Could your KPIs do more?

"Hey! Are you lookin' at me?"

In the current environment, reducing costs and increasing productivity are the keys to success.

This was emphasised strongly by a recent PriceWaterhouseCoopers (PwC) report which found that profits at the world’s top 40 mining companies, including BHP Billiton and Rio Tinto, slumped by half as the mining boom came off its highs, then reduced by a further 70% more recently.

PwC Australia’s head of energy and mining, Jock O’Callaghan, says the global mining industry is facing a crisis of confidence.  It’s no great revelation that they need to focus on cutting costs and improving productivity!

Productivity Falls Short

Unfortunately, productivity in Australian workplaces continues to fall short.

Ernst & Young’s (E&Y’s) recent Australian Productivity Pulse, revealed over $300 billion in unrealised potential for Australian companies.

This report found that a staggering 85% of employees could be more productive.

Perhaps most critically, E&Y found that the key to increasing productivity is to measure productivity.

You Need to Measure

It’s not brain surgery; effectively measuring productivity allows organisations to identify what works to increase it, as well as making more employees aware of how their actions impact the business.

Whether you’re trying to improve the operation of an individual, a department or an entire organisation, key performance indicators (KPIs) are critical.

But, just having KPIs is not necessarily going to deliver positive business outcomes.

Your KPIs need to be accurate, reliable, clear and relevant.

And unfortunately, even having those four critical elements right, your KPIs can still be a complete waste of time if the person who needs to take action doesn’t understand what they mean or if the performance isn’t clearly communicated.

Getting your KPIs Right

The critical success factor is:

Designing, implementing and communicating KPIs using the best possible practices and principles to ensure that your KPIs are:

  • Effective
  • Relevant
  • Understood – and so can be acted upon.

This means that effective modelling, reporting and analysis for organisations is critical to enable them to improve their financial and operational performance.

In a nutshell, what gets measured gets done.

This makes KPIs vital!  Because today’s successful organisations create sustainable competitive advantage by focusing on costs, productivity, profitability and optimisation relentlessly across their businesses.

Measurement and reporting are the keys to driving that meaningful focus.

KPIs must focus on only what’s important, and measure progress towards defined goals.  However, we must also accept that measures are not always precise.

It is imperative that what we measure aligns individuals to organisational goals, and that KPIs are presented in an accessible dashboard format that can be effectively distributed throughout the organisation.

Dashboard Best Practice

Access Analytic believes that best practice dashboard principles can be distilled to two critical considerations:

  • Communication
  • Actionability

In terms of the basics, data must be accurate, timely, reliable, and clean.  It must be easy to update, and ideally, this should be an automatic process.

As the overriding objective is communication that supports action, the presentation of the data should define what each KPI is – and what it means.

An at-a-glance screen that summarises the five or six most relevant measures can be a highly effective way to communicate key measures.

Ideally, it should also define what the KPIs are, and what they mean, and provide a high-level summary with the facility to ‘drill down’ to the detail where required.

Exceptions and particularly important information should be highlighted – and most critically – the dashboard should support action not just within the most senior executive team, but right across the organisation.

Get the Benefits for your Business

If you’re interested in reviewing your key performance measurement methodology, contact Jeff Robson on +61 8 6210 8500.