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279 – Learning from Metrics with Dan Miller
Welcome Dan Miller to the podcast. Our topic will be metrics; how to pick the right KPIs and we will also discuss cornerstone metrics. But first, about Dan:
Dan is a maintenance reliability engineer at Global Water Resources. The guest worked as a consultant but currently is settled at the water company in Arizona.
In this episode we covered:
- You need KPIs to ensure your assets are working correctly, right?
- What is performance management?
- Why do we have to do performance management?
You need KPIs to ensure your assets are working correctly, right?
Yes. There is a lot going on in the background to ensure that water and electricity supply works correctly.
What is performance management?
It is maintaining the system by which you measure performance. It involves:
- Measuring performance
- Setting targets
- Looking for trends
- Coming up with ways to address shortfalls
All these are done routinely.
Why do we have to do performance management?
It is about managing the health of the process. But it is a leadership/administrative job to set the targets and involve those in the process. Also find a way to make the process repeatable.
What is a metric?
It is a numerical value assigned to the actual performance of a process. A single metric does not tell much. It needs to be combined with others to give a broad perspective of the process.
The metrics need to be scrutinized and challenged before being used.
What have you learned over the years about metrics?
Metrics assist in explaining the process to the leadership in a way that they can understand for say, approval of CAPEX projects like the purchase of a piece of equipment or a part. Some metrics that can be used include:
- Process performance changes
- Impact on raw materials utilization
- Lost production
- Increased cost of labor and overtime
- Quality of finished products
- Equipment downtime
Take advantage of every moment to sell your idea using such metrics.
Are there any other metrics that are a requirement for everyone (cornerstone KPIs)?
The most important KPI is labor utilization. It compares the hours paid to those recorded in the work order. Inquire about the difference in the two sets of hours to gain an insight about your entire process.
What happens if you do not have the cornerstone KPIs in place?
Take for instance the labor utilization; it tells how good all the other KPIs are e.g. work order reporting i.e. compare the mean time to repair (MTTR) to the total recordable hours. If the MTTR is skewed then it has an impact on scheduling, the cost of ownership, and many other KPIs.
You are missing a lot of other information about your process if you are not tracking labor utilization.
Have you seen cornerstone KPIs driving not only good but also undesired behaviors?
Take for instance in safety: they often use the number of days without an incident to give salary raises or bonuses. People might avoid reporting incidences that could potentially repeat to avoid damaging the prevailing record.
A KPI needs to be combined with other metrics to avoid driving such undesired behavior.
Do KPIs only have to be within a certain sphere of influence? If so, who determines those in that sphere?
Not really. However, it is important for individuals to understand how they influence a given KPI. They need to influence the part that affects their work by diligently tracking and reporting the KPI. This way, the information in their possession becomes reliable in decision making.
What is the most important outcome of a performance management system?
Trust- If people do not believe what is being reported then it will be ignored. Therefore:
- They have to understand how the KPI is developed.
- Reports need to be scrutinized before being published- consider changes in operations
- Always do the gut check (if it doesn't look right, it probably isn't right)
- Use a consistent formula in calculation of KPI values
- Every KPI deck is different and tells a different story
- Review your KPI deck and record all the meaningful work
- Make sure your metrics are as accurate as possible, accessible, and trusted
- Dispose of a KPI that no longer adds value
- It is important to seek professional assistance when necessary
- One variable can mess up all the other KPIs
Dan Miller Links:
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