In order to be able to measure, control and manage processes it is necessary to define Process Performance Indicators. But how can a Process Performance Indicator (PPI) be specified in detail and how is it differentiated to a Key Performance Indicator (KPI)? Let’s start with the following definitions, which are relevant for both, PPIs and KPIs:
A quantitative and qualitative representation of a business driver and economic facts in order to make them measurable and thus comparable.
Defined consistently and stable over time.
The basis for
- Decisions, as they provide a comprehensive overview of the business situation and;
- Control as they allow to measure progress against planned goals (comparison of target/actual values), comparison of time or intercompany comparisons.
A tool to link to concrete actions in case of deviations from the target values.
They should be “SMART”:
After the definition of the similarities, let’s have a look at the specifics:
PPIs represent process goals that a company wants to achieve on a rather operational level. They can be measured directly by data that is generated within a specific process flow.
- Cost: travel costs per applicant
- Time: cycle time for offer building
- Quality: percentage of rejected offers by applicants
KPIs represent business goals that a company wants to achieve on a rather strategic level. They are qualitative or quantitative assessments that are the result of a comparison between an actual value and a target value over specific time periods.
- Revenue growth
- Employee turnover
- Number of new employees
- License revenue per product in Euros
The following graphic illustrates the differences between KPIs and PPIs over the different classifications of both and the importance for different management levels:
When PPIs are defined along an end-to-end process, they can be categorized in late or early indicators. Early indicators help in order to detect trends and information with future relevance. Late indicators measure the success or failure of specific process goals. Below this general categorization, the PPIs will be categorized in Quality, Time and Cost indicators. The following graphic illustrates the relations between the main categories:
- Quality indicators support process related information needs.
- Cycle time indicators are important in order to measure the processing time from a measure start to a measure end point.
- Cost indicators define how costs can be allocated directly or indirectly to the process.
- Efficiency is the ratio between process inputs and outputs.
- Volume determines which amount of items is handled by the process. Volume indicators can be determined for the process input and output and often serve as the basis for calculated indicators.
After the PPIs are defined and categorized, it is important to determine the dependencies and interrelations to each other. This is an important step in order to set up the measurement itself as well as the necessary relations between as-is and to-be values of each PPI. They are the basis for planning and controlling the success or failure of the process goals. PPIs can behave:
Complementary (support each other)
Indifferently (don`t influence each other)
Competingly (increase of one PPI leads to decrease of another PPI)
Exclusionary (exclude each other)
The following graphic shows an example of such dependencies and interrelations:
Of course the measurement of PPI will be reflected in reports or detailed analysis of the process. Therefore, it is important to decide on the optimal visualization of PPIs.
The following examples help to find the best possibility:
Fingerprint/Spider web/Pie chart:
Visualize how important several different information areas are in context to each other. They should be used for series of PPIs.
Speedometer/Ample/Simple bar chart:
Visualize the as-is situation of a specific PPI within a defined value-range and/or timeline. They should be used for one specific PPI.
Visualize a specific PPI in a as-is and a to-be situation or how they compare to each other or how they are distributed (example: regional). It should be used for 2 up to 4 PPIs.
Regarding the reporting of PPIs and KPIs dashboards are a great opportunity of presenting the relevant information in a concentrated and transparent way to management levels. It is important to implement possibilities of quickly changing the reported information dimensions as well as being able to drill-down in specific information areas. Of course, there is a difference between reporting and analyzing information. Reports portray decision relevant information out of reckless databases in a consolidated form the possibility. The exchange of each reported dimension (PPI) within the report should be possible (multi-dimensional). Process Analysis in difference to reporting allows the possibility of analyzing to the point the reasons of success or failure of specific PPIs. It is possible to directly detect bottle-necks within a process or which possible variations within a process are mostly followed by the users.
All these necessary steps from defining PPIs until the implementation in reports and dashboards can be related to the four phases (Analyze, Design, Implement, Run/Monitor) of the Process Management Lifecycle (PML). Therefore, the following graphic shows a PPI work-stream from the definition of PPIs until the implementation in reports in order to monitor them.