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KPI Leading or Lagging and When To Use Them

The document discusses key performance indicators (KPIs) for maintenance effectiveness. It explains that KPIs combine metrics and indicators to provide objective performance measurements. Leading indicators respond faster than lagging indicators and measure performance before problems arise. Examples of leading KPIs include metrics for reliability, preventative maintenance, materials management, skills training, and maintenance supervision. Lagging indicators like budgets can yield reliability issues. Both leading and lagging KPIs should be monitored.

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61 views3 pages

KPI Leading or Lagging and When To Use Them

The document discusses key performance indicators (KPIs) for maintenance effectiveness. It explains that KPIs combine metrics and indicators to provide objective performance measurements. Leading indicators respond faster than lagging indicators and measure performance before problems arise. Examples of leading KPIs include metrics for reliability, preventative maintenance, materials management, skills training, and maintenance supervision. Lagging indicators like budgets can yield reliability issues. Both leading and lagging KPIs should be monitored.

Uploaded by

kechaouahmed81
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Key Performance Indicators

- Leading or Lagging and When to Use Them –


Author – Ricky Smith

Initiating major change, such as moving from a reactive maintenance operation to one which is
proactive and employs Best Maintenance Practices to achieve Maintenance Excellence, requires
start-up support from top management. In order to continue the journey towards Maintenance
Excellence, the continued support from management will need justification. Upper management will
not be satisfied with statements like “just wait until next year when you see all the benefits of this
effort.” They will want something a little more tangible if you are to gain further commitment from
them. You will need to provide tangible evidence in the form of objective performance facts.

That’s where metrics comes in. Metrics is just a term meaning “to measure” (either a process or a
result). Combining several metrics yields indicators, which serve to highlight some condition or
highlight a question that we need an answer to. Key Performance Indicators (KPI) combine several
metrics and indicators to yield objective performance facts. They provide an assessment of critical
parameters or key processes. KPI for maintenance effectiveness have been discussed, defined and
refined for as long as proactive maintenance has been around. KPI combine key metrics and
indicators to measure maintenance performance in many areas.

Metrics can be a two-edged sword.


Metrics are essential for establishing
Two-day course on KPI’s for Reliability and
goals and measuring performance. Maintenance Managers
Metrics chosen or combined
erroneously can produce misleading 15 & 16 june 2011 – Brussels
indicators that yield incorrect and/or
low performance measures. Inaccurate This course covers both how to analyze the current
measures produce bad management organizational Key Performance Indicators (KPI's) for
decisions. effectiveness as well as the development of new KPIs to
drive different organizational behavior.
If you are involved in an equipment
improvement program, such as Click here for more information on this course
Maintenance Excellence, you must
have a thorough understanding of the Or send an email to info@bemas.org
financial metrics used by your company
to measure results and track improvement. You will need to establish a direct link between improved
equipment reliability and overall company operational performance. At the bottom line, your metrics
must yield a KPI in terms of financial performance.

To determine maintenance strengths and weaknesses, KPI should be broken down into those areas
for which you need to know the performance levels. In maintenance these are areas such as
preventive maintenance, materials management process, planning and scheduling, and so on until
two major Maintenance Department KPIs are defined:
• Maintenance Department Operating Costs (Budget Performance)
• Equipment Reliability

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In turn, equipment reliability must correlate to production – both production vs. capacity and cost
per unit produced. On the other hand, operating costs must be carefully considered. Initiating change
is going to initially increase maintenance department expenses. Accurately forecasting a budget
centered on change is essential if KPI is going to accurately depict department budget performance.
(See Figure 1)

Depending on KPI values we classify them as either leading or lagging indicators. Leading indicators
are metrics that are task specific. They respond faster than results metrics and are selected to
indicate progress towards long term objectives. Leading indicators are indicators that measure and
track performance before a problem arises. To illustrate this, think of a key performance indicators as
yourself driving a car down a road. As you drive, you deviate from the driving lane and veer onto the
shoulder of the road. The tires running over the “out of lane” indicators (typically a rough or
‘corrugated’ section of pavement at the side of the road that serves to alert you to return to the
driving lane before you veer completely off the pavement onto the shoulder of the road). These “out
of lane” indicators are the KPI that you approaching a critical condition or problem. Your action is to
correct your steering to bring you car back into the driving lane before you go off the road (proactive
condition).

If you did not have the indicators on the pavement edge, you would not be alerted to the impending
crisis and you could veer so far out of the driving lane that you end up in the ditch. The condition of
you car, sharply listing on the slope of the ditch, is a lagging indicator. Now you must call a wrecker to
get you out of the ditch (reactive condition). Lagging indicators, such as your budget, yield reliability
issues, which will result in capacity issues.

The necessity for tracking KPI other than just Equipment Reliability and Budget Performance is to
pinpoint areas responsible for negative trends (leading indicators). You would not want to scrap your
Maintenance Excellence initiative when the only problem is that the Planner / Scheduler didn’t
receive adequate training. By observing and tracking Planned / Schedule Compliance and Planned
Work as a percentage of total labor you should be able to detect “non-improving” or even negative
performance early enough to identify and correct the training problem. The “lower tier” leading
indicators are also necessary for establishing benchmarks (Best Maintenance Practices) and tracking
departmental progress. For example, the benchmark for the KPI “Planned / Schedule Compliance” is
generally accepted as 90%. The tracking and public display of positive leading KPI also provides

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significant motivational stimuli for maintenance department personnel.

A manager must know if his department is squarely in the driving lane and that everything is under
control, as long as possible before it approaches and goes into the ditch. A list of some of the key
performance indicators of the leading variety are illustrated in Table 1. Note that some of these
indicators could be both leading and lagging when combined with and applied to other KPIs (Key
Performance Indicators).

TABLE 1

Key Performance Indicators

Reliability/Maintainability Materials Management


• MTBF (mean time between failures) by total • Stores Service Level (% of stock outs) –
operation and by area and then by Times a person comes to check out a part
equipment. and receives a stock part divided by the
• MTTR (mean time to repair) maintainability number of times a person comes to the
of individual equipment. storeroom to check out a stocked part and
• MTBR (mean time between repairs) equals the part is not available.
MTBF minus MTTR • Inventory Accuracy as a percentage
• OEE (overall equipment effectiveness)
Availability x Efficiency (slow speed) x Skills Training (NOTE: A manager must notify
Quality (all as a percentage) maintenance craft personnel about the
measurement of success of skills training
Preventive Maintenance (includes predictive • MTBF
maintenance) • Parts Usage – this is based on a specific area
• PPM labor hrs. divided by Emergency labor of training such as bearings
hrs.
• PPM WOs (work orders) #s divided by CM Maintenance Supervision
(corrective maintenance, • Maintenance Control – a % of unplanned
planned/scheduled work) WOs as a result of labor hours divided by total labor hours
PM inspections • Crew efficiency – a % of the actual hours
completed on scheduled work divided by
Planning and Scheduling the estimated time
• Planned / Schedule Compliance – (all • Work Order (WO) Discipline – the % of labor
maintenance labor hours for all work must accounted for on WOs.
be covered and not by “blanket work
orders”) this a percentage of all labor hours Work Process Productivity
actually completed to schedule divided by • Maintenance costs divided by net asset
the total maintenance labor hours. value.
• Planned work – a % of total labor hours • Total cost per unit produced
planned divided by total labor hours in • Overtime hours as % of total labor hours
scheduled.

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