Best Practices, Business Process Management (BPM), Process mining
Maximize the Business Value of PPIs and KPIs
You most likely already know what KPIs are: key performance indicators are used across sectors to evaluate the success of an organization or of a particular business outcome (such as production, inventory, sales initiatives, etc). These metrics stay at the strategic level, meaning they focus on the company wide impact of these outcomes.
But what about PPIs? Though lesser known, process performance indicators are just as crucial to the smooth operation of your business, yet they receive far less attention. PPIs provide more granular insight into specific business processes. By examining the process at this more operational level, PPIs complement KPIs by filling in the details. The processes examined can range from customer service ticket resolution, to inventory tracking, to the hiring process used by HR.
You may be seeing the beginning of a difference already, so before we get too far into it, there are a few similarities we’d like to cover, starting with the core purpose of both sets of indicators—communication.
Performance indicators are used to communicate where there’s room for improvement in your company’s processes, strategies, or methodologies. This can mean, for example, your production line, your customer service tool, your inventory tracking, or your HR onboarding . The information provided can be high level, like if production has fallen 4% year over year. Or it can be granular, like you’ve had a 7% drop in quality candidates for the software development department in the last two months.
Both of these measurements are intended to highlight where your business can eliminate bottlenecks. They let you zero in on where the process breaks down and give you a starting point for solutions. Here’s where the two diverge—the level of these breakdowns and solutions. KPIs stay at a high, strategic level, while PPIs get more fine grained and look at specific processes at a much closer operational level.
KPIs offer the strategic view of your business as a whole
The ”key” in key performance indicator means that these should highlight an overall business outcome, something along the lines of company revenue or production levels. KPIs are developed on a department-by-department, or division-by-division, basis. On a broad level, these relate to one of three major areas: revenue, production goals, or customer service.
Because they reside at this high level, KPIs can take some time to define for each company. Here’s an example set of questions and answers to give you an idea of where to start:
- What is your revenue goal? To increase overall company revenue by 15% year over year.
- Who is responsible for this business outcome? The sales and marketing manager.
- How will you measure success? In dollars (US) brought in via new sales.
- How will progress be measured? Monthly, using sales statistics.
One of the primary issues with KPIs is that they don’t take into account information silos. Since each KPI relates to its own department or business unit, they don’t highlight where data is not being shared between units. PPIs are a first step in bringing these information silos into focus, so they can be eliminated and the data that each department needs can be obtained.
PPIs provide the operational-level view of specific business processes
When you need to narrow your focus and figure out exactly what caused that revenue drop (for example), you turn to PPIs. These give a much finer grained look at one specific business process at a time, allowing you to track down a bottleneck or locate a gap in the inventory system.
Processes are mapped by pulling data directly from the IT systems that form the backbone of most modern businesses. These systems leave event logs that can easily be analyzed by process mining software. That software, in turn, produces a real-time map of that process, without the inaccuracies inherent in the interviews and human interventions conventionally used to collect this data.
Since the data needed to calculate a PPI is obtainable via process mining, it is possible to monitor troublesome processes closely. This fast turnaround means you can monitor the integrity of your processes at more frequent intervals, without disturbing the process itself or causing downtime.
Compared to the KPI and the broad strategic view, PPIs are low level, so while the questions you’re going to be asking may sound similar, the answers will differ in scope:
- What is your goal for Time-to-Resolution? One business day for standard issues, and three if escalation is needed.
- Who is responsible for the process leading to this outcome? Customer Support Manager & team leads.
- How will success be measured? In minutes/days to resolution.
- How will progress be monitored? Weekly, using metrics from the ticket tracking system.
The difference in answers is that difference between strategic and operational levels. The KPI answers a broad question about overall business goals and outcomes while the PPI is for narrow answers about specific processes.
So when you need a measurement relating to company revenue or the product development lifecycle, stick with your industry standard KPIs. On the other hand, when you need to track down a bottleneck in your customer support department, go with a PPI that uses data pulled right from that IT system.
KPIs and PPIs are designed to complement each other. KPIs tell you where to focus your energy on a large scale. PPIs then give you the details you need to improve your KPIs and see gains in any set of business outcomes. Used together, these indicators give you a complete picture of your business process health and help steer future process updates.
Michal Rosik Chief Product Officer & Product Visionary at Minit
11. 04. 2019