Key Performance Indicators

Wednesday, September 26th, 2012

Key Performance Indicators

The risk of not knowing how a supplier is performing is unacceptable. Our risk auditing services regularly provide evidence that no KPI’s exist or have not been subjected to rigorous scrutiny before they have been included in a contract. We dealt with a contract for the provision of security services to a Premier League football club. If you use basic imagination on the potential consequences of this contract ‘going wrong’ it would not be difficult to realise the very serious consequences. If the security guard providing services at the footballers’ home were to absent themselves and the family was kidnapped, the likely consequences are unimaginable. Consider a position where a threat is made on the footballers’ home telephone and that threat is not passed to the police in a timely manner there are potentially serious consequences.

Is the position any different for services? They may be in degree of seriousness but the supplier still needs to be held to account. The reporting of performance will in some cases need to be on an hourly basis, others daily, weekly, monthly and/or annually.

Here are some tips for when you create or revisit contract KPI’s.

i)                    Are they capable of being accurately measured?

ii)                   How will you gather information on qualitative KPIs?

iii)                 Are the KPIs easily measurable in a manner that they are understood?

iv)                 Are the KPIs capable of being compared over time?

v)                  Are the KPIs related back to the business objectives?

vi)                 Are the KPIs subject to continuous improvement?

vii)               Who has an input to the KPIs?

viii)              Are the KPIs linked to damages/incentive payments?

ix)                 How is the reporting going to take place?

x)                  Do we have information to check the information being provided?

Only today we have become aware of risks from not having KPIs. One situation relates to the secure disposal of confidential reports, another to the availability of an airport baggage handling system and another on a construction project where the task has to be completed by Remembrance Day. KPIs are a vital management tool. Use it with professional application. Beware the suppliers who resist KPI accountability.