Part Three of this four-part series focuses on assessing the Key Performance Indicators (KPIs).
KPIs measure achievement (past performance) of operational standards and progress toward strategic objectives and continuous improvement. Formal evaluation of a supplier’s performance includes objective and subjective ratings. There are numerous evaluation templates to measure KPIs. They typically include:
- Strategic Focus Areas to group similar KPIs (e.g. Quality, Delivery, Cost, Partnership/Service, Innovation)
- Associated Key Performance Indicators – A set of quantifiable, well-defined and significant-to-the-business measures used to gauge a supplier’s performance in each Focus Area
- Weighting scheme applied to the Focus Areas, with the most important Focus Area having the most points/weight
- Rating method applied to each Focus Area and KPI (e.g. Likert-type scale)
- Comments to support the ratings (constructive feedback and improvement made)
- Scorecard to report the results to the supplier and key stakeholders and compare historic trends
Tips for assessing KPIs:
- Invite all key business process owners who receive and/or provide support and/or are impacted by the suppliers to evaluate.
- Weight the responses commensurate with the criticality and frequency of the respondent’s interaction with the supplier.
- Apply only metrics that are critical to the business strategy.
- Keep the evaluation time under an hour to ensure focus.
- Provide clear instructions.
It’s most important to ensure that the evaluation goes beyond measurement to actual performance improvement.
The Team at HR&Relo Advisors