Key Performance Indicators: A Case Study Example

Key performance indicators, as their name suggests, define the core measures which determine the success of contract performance.

Some of the difficulties of KPIs is that there are often too many of them, they can be vague, unrealistic, undifferentiated in terms of their importance, may contradict each other, or have unintended consequences. In order to overcome these problems, KPIs should be limited in number and SMART (specific, measurable, achievable, relevant, and time-bound). In addition, they should be stretch KPIs which should state, not only current desirable performance, but future performance as a means to achieve continuous improvement.

There are many metrics which are stipulated in contracts and service level agreements. However, KPIs should focus on a limited number of metrics which encompass the core aspects of the contract. This will achieve focus and enable effective performance management. Organisations are often reluctant to focus on a core range of KPIs and instead get bogged down by a bewildering range of metrics.

In order to develop KPIs, stakeholder workshops could be held and KPIs developed in a three-stage process. First, the critical success factors (CSFs) of the contract are determined. Second, relevant metrics are determined which enable those CSFs to be measured. Third, the measures are converted into quantifiable, SMART and stretch KPIs. The diagram below demonstrates this development process.

This approach involves all stakeholders, requires a great deal of discipline, and ensures that KPIs are relevant, effective and manageable. An example of developing a KPI using this approach is shown in the figure below. This example is related to an item in the medical stores.

In order to demonstrate KPI development more holistically, an example is provided below for a radiology managed equipment services contract.[1] Four themes were identified (clinical efficiency, development, financial, and environmental) encompassing four healthcare objectives (high quality care, transformation of health services, affordable care, and sustainable care), drilled down to hospital objectives, and finally the development of twelve key measures. These measures would then need to be converted into quantifiable, SMART and stretch KPIs.

Clinical Efficiency Measures

Development Measures

Financial Measures

Environmental Measures

[1] Adapted from: http://pubdocs.worldbank.org/en/258511553620191211/Procurement-Guidance-MDI-Equipment-Buyers.pdf