How to Cascade KPIs Throughout Your Organization to Create Buy-in (KPI Tree Explained)

How to design a KPI tree for effective performance management

• The video discusses the concept of designing a KPI tree for effective performance management.
• It emphasizes that KPIs should be linked to company goals to measure performance.
• The KPI tree breaks down company goals into smaller chunks, aligning with different departments or units.
• The video suggests that KPI levels should match the organizational structure, from line-level KPIs to department, factory, and company levels.
• It highlights the importance of establishing a meeting structure that aligns with the KPI levels and the need for regular performance checks at each level to ensure alignment with overall company goals.

Source:

How to design a KPI tree:

1. KPI Tree Overview: The KPI tree is a hierarchical structure used to track and measure key performance indicators (KPIs) within an organization, starting from corporate goals and cascading down to operational units like factories and departments.

2. Hierarchy and Layering: The KPI tree follows a hierarchical structure, with a few corporate goals at the top that break down into multiple KPIs at lower levels. It emphasizes layering KPIs in alignment with the organization's hierarchy.

3. Types of KPIs: There are two main types of KPIs mentioned—management performance indicators and operational performance indicators. Management indicators focus on high-level corporate objectives, while operational indicators delve into factors affecting profit or loss, such as equipment efficiency (OEE) and actions related to production assets.

4. Action Indicators: Action indicators are crucial in KPI trees, focusing on what actions are taken to achieve the desired outcomes. They involve actions that impact KPIs at different levels and require continuous monitoring and improvement.

5. Example Application: The transcript provides an example of how to build a KPI tree, starting with corporate objectives like increasing sales volume and maintaining labor cost per ton. It illustrates how KPIs are linked to actions and how the tree can help improve specific aspects of an organization, such as reducing unplanned stops and increasing equipment reliability.  It also explains how not to end up with "nonsense" KPIs.

Course Forward:  

• Do you need to further develop these skills?

  • Lead a team through the Strategic Planning process, using the guidance from current state analyses, and incorporating into it the roll-out of new initiatives and project teams.
    • Create a vision, prioritizing roll-out of activities, training planning, and project prioritization process.
  • Lead a team to cascade (from the Site metrics and goals as a starting point) the objectives and KPI's down through the organization into Quarterly, Monthly, Weekly, and Daily KPI's. 

• Get Better Prepared for Your Strategic Planning Event!  You will be able to:

  1) Learn and practice with a hands-on Simulation of the Strategic Planning process in a simulated site.

  2) Build a yearly strategic plan and establish and cascade metrics

• To learn more, visit:  https://www.beltcourse.com/Strategic-Planning-Belt-Course-Page-CS