Organizations harness the power of Key Performance Indicators Systems at multiple stages to evaluate their target outcomes and monitor progress towards annual goals to get an idea of program or portfolio health. KPIs are beneficial at the program component level as well. Since many programs are either outsourced to third party implementation firms or heavily rely on trade allies, monitoring their performance is an important risk management tool.
Establishing targeted KPIs for your implementers or trade allies gives you a method to monitor their monthly activity and performance against program standards. Properly designed, these KPIs will give insights into patterns and behaviors that can show a cause-and-effect relationship. Additionally, they can help catch early warning signs so that problems can be headed off before they occur. These signs do not always need to share bad news; they can communicate that activities are going well. All these can feed into the larger program KPI to assist in budget and savings forecasting.
What are some key considerations for establishing these targeted KPIs?
They fall into four areas:
- On-time delivery
The first one is simple, are their savings reports, invoices, and other deliverables submitted on time? Late or delayed reports have a way of impacting other functions like forecasting. If a provider’s reports or billing is always late, that may signify that problems could lead to larger issues. The on-time metric can be as simple as a binary yes or no question or an aging report that illustrates the number of days late on a deliverable. Closely related to on-time is accuracy. A report delivered on-time that is flawed is useless.
A metric such as several rejected reports could be a powerful tool in discussions with the provider concerning performance. Accuracy is closely related to compliance. It may be a program requirement to have project installations meet certain standards. For instance, some require trade allies to maintain insurance coverage. If they fail to have coverage, again, it may be a symptom of a larger problem. That leads to the issue of risk. How large a role does this implementer or trade ally play in achieving program objectives. An overall grade can be generated from the other criterion to rate this provider risk to the program or portfolio. For instance, a high score can mean a low risk; conversely, a low score could mean a high risk.
Update Your Business Objectives with Next Generation KPIs
The hardest part of this effort is getting started. Pick several simple metrics to calculate and monitor the vendor’s performance. Metrics can always be changed and updated. As with the larger program and portfolio KPIs, automation is important. Whatever KPIs are selected should be easy to generate in a short period of time. More than likely, the tracking system being used contains all the information needed to get started.
As the old saying goes, you cannot improve what you do not measure. Key Performance Indicators are a handy tool to improve the quality and execution of DSM programs.
Written by – Michael Stockard
Michael Stockard is an independent consultant at Stockard Energy Advising and is a member of the Advisory Panel at ANB Systems. Michael has over 40 years of experience in the design and implementation of demand-side management programs.