The case for key performance indicators
March 7, 2014
by By Denise Flint
How do you measure process performance in a public procurement environment? It can hardly be compared to a manufacturing environment in which a specific product can be tracked and tested for flaws. Performance processes are administrative and not necessarily standardized and repetitive.
And yet, without putting any measurements in place it becomes almost impossible to improve, —or at least to recognize when an improvement has taken place. And improvement in organizations is crucial because in many cases good enough simply isn’t good enough. Even working at 99-percent efficiency, the US Postal Service would lose 20,000 pieces of mail per hour and American hospitals would perform 5,000 incorrect operations each and every week. As well, there would be two bad landings a day at most major airports and 200,000 incorrect prescriptions that get filled every year.
Francois Emond, the executive director of the Canadian Public Procurement Council (CPPC), believes that he has the answer. In a session presented at the Canadian Public Procurement Forum 2013, Emond explained how to use key performance indicators (KPIs) in order to continually improve methodology in a public procurement environment.
KPIs measure the business health of an organization, ensure that everyone is on the same page regarding goals and strategies and also provides a focal point for enterprise-wide standardization, collaboration and co-ordination. Although KPIs are usually thought of as private business measures, they can also be used in the government. It’s possible to apply the notion of defects to services and administration as well as pens and machinery.
“Remember, data is objective,” Emond stressed. “It will tell you what your performance is.”
To that end, indicators can be used to identify and improve ineffective processes—those that don’t meet expectations; inefficient processes; those that are expensive or require a lot of effort; and non-existent processes, as well as to resolve quality problems. However, in order to improve, organizations must establish a baseline that will measure the performance, isolate the trouble spots and identify areas that are ripe for improvement.
Emond used the Six Sigma methodology to illustrate how to make improvements. The process begins with defining a project and determining the priorities.
A narrow, well-defined process is identified for improvement, which is then measured—what are the sources of variance and waste, analysed—what critical factors lead to the current performance, improved—implementing any corrective modifications, and controlled—maintaining the gains that have been achieved.
This process is often referred to as DMAIC. The most important phase is defining the process to be improved, while the most neglected is control, Emond said.
“You think you have accomplished something and then you move on,” he told the audience . “This leads to neglect.”
Emond also warned against falling victim to the belief that the end result is for the benefit of the institution. Too often, he noted, indicators such as the number of purchase orders are used by those looking to measure efficiency. But those numbers mean nothing to what should be the real focus of the exercise.
“This is not done for the organization,” Emond said. “It’s done for the client. And what are clients concerned about? ‘When can you do it?’ and ‘How much will it cost?’” Those are the figures that have to be improved.
“Client satisfaction is the goal, not just internal efficiency.”