KPIs are not adding value.

In my organization (service industry), There are three KPIs :
OTD (On Time Delivery) Target 90%
FPY (First Pass Yield) Target 95%
EV (Effort Variance). Target +-20%

For the last 2-3 years we are constantly over-achieving Target and never missed a KPI target.
However, on-ground customers do not agree with the quality levels. The employees are devoting a lot of time to fulfilling the KPI targets as well.

How can we reduce overburden on employees and do we need to think about new KPIs. Basically what needs to be done to match reality with numbers?
Do you see such scenarios in other places as well?

4 Replies
Hi Deepak;
My first impression is that your targets are too low. If you constantly achieve them, shouldn't you increase them? This would be in line with continuous improvement. In my organization our target was 95 % OTD and when we reached that, we increased it to 96%. If we achieve that consistently this year, we will increase to 97% next year.
Hi Deepak,
It may be worth making a review and revision of your KPIs part of your annual review cycle. In my factory we review performance to targets each December and set new KPI targets. If we hit the target some of the time but not all of the time, we tend to leave it the same, but if we consistently surpassed the target (good or bad) then we revise it to either make it more reasonable. For example, if OTD was 90% and we were only achieving 80%, we might adjust the target down to 85% to make it less out-of-reach for the coming year... on the flip side if we were constantly hitting 95%, we might make it 97% to challenge the team to do better. Of course, the voice of the customer is also important in considering your Quality targets.

This has really helped highlight good weeks/months/quarters versus bad ones, as when our goals were unreasonable in the past, failing by a meter and failing by a mile seemed the same. Constant failure to perform can lead to a "well what's one more failure" mentality that's not healthy. We also had goals set at times (typically by outside sources) where a cycle time target was less than say 8 hours and our process for whatever reason was finishing in perhaps 2 hours, so the urgency to engage in continuous improvement evaporated.

Best of luck!
There's another possibility you might check out. Are people gaming the KPI's? I mean, are they taking actions which were not foreseen by the person who set up the formula, which result in the numbers always looking good even if performance in the real world is not so good? Maybe that's not the problem, but it could be worth checking what data you collect and how you calculate the KPIs, just to make sure.
John Elwer
4 Posts
First, if you consistently meet your goals, you can tighten them up. OTD at 95%, FPY at 98%, etc.

Another consideration is the use of continuous data vs discrete data. On time delivery is not continuous data, but time between shipment errors is and can give you more usable info.

All goals/objectives are only useful if the company takes action on goals not met to improve the process. Otherwise it is a waste of time to collect the data or an empty achievement for brown-nosing.

Reading about the Lean/Six Sigma can give more insight on what to measure, why, and how. I think is a great site.