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13 November 2017

Creating a KPI management system (part 2)

In our first article of this cycle, we have described how you can use KPIs to manage the SLA in a service center. In this article, we attempt to describe the best way to select and configure the KPIs for such a company.

The classic concept of Kaplan and Norton implies a precise approach to KPI management comprised of several stages.

  1. Work out the strategic goals of your company.
  2. Work out a set of activities aimed at achieving the goals. Responsible employees must be assigned to each activity.
  3. Set tasks and work out KPIs for each task.
  4. Work out incentives for employees and perform control of KPIs and tasks.

However, this classic approach has its flaws. Problems can arise at the first stage because having a clear understanding of strategic goals is something most companies lack. Also, there might be several goals or they may depend on the current market situation.
That is why we offer a different approach.

First, in order to create a KPI system for the company, consider the chain of added value of your service. Then, take a closer look at each part of the chain from the point of view of process optimization. Select parameters that you can influence and then link KPIs to these parameters. As a result, when KPI values are reached, the processes are optimized and the overall situation is improved.

Either way, you have to start with the organizational structure of your company. As an example, we took a rather small service center that deals with electronic appliances for individuals and organizations. It has several reception points, the appliances are delivered for repair and back to the customer by a deliveryman.

Modeling the organizational structure of a company

company stucture in ELMA BPM

Description of roles

  1. CEO is the head of the company who is responsible for reaching the main strategic goals.
  2. Maintenance chief controls the work of technicians, distributes the incoming work, is responsible for how long the appliances are kept in repair, the repair quality, and qualification of technicians.
  3. Technician does the diagnostic testing; orders spare parts and does the repair. The technician is responsible for the duration and quality of repair.
  4. Head of the Client Relations Department manages conflicts with the customers and is responsible for the number of appliances repaired but not sent to the customers.
  5. Client Relations employee receives and issues the appliances and is responsible for correct registration and paperwork.
  6. Phone operator is responsible for incoming and outgoing phone calls and communication between customers and technicians.
  7. Head of Procurement manages temporary storage of appliances, orders spare parts and is responsible for the warehouse for spares and instruments.
  8. Storekeeper receives and hands out appliances and spare parts to the repair shop and is responsible for picking up and bringing deliveries to the delivery points. Also, the storekeeper is responsible for the delivery schedule.
  9. Deliveryman delivers the appliances and must do it on time.

The chain of added value
The main strategic goal of a service company is a better quality of the offered services. You can achieve that by optimizing business processes on each step of the service. For that, you must decompose the added value of the service to define all the parameters of the service.
added value

Describing parameters and configuring KPI system
The most important part of the service is the repair. We will now define the tasks that must be accomplished in order to improve each parameter of repair, and configure corresponding KPIs. The period under account is 1 month.

Parameter Has influence on KPIs

Speed.

The time spent at this stage.

Decrease of repair time

  • Average time of work.

  • Amount of orders that took more than 3 days to complete.

  • Amount of orders that took 1 day to complete.

  • Amount of orders completed on time.

  • Amount of orders delivered on time.

Qualification.

During diagnostic testing the technician must make the right decision about fault repair.

Decrease of repair time and of spares warehouse growth, higher quality of repair

  • Amount of repeat orders of spare parts.

  • Amount of repeat repairs during 1 month.

Price of repair.

When an order is handed in for repair, the customer is given an estimate cost of repair. The final cost is then determined by the technician.

Growth of revenue

  • Average cost of repair.

  • Revenue.

Cost of the spares warehouse. Total cost of all the spare parts stored at the warehouse.

Lesser growth of spares warehouse

  • Percentage of growth of spares warehouse.

Warehouse of appliances not handed out to the customers

Total cost of services and parts used for the orders that are completed but not yet handed out to the customers.

Debt.

  • Debt.

  • Percentage of customers notified about completion of repair.

Quality.

Level of customer satisfaction.

Growth of revenue, growth of number of repairs.

  • Amount of repeat repairs during 1 month.

  • Amount of orders handed out without repair.

Compliance.

Paperwork done according to instructions.

Faster repairs. Better quality of repairs.

  • Compliance.

  • Certification results.

  • Work evaluation.

KPIs that help shorten the repair period

KPI in ELMA BPM

  • Amount of orders that took more than 3 days to complete. A computable KPI that shows the ratio between orders that took more than 3 day to complete and the total number of orders. The employee responsible for reaching this KPI is the technician who performs the repairs.
  • performance in ELMA BPM

  • Average time of work. This general statistics KPI is calculated as the ratio between the total time spent on repairs and the total number of orders. The employee responsible for this KPI is the maintenance chief.
  • Amount of orders that took 1 day to complete. This computable KPI shows the ratio between the number of orders that took 1 day to complete and the total number of orders. The employee responsible for this KPI is the technician.

KPIs that influence the quality of work

  • Amount of repeat repairs during 1 month. This computable KPI shows the ratio between the number of repeated repairs in a month and the total number of repairs. A repair is considered repeated if the same piece of appliance is sent in for repair with the same defect more than once in a month. The employee responsible for this KPI is the technician.
  • Amount of orders handed out without repair. This computable KPI shows the ratio between the number of orders returned without being repaired to the total number of orders. The employee responsible for this KPI is the technician.

Financial KPIs

The head of Client Relations Department is responsible for the financial KPIs.

  • Revenue. Monthly revenue.
  • % of notification – The percentage of clients notified about the repair being completed. This KPI showed if the notification process is effective. A notified client pays for the service, therefore, this KPI is a financial one.
  • % debt growth. This relative KPI shows the dynamics of growth or decline of debt. It is calculated as the ratio between the debt of the current period and the debt of the previous period.

In the next article, we will use the developed KPI system to work out incentive schemes for the employees based on their performance matrices.
employee performance evaluation in ELMA BPM
We will develop performance matrices and KPIs for all the key employees of the service center: chief of maintenance, technician, head of Client Relations Department, phone operator, head of Procurement, storekeeper and deliveryman.

How to manage SLA parameters with KPIs in a service center (part 1)
Performance matrices (part 3)

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Alexander Khodyrev
Alexander
Khodyrev
Localization Specialist