Process KPIs – the basis for a successful process-oriented company
It is undisputed that process KPIs are essential for managing an organization. Key performance indicators are also essential in a process-oriented organization. They show the extent to which the execution of the process leads to the achievement of the process objectives. But how can the right process KPIs be selected? What should be considered when defining and introducing process KPIs?
What are process KPIs?
In general, KPIs concisely depict operational issues and show the need for control/analysis to achieve the desired goals.
Key figures that are used to control processes are referred to as ‘process key figures’. Process KPIs are derived from process objectives which means that process objectives form the basis for process KPIs. Without goals, we are embarking on a journey with an unknown end – which may sound exciting for the adventurous among us but does not contribute to the sustainable management of processes.
What is the benefit of process KPIs?
- Measurement of target achievement
- Orientation for process control
- Transparency about the performance of processes
- Possibility of benchmarking processes
- Relationships and expectations between predecessor and successor processes are clarified more easily
- Work organization, time, and self-management in terms of the target focus are supported
Which key figure is the right one?
‘Select the right KPIs’ – a statement that you come across again and again. But when is a process KPI useful and effective?
The process KPIs must support the process owners and management in steering their area of responsibility towards the desired process objective. To achieve this, the number of KPIs must be manageable and balanced and reflect the business content as accurately as possible. The process KPI compass developed by BPM&O provides a structure for systematically selecting the right KPIs.
Which process KPIs are available?
In operational process management, we also speak of operational process indicators (OPI). Key figures and thus also operational process indicators can be both absolute and relative values.
Absolute key figures are
- Quantities
- Time
- Value
- Quality
But of course, absolute figures can also be set in relation to each other and thus be defined as relative key figures.
Relative key figures are e.g:
- Defective quantity per total quantity
- Costs per product
- Costs per time unit
- Time to achieve quality
- Resources required to achieve quality
- Costs to achieve customer satisfaction
The process KPI compass
With the process KPI compass, we provide our customers with a tool for generating process KPIs. With its help, the control direction (effectiveness, efficiency, stability, compliance) can be determined and the measurement of the process can be selected in the appropriate measurement dimension (time, quantity, value, or quality).
Throughput time is an example of a time-related process indicator, while process costs are a value-related process indicator. Customer satisfaction, for example, is a qualitative process measurement.
The process KPI profile
Process KPIs can be documented and specified in more detail with the help of the process KPI profile. All important information on a process KPI is presented clearly and comprehensibly for everyone briefly, e.g.:
- Meaning and purpose of the process KPI
- Recipient/target group of the process KPI
- Concrete definition of the process KPI
- Type and frequency of the survey
- This helps to ensure that the control statement of the KPI is transparent for everyone and that the need for action is recognized.
Examples of ‘Purchase to Pay’ process KPIs
Below you will find some typical process KPIs for analyzing all or parts of the ‘Purchase to Pay’ process.
- DPO (Days Payable Outstanding): monetary weighted lead time from invoice receipt to payment
- Lead time from order date to goods receipt
- Number of orders
- Average order/purchase volume in €
- PO approval rate (PO: Purchase Order)
- % of cases without goods receipt
- Delivery reliability (= punctuality of delivery)
- Proportion of invoices without a purchase order
- Proportion of orders outside of purchasing (maverick buying)
- Proportion of incorrect incoming invoices
- Average duration of invoice corrections
- Compliance with the payment plan
What are the challenges?
The introduction of process KPIs can be associated with fears and anxieties and can lead to resistance. Experience has shown that open communication, among other things, is very favorable for the acceptance of the project. We therefore recommend accompanying the introduction with suitable change management methods.
Measuring process performance – which tools are available?
There are a variety of methods available to measure process performance. Process mining is becoming increasingly interesting in this context. It reconstructs processes from IT systems and enables the automated collection, visualization, and analysis of process KPIs.
For many companies, conducting an ‘eden’ maturity level analysis is a helpful method for gaining an overview of the status quo in process management and what the goals and possible strategies for achieving the next maturity level could be. The maturity level analysis can be carried out together with our certified eden consultants.
Process KPIs as the basis for the process analysis
Process KPIs can be used to identify the need for analysis to achieve the desired goals. This identified need for analysis triggers the start of the subsequent ‘analyze processes’ phase of operational process management. Existing problems can be uncovered as part of the process analysis. Why might the time, value, quality, or quantity of the process not be in line with expectations? Why might the set targets for efficiency and effectiveness, stability, or compliance not be achieved? These questions are addressed in the process analysis.
Would you like to find out more about process KPIs?
