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Key Performance Indicators and When To Use The

This document discusses key performance indicators (KPIs) and how to use leading vs lagging indicators to measure maintenance performance. It explains that KPIs combine metrics to provide objective assessments of critical processes. Leading indicators respond faster and indicate progress towards goals, while lagging indicators measure performance after issues arise. The document provides examples of leading KPIs like planned/schedule compliance that can detect problems early to take proactive action before major issues develop. Understanding both leading and lagging KPIs is important for maintenance excellence.

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André Santos
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16 views3 pages

Key Performance Indicators and When To Use The

This document discusses key performance indicators (KPIs) and how to use leading vs lagging indicators to measure maintenance performance. It explains that KPIs combine metrics to provide objective assessments of critical processes. Leading indicators respond faster and indicate progress towards goals, while lagging indicators measure performance after issues arise. The document provides examples of leading KPIs like planned/schedule compliance that can detect problems early to take proactive action before major issues develop. Understanding both leading and lagging KPIs is important for maintenance excellence.

Uploaded by

André Santos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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KEY PERFORMANCE INDICATORS

“Leading or Lagging and When to Use Them”

By Ricky Smith CMRP

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. KPIs combine key metrics and indicators to measure
maintenance performance in many areas. Metrics can be a double-edged sword. Metrics are
essential for establishing goals and measuring performance. Metrics chosen or combined
erroneously can produce misleading indicators that yield incorrect and/or low performance
measures. Inaccurate measures produce bad management decisions.

If you are involved in an equipment improvement program, such as Maintenance Excellence, you
must have a thorough understanding of the 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
In turn, equipment reliability must correlate to production—both production versus 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).

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 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 are
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 are approaching a critical condition or
problem. Your action is to correct your steering to bring your 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 your 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 KPIs 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 KPIs also provide significant motivational stimuli for maintenance
department personnel.

Figure 2 – Key Performance Indicators

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 Figure 2, “Key
Performance Indicators”. Note that some of these indicators could be both leading and lagging
when combined with and applied to other KPIs (Key Performance Indicators).

“Like to learn more concerning Maintenance KPIs go to www.worldclassmaintenance.org or


email Ricky Smith at rsmith@worldclassmaintenance.org

Checkout my upcoming public and private workshops availability:


1. Maintenance and Reliability Best Practices
(3 Days)
2. MasterClass – Maintenance and Reliability Best Practices plus SMRP Body of Knowledge
(5 Days)
3. Maintenance Planning and Scheduling
(3 Days)
4. Maintenance Technician Best Practices
(3 Days)

More to come: “Current Workshops in Design Phase for 2022”


 Maintenance Storeroom Best Practices (3 Days)
 How to Create Failure Reporting, Analysis, and Corrective Action System (3 Days)
 Root Cause Analysis for Maintenance

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