The application of KPIs is an established method in manufacturing processes for performance analysis and enhancement. From REFA time recording and PMT systems through to different incentive models the most different methods are available for performance assessment and the subsequent pay. What is normal for workers in the production, for a long time it seemed to be impossible for office staff in charge of the processing of orders. In addition to the introduction of the principle of equal treatment in the pay for workers and employees, the main focus in the development of a KPI system was concentrated on the transparency that needed to be created, the exploitation of the performance potential and the performance-related pay in the order processing.
Objective Target
The purpose for the implementation of a KPI system should therefore be the disclosure of the job performance in the processing of orders enabling further optimization and the use of KPIs as basis for a performance-oriented pay. In order to achieve the objectives, the following requirements are placed on a new KPI system for order processing:
- Visualization of the job performance in the processing of orders.
- Clear and distinct definition of the target KPIs.
- A clear reproducibility of data.
- Traceability for the employees and the works council.
- Analysis of the KPIs on a daily, weekly and monthly basis.
- KPIs should provide the basis for the pay.
- Minimal administrative expense for the determination of KPIs and for the settlement of work performance.
Achievable result
When introducing new systems or implementing new projects, it is nearly always the same argument that comes forward "So what is the advantage?". Of course it is also this question that is raised when it comes to the optimization of the processing of orders and the development of a KPI system for performance measurement. The example hereafter illustrates how you can achieve a successful implementation of KPIs and shall at the same time be a point of reference for future projects.
As is so often the case, in the beginning there was only the feeling that recently things are not running quite as smoothly as they should and that there is certainly still unexploited performance and optimization potential. Based on this awareness, an optimization of the order processing through the use of KPIs was introduced and implemented which, in turn, provided the basis for an incentive pay system. Few months after the implementation of KPIs a significant performance improvement of nearly 30 percent became already evident which was not only a benefit for the company but also brought a monetary advantage for the employees.
The Gauss method for the KPI determination
Contrary to REFA and other specific systems, the KPI determination is based on a purely statistical analysis of the values obtained which normally are taken in automated form from the order or time logging system for being subsequently prepared for analytical purposes.
In the beginning stands an analysis of regression which defines significant influencing factors such as the number of processed orders, order lines, carcases or order values in the order processing. It follows the analysis of the data recorded. This includes the comparison of the weighted influencing parameters with the time spent to complete the task and is resulting in the work performed during the analyzed time frames. By observing a sufficiently long time period as e.g. half a year, normally a Gaussian normal distribution of the performance is obtained as well as a basic and target KPI. In this connection the basic KPI constitutes the average value of the analyzed random inspection and the target KPI that needs to be achieved constitutes the average value plus the triple standard deviation.
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Time-related KPI analysis
Now that the basic and target KPIs are fixed, it is possible to further analyze and evaluate the random inspection on a daily, weekly or monthly basis. The time-related KPI analysis shows clearly by means of the values obtained which performances were realized in which periods of time. As already the analysis of the number of job performance units indicated, the majority of the work performed can be found within the triple standard deviation (target KPI) and a smaller number of values outside of (above the target KPI). Furthermore, the analysis shows clearly how the accumulated weekly values during the observed period of time increase significantly from below the basic KPI to approximately 50% in the achievement of objectives with regard to the target KPI.
Keyword transparency
In this connection a very important aspect for the employees is the fact that the KPIs were not "made" by external persons but purely on the basis of the work performed by the employees. As a consequence, the principle of this pay system is that 100 percent of the company-internally agreed incentive bonus will be distributed to the employees having achieved the objective (achievement of target KPI) and in case of a proportional objective achievement, a proportional bonus incentive will be distributed. Another advantage of applying the Gaussian KPI system is that no rigid management of the system is necessary but it is characterized by a dynamic development and consequently is flexible in the adjustment to changes, as e.g. the modifications within the order and customer structure.
Generally speaking, the Gaussian KPI system is a good way to effectively design the company-internal jobs in the processing of orders by simultaneously providing the employees the opportunity to participate financially in the realized performance enhancement due to a monetary incentive system.
Author: Dipl.-Ing. Maik Büssing MBA&Eng., SCHULER Business Solutions AG, published in the trade magazine "Holz- und Kunststoffverarbeitung (HK)" 2/10