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KPI Implementation Case Study

Peter Drucker, the renowned modern business guru, is credited with the following: “If you can’t measure it, you can’t improve it...”

Welcome Professionals,
I am J. Reynolds – President and CEO of Fortune 1000 metal stamping firm

As the owner of a light manufacturing business, I saw performance inconsistencies between the day, afternoon, and midnight shifts in the areas of product quality, equipment downtime, and overall employee first-aid incidents. This hit my bottom line horribly! As the guy at the top, I needed to find out WHY? I quickly understood the metrics I needed to measure our performance were there, but not being measured. I then found out about Key Performance Indicators (KPIs). Tweaks to our manufacturing process not only improved my bottom line...morale is better than ever!

Typical KPIs we measured included:

  • Number of times errors are made by staff
  • Number of unexpected incidents due to failure of equipment
  • Number of elements of the emergency procedure that do not function to the designed performance standard
  • Number of incidents attributable to staff failure in recognizing alarms

The metrics for these indicators showed significant problems within our organization. Unfortunately, these indicators are not predictive of future incidence likelihoods. For this reason, they are called Lagging Indicators. The concept of a Lagging Indicator and its’ non-predictive nature needed to be clearly explained to staff with an intuitive example. For instance: measuring the incidence of Alarm Failure Recognitions is not very helpful if a single incident may result in serious injuries or fatalities. It is “After the Fact” and it says nothing about the factor(s) influencing and/or leading to the event. The incidence rate may have been zero; however, multiple Near Misses have occurred, and the next catastrophic incident is just around the corner! Perhaps, we should focus on metrics that are predictive in nature?

Meet Leading Indicators

Leading indicators are best understood if one views leading indicators as those “activities” conducted to minimize the likelihood of an accident or event. Think of leading indicators as leading your business to a positive outcome. The number of times an employee is trained on something as simple as the procedure to follow in responding to an alarm or tracking the number of times per quarter the individual steps within an operating procedure were followed are good examples of leading indicators.

If an operating error in a facility results in an explosion, a lagging indicator has been created. Management of leading indicators are used to PREVENT the creation of a lagging indicator.

To put the example in perspective, what are the consequences if the steps in a procedure are not followed? Most likely, and depending on the loss/injuries, lack of compliance to a procedure could be much more expensive than costs associated with managing indicators.

In simple terms, creation and proper management of leading indicators allows management to track activities/actions to lower the likelihood of an accident, improve employee morale, and ensure quality is maintained in output/ products in an organization. In the metal stamping business reliance on the metal suppliers’ quality program can be a mistake as intermittent quality checks during the stamping of parts can minimize “out-of-specification” issues. Checking the quality of the steel multiple times during part stamping allows employees to address steel quality issues and minimize off-spec production. Tracking the frequency of such tests (a typical leading indicator) can effectively promote quality.

Study your operation and seek the “low hanging fruit” areas in your business that can be considered as candidates for establishing your leading indicators and begin improving your bottom line. The best thing about indicators…the costs to establish and track indicators are less than the costs associated with poor quality, injuries and low employee morale. Utilization of the IndustryDocs KPI tools should make the creation of your indicators painless!

Identify Indicators Predictive of Future Safety Incidents Likelihoods

Our product Leading Indicators Template in Excel Format will help your team identify system state indicators whose performance is predictive of future safety incident likelihoods. A professionally written sample set of indicators is very helpful for someone new to the KPI design process. There is much discussion on the web regarding KPI ("Key Performance Indicators"); however, finding a good sample set is not always easy. Our product provides a professionally written set of leading indicators geared towards safety within the Chemical and Process Industries. We are confident that you will find it helpful.