Four Things to Remember When Implementing a KPI Program for Utilities

“What gets measured gets done” has been attributed to Peter Drucker, Tom Peters, and Edward Deming. Regardless of who said it – it is correct – and metrics are the measures by which an organization assesses performance. An organization’s most important metrics are its Key Performance Indicators, or KPIs.

Utilities, like any other business, utilize KPIs extensively. They need the right information to keep their organization on track, and KPIs are the first line of defense. But keeping KPIs up to date often requires people chasing down data from every corner of the business. That can slow your reaction time and force you to make decisions based on instinct instead of data.

Implementing a Key Performance Indicator (KPI) program within a utility takes careful consideration and should align with your business strategy to ensure success. Here are four best practices utilities should consider when defining KPIs:

1. One size does not fit all

Utilities provide the same services, but that doesn’t mean they should have the same KPIs. Performance indicators most important to a utility can vary based on multiple factors – number of customers, size of territory, location, private vs. public, age of infrastructure, technology systems in place, and many more. Several reputable utility industry reports provide benchmark information and metrics – do not simply adopt theses as KPIs. Determine specific opportunity areas and goals and align KPIs to track metrics essential to accomplishing the goals. Many utility specific KPI metrics will not be included in an industry-wide report.

2. Spend the necessary time identifying how you measure a KPI and get sign off on requirements

A KPI could be measured several different ways. Spend time determining the best measurement before developing reports. Have conversations to define exactly what each component of a KPI calculation is measuring and make sure all stakeholders agree on the calculation. Document the definition and calculation in easy-to-understand, plain English and attain client to sign off prior to developing the KPI. This will eliminate redeveloping reports later. The “why did we measure it this way?” questions will inevitably come – be prepared with answers.

An example of an ambiguous utility KPI metric is number of accounts. Have solid answers to these types of questions:

  • What is an account?
  • Does every account have a meter?
  • Can one customer have multiple accounts?
  • Are there different types of accounts? What types are included in this KPI? Why?
  • Are there accounts that have been cancelled? Are they included?
  • Does the number of accounts coincide with the number of unique bills?

3. Don’t overdo it

Just because you can measure it doesn’t mean you should. Also, it is not necessary that any measurement or metric rises to the level of a KPI. Remember that the K in KPI stands for Key. Creating too many KPIs dilutes the value of the Key Performance Indicators that will truly drive improvement. Stick to the KPIs that are vital to the utility and hold individuals accountable for results.

4. Focus on targets, not benchmarks

Benchmarks tell the story of how other utilities are performing. While benchmarks offer an indicator of customer expectation, they don’t take into consideration variable components specific to each utility. Develop targets based on your historical data. How has your utility performed in the past? What are the root causes impacting a KPI? What actions will affect the root causes and drive improvement? Answer these types of questions and build a business case for improvement. Use it to set tiered targets for a year, two years, or five years.

In short, determine KPIs essential to your utility, carefully define how each KPI is measured, keep the list of KPIs focused, and set targets with responsible owners. Utilities should look to spur continuous improvement by effectively managing their KPI program.

Ben Snyder is an Experienced Consultant with West Monroe Partners and can be reached at bsnyder@westmonroepartners.com.

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Chicago, IL 60606
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