Key performance indicators or KPIs are fundamental when it comes to quality management. Which KPIs should be used in your quality strategy and why? After reading this article, you will be able to implement the right KPIs and therefore manage your quality.
A key performance indicator is a number that shows how a process is performing. This process might be a manufacturing process, related to production, quality or general management.
An objective is a KPI with a set target. This means that all objectives are key performance indicators, but not all key performance indicators are objectives. In my opinion, you only turn a KPI into an objective when the measured process is very important for your department or when the metric has a big impact on multiple processes or even on the entire organisation.
In the early 2000s I was working as a site quality manager. At one point, we were rewriting our quality management system. During this process, we asked all heads of departments and managers to put their organisational activities into a flow chart.
Based on these flow charts, we asked them how they measured their overall performance and how they could tell it was improving or declining. With this exercise, I let them define key performance indicators for their own processes.
When it comes to KPIs, there are endless possibilities to choose from. Therefore, it’s fundamental to determine the right KPIs adapted to your department goals.
Some examples of KPIs adapted to certain departments are:
To measure quality performance, I recommend the following KPIs:
Not all quality-related KPIs are owned nor the responsibility of the quality department. As you might have read in my previous blog post on quality ownership, you might be aware that I’m a strong believer of quality ownership. This means that every employee in the organisation has to contribute to achieve that quality.
Let’s take a look at the ‘right first time’ KPI. For me, this is a KPI used by production and should even be transformed into an objective. The ‘right first time metric’ is the percentage of products made that can go directly to market without the need to be modified before product sales.
Quality control means that every product that is not right the first time gets withdrawn from the process. Whatever gets blocked by quality control, cannot go to the customer and is therefore preventing customer complaints.
If ‘right first time’ would be a quality KPI or even an objective, these quality departments would be penalised for doing their job which cannot be the aim. On top of that, the production department is producing nonconforming products, not the quality department.
Therefore, it’s important to always contemplate about who is the real owner of an underlying process and KPI.
On top of that, quality KPIs can be divided into two categories: lagging and leading indicators. A lagging indicator looks back on the situation, but never looks forward, which means this indicator won’t tell you anything about a possible future state. Leading indicators on the other hand, use data from the past to tell you something about the future.
The 'complaint rate' for instance, which is a ratio between the number of complaints received and the volume sold, is typically a lagging indicator: it tells you how good or bad the quality is of the products sold in the past.
This KPI doesn’t have a direct impact on the future nor will it tell you something about the future. The outcome of the complaint management might have an impact, when corrective actions are defined.
The next quality KPI I want to discuss is the 'overdue corrective action rate’. This KPI divides the number of overdue improvement actions by the number of open improvement actions. This percentage will tell you how good you are in completing improvement actions and in preventing recurring mistakes. Therefore, this KPI shows you how good your continual improvement action process is working.
It gets more interesting if you detect correlations between different KPIs and present your data in a graph.
When we take a look at the three KPIs we previously discussed (right first time, complaint rate and overdue improvement action rate), you can establish the following findings:
The ideal situation is when the right first time metric increases and your complaint rate decreases. That’s when you created real improvement.
When you take a look at the overdue improvement action rate, you can bring the trend in relation to the ‘right first time’ and the ‘complaint rate’. To solve this situation, you take improvement actions to prevent issues from reoccurring.
If you're not good at executing these actions, you can expect your RFT and complaint rate to continue in the wrong direction. In this way, this metric will give you the handles to start predicting how complaints and nonconformances will occur in the future.
To get the best results in analysing your KPIs, I recommend calculating the periodic KPI result, together with the ‘year to date’ and the ‘rolling moving average’ to establish the trend.
Need support in setting up, implementing and analysing KPIs? Don’t hesitate to contact QuontinuIm.