Innovation and Government Spending
Innovation is and has always been at the center of all human endeavors. People those who are able to perform more complex tasks with relatively fewer resources have often captured world markets and gained the maximum wealth. Every economic textbook acknowledges the value of innovation. It also explains how the printing press made scribes obsolete […]
America’s Municipal Debt Problem
The American federal debt problem is well known. There are famous debt clocks which are tracking the increase in American federal debt. However, that calculation does not take into account the true scale of America’s debt problem. This is because the American federal debt is out of control. This is a known fact. However, many […]
The Economics of Code Sharing Agreements
The airline industry is one of the most competitive industry in the entire world. A large number of incumbents in this industry are making losses. This is primarily because of their lack of efficiency. Since success in the airline industry is solely based on efficiency, many companies have explored unconventional options in order to increase […]
Globalization and the Trickle Down Theory: Does it Work ?
The underlying premise behind globalization is that the transfer of wealth from the developed countries to the developing countries would eventually result in a scenario where those at the bottom of the ladder in the developing countries would benefit from the wealth flowing into their economies. The theory behind this is that if a Billion […]
How Loose Monetary Policies by Central Banks Create Asset Bubbles and Lead to Inflation
Loose or Tight Monetary Policies ? The debate over whether central banks around the world must pursue loose monetary policies or tight monetary policies has become sharp in the aftermath of the global financial crisis. Loose monetary policy refers to the practice of central banks keeping interest rates low, stimulating the economy as banks would […]
A KPI is a great tool to measure and control the performance of any given process. In management jargon, there is a famous saying which says “That which cannot be measured cannot be managed”. The whole process of control, therefore relies on real time measurement and transfer of information from the site where the task is actually being performed to the control room i.e. the management.
Definition of KPI: The KPI can therefore be thought of as a measurement that tells that management the precise state of operations at any given point of time.
There are 4 components to any KPI.
It is important that these 4 parameters are carefully defined keeping in mind the operational and technical capabilities. Measuring the wrong KPI or measuring the right KPI in the wrong manner can cause more harm than good to the organization that is measuring it.
While a KPI is a measure of performance, the Service Level Agreement or SLA is the ideal state of those measurements. For instance our body temperature is a KPI for our health, while 98.3 degrees Fahrenheit is the SLA i.e. the ideal state of affairs.
Hence, if we were to control our health, we would create a mechanism in which our temperature is being automatically measured. When the KPI deviates from the desired SLA i.e. temperature deviates from 98.3 degrees Fahrenheit, it must send some sort of a message to the management that management interference is required.
The beauty of KPI’s and SLA’s is that it provides required solutions in required time. Hence management can take preventive action instead of having to cure the problems.
Algedonics: While BPM solutions have built in functionalities to report any and every deviation from the SLA, it would not be in the best interest of the management. It is impossible for any process to function at uniform speed, if it is being performed by humans. Even mechanised processes do not function at absolutely uniform speed. Some level of tolerance, therefore needs to be built in the control mechanism.
The KPI’s and SLA’s should therefore allow for +/- 10% changes. Anything which goes above this is serious enough to require management attention.
The 10% is a ballpark figure and may be different depending on the degree of automation and criticality of the process. But the idea is clear, some tolerance level needs to be built in this system or else the managements mailboxes will be flooded with deviation messages which do not even represent an operational problem.
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Continuous Improvement and Business Process Re-Engineering
February 12, 2025
