In our current series of articles, we’re looking at a few well-known KPIs and focusing on each one in turn. So far we’ve reviewed customer satisfaction and financial KPIs, and today we’re going to look at quality – and the concept of a quality index.
Why you need to own your KPIs
We’ve also talked about why it is essential to create KPIs that are specific to your business. Yes, it is useful to have a broad awareness of common KPIs that are used across organisations like yours, as well as similar industries and business verticals. In fact, we have a list of those most common KPIs here for reference: https://www.intrafocus.com/kpi-library/ But from this base of understanding, every organisation needs to create its own set of meaningful, tailored KPIs. If you want to get ahead of the competition, your business strategy will need to have goals and objectives that get you there – and KPIs which measure that specific set of objectives. Find out more about Developing Meaningful KPIs, in our free e-book.
So why are we looking at quality?
Quality drives everything that most modern organisations do to achieve competitive advantage. As a total approach, it ensures that the business is satisfying its eco-system of stakeholders on each level – from service to compliance.
What is the value of the quality index?
Quality is driven by a specification, such as an accepted standard or range. Those performance standards are set organisation-wide, sometimes using a framework such as ISO 9001. Typically, a business will produce a product or a service that is fit for purpose and which meets the customer expectation – whilst also offering the chance for the organisation to make a profit or surplus. The Quality Index allows managers to assess measures of quality against the full picture. In addition to the factors above, these could include metrics for: – Costs associated with quality – Wastage (of time and resources) – and re-work time – Production within certain tolerance levels, for factors such as performance, durability etc. – Customer satisfaction (gathered via surveys for example) – Regulatory compliance (defined externally where this applies)
How is a Quality Index created?
Businesses will usually select between 5-10 factors to evaluate within their Quality Index, score each against an establish range and weight them (where required) to show how important each factor is to the organisation. The resulting figure is typically expressed as a percentage, for easy comparison over time.
Example:
A website design agency might choose build time, a user conversion goal, and a website usability metric as three quality factors, and weight the usability metric by two. Every factor would be expressed as a percentage, and then averaged for a final quality score.
Tailored quality metrics
It’s worth bearing in mind that measures of quality may be described in a contextually different way according to the business. A quality finished product on an automobile factory line will look different to a quality website built by a design agency. Quality will be defined against a specific objective for your business. Returning to our example above, quality for the manufactured car might be measured against a dashboard of compliance checks. Quality for a new website development might be measured by design, functionality, security and the seamlessness of the user experience.
Selecting the right quality KPIs
A good approach is to begin with your business strategy and its own goals and objectives. Look for those which relate to quality – probably most of them do to some degree! Then assess how you can measure quality. Many businesses will use an established framework to do this, such as ISO 9001, Total Quality Management or Six Sigma. It’s interesting to note that these frameworks encompass an entire management philosophy for the organisation, showing just how vital quality is across all departments and activities. Keen to find out more? See our previous article on developing meaningful KPIs.
5 Good Reasons to Measure Quality
1. Businesses with a quality ethos are invariably more successful than those without. A total approach to quality means that the organisation will strive for excellence in every area of its delivery – satisfying its complex ecosystem of stakeholders and increasing the chance of securing a healthy profit or surplus. 2. Quality allows businesses to be more compliant. A quality management system means that regulatory requirements can be fulfilled, and minimises the risk of complaints, investigations, legal action and expensive fines! This is particularly important in areas such as Health & Safety, data protection and so forth. 3. Customers are inclined to spend more with a quality business. If you can offer a high-quality product or service features which satisfy your own quality index measures, then your customers will be satisfied and happier to pay a higher margin. 4. It is great for your brand! If your brand is associated with a quality product or service, then it will be easier to attract new customers, retain existing ones and build awareness and brand loyalty within your market. 5. Quality businesses attract a talented workforce. Great people want to work for a business with a strong reputation, excellent product and a safe, efficient, well-managed business. Quality businesses invest in their people and ensure they have the right training, development, remuneration and recognition packages, opportunities for progression and a culture of recognition. This all-encompassing approach to quality becomes a philosophy that permeates the entire organisation.
Find out more
Whether you need help to develop your KPIs or are just beginning your business strategy journey, Intrafocus is here to help. Please contact us for a chat about your needs. We recommend the Management guide to KPIs by Bernard Marr. It’s highly accessible and packed with usable information: KPIs Every Manager Should Know
