A common theme among LeanCor customer on-sites is ensuring that we are showing our customer contacts the value of the operational and strategic work that we do. As we start to define our Key Performance Indicators (KPIs) by customer, one approach would be to follow the SMART model. The SMART model (Specific, Measure, Attainable, Relevant, Timely) is a way to ensure that our metrics have a clearly defined goal that we can center around our daily work. It is imperative to ensure that we meet with our customers to make sure that they agree with our metrics. Once they are set, these provide the talking points and the way to prioritize our work.
Let’s walk through each component of SMART and provide an example you can use in your customer KPI discussion.
The first step to solving any problem is to make sure you have properly defined what it is. Even if you think you know the problem, this is a good practice for providing focus and direction to your actions. Being specific helps to get right to the heart of the matter, by focusing only on those inputs that directly affect your ability to achieve the goal. Diagnosing what is broken is the first step to getting something fixed.
This step is all about taking something that is qualitative and making it quantititative—turning the abstract into the concrete. The point is, if you are going to sit with your customer and discuss performance, you should both draw the same conclusions as to where you stand. If you have clearly defined the data, that is an indicator of an issue and the target state of that condition. Conclusions drawn from the KPI will not be subject to interpretation or bias the same way two teachers could grade the same essay test differently, but not if the test was standardized. Being strict and honest with the measurements fosters true improvement by eliminating the ability to “dress up” shortcomings. Also, when measuring, it is extremely important to ensure that a baseline of data has been agreed upon between you and the customer.
Goals need to be attainable, in the sense that they should be possible to achieve. Just b/c you want 100% compliance, what will you actually live with? Where is your baseline? There is nothing that means you can’t raise your goal once you achieve it. The pursuit of perfection is admirable, but remember that holding someone to unrealistic expectations can also be a de-motivator. Always obtain your customer’s input when setting goals, as it is their expectations you should be exceeding. Periodically review your targets to determine if they should be raised, especially if they’ve been reached. If you are having trouble reaching your KPI, maybe there is a root cause for that. It might be a good time to start an A3P (Problem Solving) to figure out why you aren’t reaching your goals in timely fashion.
It is important to know the distinction between information and data when compiling your customer KPI’s. It is often the tendency to over do it when it comes to providing data to your customer. The first thing you want to filter out is anything that doesn’t serve the purpose of defining the performance of a situation. Remember, we’ve built the KPI around an issue that we want to resolve—if you are including figures that don’t directly correlate to a target, then it is likely just information and could be excluded unless requested, or provided in an appendix. Keep the primary KPI free of ‘noise’ by clearing out superfluous data.
Possibly the most often overlooked component of a KPI is establishing when the target is going to be reached. After telling your customer what you can deliver, they’re naturally going to be interested in when they can expect it. Targets need to have an element of time in order to drive action and bring closure to a problem. If the issue you are tracking doesn’t have an obvious end date or required need-by time, annual or quarterly intervals work best. At the end of each year or quarter, adjust your goals as needed to keep focus on bettering yourself for your customer.
Applying these principles to each of your KPI’s with your customer, as well as applying the PDCA method are the basis for forming open lines of communication with your customers and ensuring that we are always marching towards “True North” in our Lean Journey.
Written by Matt Wahl and Ben Green, Managers of Lean Supply Chain Operations at LeanCor