Running your business on gut feeling is not easy or recommended. There is too much to predict and conditions always change. Laboratory leaders need to rely on data to help design high-level goals that accurately reflect business performance. Laboratory leaders must keenly navigate through the mounds of data pertaining to their lab and its operations to uncover insight into the success of their business. To accomplish this, lab managers should select key performance indicators (KPIs) to track progress, evaluate results, and act based on outcomes.
What are key performance indicators?
KPIs are high-level, often strategic, measures of performance towards a long-term goal. They are typically designed to provide insight into whether your laboratory is on track to future success. Laboratories can use KPIs to evaluate the health of their operations by providing feedback on progress towards high-level goals or strategic initiatives related to safety, finance, quality, and people. The usage of KPIs allows laboratories to intelligently update their operations based on KPI results.
Key performance indicators vs metrics
The terms “KPIs” and “metrics” are often used interchangeably. However, there are distinct differences between these concepts. KPIs are related to business or laboratory objectives and are high-level or strategic in nature. They are applied across departments. By contrast, metrics provide information related to performance of specific processes and can be considered tactical. They are typically specific to individual departments or groups rather than broadly applicable across departments. Metrics provide the information that drives the KPIs.
For example, within the quality function of a laboratory, a metric might be the number of procedural deviations for the month. The corresponding quality KPI might be the delivery of an error-free product. In this example, the ability to produce error-free products solely relies on staff not deviating from internal procedures and processes. This metric, along with several others, will support the overall quality metric of percentage of error-free products. Table 1 shows more examples illustrating the difference between KPIs and metrics.
How labs can use KPIs
KPIs can be a valuable process to initiate at your laboratory. Even breaking down the meaning of KPIs, key performance indicators can help to develop an evaluation of the current performance:
- Key: The most important
- Performance: Directly related to the success of the lab
- Indicators: Shows direction and provides clear feedback around if current performance is aligned with the goals
When first using KPIs, note that you will likely be seeing the collected data in a whole different light. This will easily identify opportunities for process improvement or highlight deficiencies. KPIs show the preferable level of the metric to maintain to aid in continued, seamless processes. In turn, maintaining these levels may innately improve the quality of the work, which will also improve the business process. These improvements will drive better overall client satisfaction.
Establishing and selecting your lab’s KPIs
It may seem overwhelming to begin gathering data to develop KPIs. However, these small steps make it easy to get started:
- Find a starting point by reviewing data that has already been collected. This may include the number of procedural deviations, cost of lab supplies per month, or perhaps products or reports generated per day/week/month.
- Ensure that you understand which pieces of data are most important to the business and to the end users of the data.
- Confirm the data have measurable evaluations that are meaningful and easy to analyze. The data should be easily quantifiable, not subjective.
- Make certain the data can be tied to action. If data is collected for a KPI that is out of your control, it may not be a valuable use of your time and effort. An example of this could be how many times prices have been raised by your vendors or suppliers. Although this may be helpful data for financial purposes, there may not be any action you can take to address the issue.
- Start small. Once you know your data, select one to three KPIs that can be established based on the criteria above.
Monitor, evaluate, act, and re-evaluate KPIs
There is little advantage to developing a KPI system if routine monitoring and action plans are not included. Having this plan in place gives the space and dedication needed to ensure targets can be achieved. Once KPIs are set and a baseline is established, a system for continued monitoring should be developed. This may include frequency of updating, timelines of data to be reported, reporting format, delivery of report to stakeholders, and a plan to address the results. Re-evaluation will be part of this process, and should review KPIs definitions (right targets, right data, right time frames, etc.), effectiveness (are you meeting or missing targets consistently?), or if new KPIs are needed. Your KPIs must be actionable. A KPI that consistently misses the target levels, with no correction made, warrants discussion.
Gaining support from staff
When word is spread that metrics are being collected, staff may see this as a managerial whip, so to speak. It is important to communicate to staff (1) why the metrics are being collected and (2) how they will be executed. Ensuring they know the “why” helps to ensure they are on board to assist where they can, to meet the targets or goals set. Also, rewards do not hurt—they indicate to staff that they are on the right track. It is also important to ensure senior management is engaged with the KPIs and supports the system. This will encourage buy-in from all staff.
Laboratory leaders can use KPIs to develop a more detailed understanding of performance and determine whether the lab is on track to succeed. By taking the necessary time to establish actionable KPIs, lab leaders will ensure that they have the right information at their fingertips to make more educated decisions about safety, quality, operations, sales, and staffing within their businesses.