Why we need to distinguish between performance standards and key performance indicators
ROGIER ROELVINK from Turner & Townsend hopes to clear up the confusion about performance standards and key performance indicators being the same thing.
Let’s clear up one of the most common misconceptions within facilities management contracting – that service or performance standards are the same as key performance indicators (KPI). They are not the same.
Experience has shown there are still plenty of organisations that do not benefit from current facilities management good practice contracting. Service contracts with a performance-related reward mechanism are often actively avoided. These contract structures are shunned because people and organisations are led to believe that performance management of such service contracts is cumbersome, laborious and resource heavy, due to the multitude of service performance standards that need to be managed, monitored and measured.
The truth is that a well-structured service specification with performance requirements, regular self-reporting and clear KPIs will allow relatively easy management and measurement of performance.
MEASURING SERVICE DELIVERY
The following loosely applied two distinctive definitions demonstrate that performance indicators and KPIs are fundamentally different:
- A performance indicator determines the level of performance required for an individual service element or task.
- A KPI provides measures of service performance on reflection of overall service performance.
A performance indicator, therefore, is a measure by which a service delivery standard is measured. This measure allows the objective determination of whether a service provided has been delivered above, on or under par. Well-written service standards can, in fact, include inherent performance indicators; for example, ‘all calls to the helpdesk will be answered within four rings’.
The performance indicator is four rings. Three rings or fewer would be over-delivering, five rings would be unsatisfactory or under-delivering and four rings would be on par. In reality, helpdesk services will need to be described by a series of individual performance standards making up the helpdesk service specification.
What is significant is the overall performance of a helpdesk service, for instance, against the suite of service and performance standards that make up a service specification. As defined, a KPI is a reflective measure of overall service performance. Therefore, an example of a helpdesk KPI could be: ‘each month 98 percent of all helpdesk service standards must be met’.
This key performance indicator provides a measure of overall reflective performance of the whole of the helpdesk service in any one month. There is no restriction on the number of KPIs that may be desired for a single service.
WHAT MAKES A GOOD KPI
Before drafting a series of performance standards and KPIs, it is worth paying due regard to the summary findings of the research conducted by the Victorian Department of Treasury and Finance (DTF) in 2009 on performance regimes and what makes a good KPI. These summary findings include:
- focus on what’s important
- not every important element needs a KPI
- standards should be about outputs not methods
- standards should be achievable
- standards should be measurable
- the number of performance standards and KPIs should be manageable, and
- performance standards and KPIs should be clear and straightforward to interpret.
Considering the summary findings of the DTF’s research and the performance indicators and KPI definitions, there is no reason to shun facilities management service contracts with a performance-related reward mechanism. Clear service specifications with clear, concise and unambiguous performance standards and trusted self-reporting by the contractor will allow implementation of a relatively easy performance-related reward mechanism through the use of KPIs.
Introduction of true KPIs will present an opportunity to introduce a simple penalty or reward mechanism based on the contractor meeting its contracted monthly KPI performance. Applying performance standards and KPIs correctly to service contracts provides the opportunity for facilities management to benefit from service contracts with performance-related rewards mechanisms. These good practice contracts incentivise contractors to continually deliver the quality service paid for.
Rogier Roelvink is an associate director with Turner & Townsend. Roelvink is responsible for the company’s asset and facilities management, and transaction advisory services. He has 12 years of international (Australia, UK and Europe) experience in facilities management and public private partnerships (PPPs), specialising in strategic facilities management advice, business case development and complex procurement/PPP transaction management.