#47 The 7 Performance Signals to Look For in Your KPIs

June 1, 2010 by Stacey Barr

Your performance measures are there to give you advice about what is going on in your business so you can choose the most appropriate way to manage its performance. This means that you will choose different types of actions depending on what kind of advice your measure is giving you, or, what kind of signal it’s giving off.

There are seven important performance signals you’ll want to look for, and be prepared to respond to when you see them:

traffic lightSignal 1: Performance is unpredictable or chaotic

When performance is unpredictable you’ll see it fluctuating wildly with very large variability from week to week or month to month. This chaotic behaviour is symptomatic of a business process that is out of control because it lacks standardisation in the process steps or the inputs used. Don’t try to improve performance. You need to get it under control first.

Signal 2: Performance is worsening

Depending on your performance measure, worsening performance might be evidenced by an upward trend or shift, as in the case of Expenditure or Rework Hours, or by a downward trend or shift, as in the case of Customer Satisfaction or Profit. If you can pinpoint when the worsening in performance began, you have a better chance of finding out why, and taking successful action to turn the trend around.

Signal 3: Performance is stable and not changing

Performance values will always vary to some extent, and variation does not necessarily mean change. If your performance measure values are varying consistently within the same band or range, and you don’t see any values breaking away from this consistent but random pattern over time, the measure is signalling that nothing is changing. Sometimes that’s good, but it’s not good if you expect to see improvement.

Signal 4: Performance is improving, but not fast enough to reach the target

All improvement in performance is good, when it’s planned, but sometimes improvement is not big enough or fast enough to reach the planned targets. If the targets still matter, and your measure is signalling that the improvement rate won’t be fast enough to reach the target in time, you need to intervene.

Signal 5: Performance is improving at a rate fast enough that the target will likely be met

This is a good signal! That your measure is indeed tracking confidently toward its target level of performance is a great sign that your strategies and improvement projects aimed at achieving the target are working. But such signals are not a sure sign, because just as extraneous factors can cause a deterioration performance beyond your control, they can also cause an improvement in performance beyond your control too (just take the economy as an example in both cases). Check before you celebrate.

Signal 6: Performance has reached target

The best signal to get from your performance measures is that the target has been achieved. As with the signal of performance tracking confidently toward its target, this is a great sign that your strategies and improvement projects have worked. But again, such signals are not a sure sign, because of those extraneous factors outside your control. Check before you celebrate.

Signal 7: Performance has exceeded the target

Contrary to what you may think, exceeding a target is not better than meeting a target. It is a potential waste of resources and time that could have been better spent fixing more important performance shortfalls.

The best way to be sure you can see these signals in your KPIs and performance measures is to present them in a time series, using a line chart, with at least 20 historic values, and add your target as a point above the future date it should be achieved. Then you’ll have a clear view of what’s really happening with performance, and you won’t make those rash and wasteful decisions from drawing conclusions based on “this month to last month” comparisons.

TAKING ACTION:
Are your KPIs and performance measures displaying graphically in a way that can highlight these 7 important performance signals? If not, display your measures in a time series line chart, with at least 20 historic values, and add your target as a point above the future date it should be achieved. What insights does this give you about actual performance?

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