Targeting KPIs for better business performance

Key performance indicators (KPIs) offer a concise way to monitor business performance and provide a call to action. Typical measures involve financial data, such as year-to-date revenue, and operational results, such as the number of insurance claims filed in a month. Those measures have two characteristics commonly associated with KPIs: They are quantitative, and they are measured in a certain time interval.

Often, KPIs are viewed within the framework of a balanced scorecard, which is an evaluation method that includes both financial and non-financial information. KPIs are also often displayed on a dashboard that provides different views for individuals in different roles.

With the proliferation of applications such as customer relationship management (CRM), business intelligence (BI) and business process management (BPM) systems, metrics are easy to obtain, but they are not always easy to interpret. A revenue increase of five percent over the past year might seem like a positive outcome, unless the organization's primary competitor gained 10 percent. Therefore, KPIs are best chosen and understood in the context of strategic plans that identify goals at a higher level. Strategic plans not only supply the context for interpretation, but also guide managers in selecting which measures are relevant in the first place.

Customer retention

ScottishPower serves more than 5 million customers in the United Kingdom. It competes with multiple other power companies in the market, and keeps close track of customer preferences and needs. "We now provide many services online, from paying bills to logging in meter readings," says Richard Tasker, head of direct debit operations in customer service at ScottishPower.

ScottishPower uses Ciboodle, a multichannel customer engagement platform from Sword Ciboodle, which was recently acquired by KANA. Ciboodle supports customer self-service and also manages customer interactions through e-mail, telephone, online chat and phone calls. Customer information is integrated across channels so that service agents can be aware of any previous interactions.

The metrics in Ciboodle allow ScottishPower to keep track of the factors that underlie its main objective, which is customer retention. Those factors include the proficiency with which issues are resolved, and providing alternate channels for interactions. "We have excellent retention for the customers we speak to," says Tasker, "and the rate has increased from 95.5 percent to 97.5 percent." Each percent represents an extra 1,000 customers per week, an important outcome because customer acquisition is much more expensive than retention.

An example of the way in which strategic goals should guide interpretation of metrics is provided by measurement of the time to handle a call. "We made a decision to increase handling time because we were expanding our offerings and asking the agents to do more while they were on the phone," Tasker recalls. "We are now offering services such as boiler care and heating products. We have seen an increase of 8 to 10 percent year to year." Had ScottishPower not interpreted those results in the context of their plan, the longer handling times might have been seen as a drop in agents' productivity.

Metrics and variations

Measurements of agent performance in terms of sales are routed into another system that indicates whether they are performing above or below target levels. Those results are used to apply rewards or provide additional training as needed. "Again, we don't just look at the absolute levels but at their performance relative to the number of opportunities they had," Tasker explains. "This interpretation allows for variations that are not attributable to the agents but might reflect the number of hours they work, for example."

Agent performance can be rolled up by team, site and customer service as a whole. "We have a clear line of sight to the overall company big goals," Tasker says. "Using a balanced scorecard approach, we look at a ‘basket' of measures that we expect agents to meet." Resisting the temptation to over-measure, ScottishPower reduced the number of agent performance measures from eight to five in order to arrive at statistically significant findings.

Measurement should always be a means to an end, not a rote activity. "Organizations often measure what's easy and don't go beyond that," says Mitch Lieberman, VP for marketing strategy at Sword Ciboodle. "But if they only look at the length of a call and not how many issues were handled or their complexity, they are missing the point." The measurement should be meaningful in terms of the overall goal.

One obstacle that Lieberman sees in using metrics effectively is lack of coordination among departments. "More often than you would think, marketing directs a product launch without filling in the sales or customer service departments," he says. "The overall corporate strategy should be shared across departments, so that everyone is on the same page. Each department needs different metrics and different views of them, but they should all be directed at a common goal."

After sales and KPIs

In the highly competitive mobile phone market, customer satisfaction is key to retention and thus an important factor in gaining market share. A leading mobile phone company wanted to improve customer satisfaction by speeding up its process for phone returns and replacements. The company began using eBuilder After Sales, a cloud-based software product that manages this process and measures performance.

The after-sales process is a complex value chain involving numerous steps and many different partners such as retailers, repair companies and delivery companies. "By automating after sales, eBuilder After Sales can cut lead times for returns by up to 50 percent," says Mikael Ekström, senior VP of marketing at eBuilder. The software also includes a self-service component that has multiple benefits. "Customers can find out the status of their order through our portal, which reduces the number of calls to customer service and therefore also helps contain costs," he adds.

eBuilder After Sales provides information from all the elements in the "value network." A BI tool based on Jaspersoft, which is embedded in eBuilder After Sales, provides analytic reports, including graphical representations that allow intuitive drill-downs by business users. The analytic capability provides benchmarking of supplier performance and measures of customer satisfaction, as well as cost-related KPIs.

Competitive advantage

Because the information from all the sources is contained in a single database, the mobile phone company can easily compare the performance of different partners-for example, whether one transport company delivers products more quickly than another or how well each repair company is performing. "With this degree of data integration," Ekström says, "companies can obtain a much higher-level KPI than would otherwise be possible."

Ekström continues, "The after-sales process is often overlooked as a potential source of competitive advantage. But customer satisfaction is increased when problems are handled quickly, and that leads to improved retention."