How To Select The Appropriate Performance Indicator?

\"If you cannot measure it, you cannot control it\" so goes the adage. But the question is often, measure and control what? There are performance indicators for every conceivable role in every organization. Some of these are discussed.

The most crucial role in any company is Sales and Marketing: Some measures are, market share percentage, new product sales percentage in overall sales, new customer percentage in overall sales,On-time deliveries, returns percentage to sales, number of complaints, average time to resolve complaints, top three dissatisfaction issues, improvement in dissatisfaction issues over a prior period, lead time for new product.

Operations is the next role: Productivity, takt time to standard, lab hours lost, scrap %, cost of poor quality, rework %,defects PPM, capacity utilization, manufacturing cycle time, service cycle time, design to market cycle time, absenteeism rate, cost savings % to overall costs, material cost to sales, preventative maintenance completion percentage, down time hours, top three down time issues and improvement on that.

Financial indicators could be return on investment, gross profit to sales, asset turnover, working capital ratio, sales growth, gross margin percentage, net income as a percentage of sales, customer profitability, product profitability, market profitability, cash flow comparison, obsolete inventory, and capital investment.

Human Resources: employee attrition, training hours per employee, benefits % to payroll, employee complaints, lead time for resolution of employee complaints, average length of service. safety and environmental: number of days without an accident, fines paid, recycled percentage, resources consumed, energy reduction, toxic waste produced.

Engineering: cost savings, material cost reduction, cycle time improvement, problem resolution lead time.

Before we finalize the list of indicators that we track, we need to answer some issues such as

- What are the important issues in the business that needs to be tracked?

- Why are these issues needed to be tracked?

- Who will compile this information?

- Who will be the recipient of this information?

- How will improvements be communicated?

- In what frequency is this information to be reported and to whom?

Unless these questions are answered and the recipients clearly understand what is expected, it will be one more report on the pile.

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