for the services community.

It is noted, however, that the percentage of organizations running service as an independent profit center varies – sometimes significantly – from one industry segment to another. For example, the medical/healthcare segment reflects only 57% running as profit centers, compared to 65% for the Computer/IT Services segment and 77% for industrial/manufacturing – a 20% spread.

US$1 billion-plus organizations come in at 74%, while SMBs (i.e., Small and Medium-sized Businesses) report only 55%. Not surprisingly, organizations reporting total annual services profits of greater than 30% come in at 76% – one of the highest levels among all of the segments covered in the survey. As such, they are not only operating service as a profit center – they’re actually making a significant profit by doing so!

More importantly, the respondent base clearly reflects the predominant mode of Field Service Management (FSM) solutions currently being deployed – that is, typically off-the-shelf, either with some customization (37%), or basically right out-of-the-box (4%), comprising 41% of the respondent base in total.

More than a third of respondents (35%) are either using home-grown, or internally-developed automated systems (23%), or custom solutions developed by a systems integrator (12%). However, the most perplexing statistic may be the fact that nearly one-in-five respondents (18%) are still running their field service organizations basically via a series of manual processes (and spreadsheets).

Despite the means by which field service operations are being managed today, one of the more compelling reasons for why so many organizations are looking for ways to improve or enhance their service delivery performance and, ultimately, their corresponding levels of customer satisfaction and service profitability, is the fact that less than half (43%) are currently attaining as high as a 90% customer satisfaction rating. While more than a quarter (28%) currently find themselves performing in the 70% to 89% satisfaction range (i.e., probably where your organization stands), the best practices organizations typically find themselves at the 95%-plus level – and this is, ultimately, where you want to be!

However, making the improvement from a level of 70% – 80% customer satisfaction to 90% or higher is not simply accomplished through the implementation of new field service software automation technologies; or the deployment of mobile tools, devices and solutions and simply waiting for customers to become more satisfied – there are many additional aspects of service performance that will still need to be improved and/or enhanced in order to have a positive impact on customer satisfaction.

The respondents to the survey have clearly identified the specific drivers that are pushing them to aspire to the attainment of higher levels of performance. For example, customer demand for quicker response time is cited by just over half of the respondent base (i.e., 52%) as the top driver their organization currently focuses on with respect to optimizing field service performance. The need to improve workforce utilization and productivity is next most highly cited by 47% of respondents.

It is noted, however, that these two market drivers have essentially “flip-flopped” over the past two years in terms of characterizing the most important market drivers currently impacting the market’s path toward service delivery optimization. As such, once again,   the top market driver is focused on satisfying the customer, rather than strictly on improving internal processes and/or productivity – a reflection back to the more historical perspective of the field service community.

However, there are several other key drivers that also impact between one-third and one-half of the market, including the need to improve workforce utilization and productivity (47%), the need to improve service process efficiencies (43%), customer demand for improved asset availability (35%), and an internal mandate to drive increased service revenues (33%).

As such, the common threads that tie all of these drivers together may be best categorized into three groupings essentially comprising:

  • Customer demand for quicker response and improved asset availability;
  • Field technician utilization, productivity and efficiency improvement; and
  • An internal mandate to drive service revenues – and profits.

The results of the survey reaffirm the relationships between and among these three groupings by linking internal process and productivity improvements directly to improved customer support, ultimately leading to reduced costs, increased revenues, more satisfied customers, and a healthier bottom line.

Another key influencing factor revealed through the analysis of the survey findings is that only two-thirds (67%) of the services organizations surveyed have experienced any improvement in year-to-year field technician productivity in the most recent period. In fact, one-in-12 have actually experienced declines in productivity over this 12-month period – some of which were up to 50%! These levels of year-to-year declines in performance are largely unacceptable in an environment where a majority of FSOs remain on a path toward improved service delivery performance.

We also believe that it is a mistake to dwell only on the “top” factors that are driving the market – and the organization. In fact, there are several other factors that respondents cite as just “bubbling under the surface” with respect to their potential impact on the overall well-being of the organization. These include:

  • 32% Competitive pressures / need for market differentiation
  • 18% Escalating field service operations costs
  • 15% Customer demand for more accurate service call scheduling
  •   6% Need to reduce dispatch-related errors
  •   5% Need to reduce / eliminate incidence of night / weekend work

Again, while not necessarily representing the top market drivers overall, these factors still resonate with many field services organizations in terms of their impact on the way day-to-day business will need to be transformed in order to meet customer – and market – expectations for meeting service performance and customer satisfaction expectations. Best practices field service organizations typically take all of these factors into consideration when evaluating their service performance and identifying more effective ways by which to satisfy their customers.

Next up (in Part 2) will be a discussion of what many of these FSOs are currently doing – and planning to do – with respect to addressing these key market drivers.

What Is Customer Relationship Management (CRM), and Why is It So Important?

Customer Relationship Management, or CRM, may be defined in many different ways – and the variety of definitions can be all over the place. For example, some people think of CRM as mainly being a software product, as in “We just implemented a new CRM software package at our company”; while others think of it more as a business strategy, as in “We’ve adopted a CRM strategy at our company that will help us support our customers better.” Still others think of CRM as a set of operational processes or business applications, as in “We’ve implemented a new set of business guidelines that our employees will be using to keep customers satisfied.”

As you can see, there are many ways to define or explain CRM – but the common thread that runs through all of these definitions is that CRM – no matter how you define it – can be used to make it easier for both your company – and you – to keep your customers satisfied

To avoid any potential confusion about what CRM really is, we prefer to define it somewhat broadly as “a general way of doing business, built on a customer-focused strategy, and executed by trained personnel who are empowered with the right tools and processes to provide customers with the desired levels of support and support”. As such, CRM is neither a “product” nor a “service”. It is simply a way of doing business that focuses squarely on the customer.

One of the best ways to understand what CRM is all about – and how it can ultimately make your job easier – is to look at each of the individual words that make up the name, and see exactly how they interact with one another.

Basically, CRM is the ability of the services provider (that is, you and your company) to Manage the Relationships it has with its Customers. Just as the sign of a good manager is his or her ability to get the most out of their employees and keep everyone both happy and productive, the same guidelines apply to CRM. By adopting a CRM “way of doing business”, your company – and you, as an ambassador of the company – will also be depended upon to ensure that customers receive all of the service and support they require to keep their business systems and equipment up and running. And by doing so, you will continually be showing them that you are doing everything possible to meet their service and support needs, as well as everything it takes to keep them satisfied.

CRM is what organizations put into it. Nothing more, and nothing less. The trouble is that some organizations still do not recognize the importance of CRM – or even if they do, they still don’t quite know how to make it work all the way down to the individual customer level. They understand that CRM is important – and, in fact, essential – but they may not know how to effectively implement and manage it.

However, this is where you can contribute the most – right down to the grass roots, customer face-to-face level, where it so important to reflect your best capabilities and performance. Ultimately, your company’s CRM program must belong to you. It must be embraced by you, practiced by you, measured by you, and managed by you. Remember – you’ll need to constantly monitor your company’s – and your own – performance, because your customers are already doing so!

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.