04. Process Driven Methodology to Identify Metric (KPI/KRI/KCI) Parameters

1.   Executive Summary

As part of any process management activities, it is critical to identify the right metrics at any stage to govern that process in a better way. These metrics provide the necessary feedback for course correction for the executing process.

Metrics can be of 3 types:

-       KRI which stands for Key Risk Indicator

-       KPI which stands for Key Performance Indicator and

-       KCI which stands for Key Control Indicator

KRI has a strongly negative connotation. KPI has a strongly positive connotation and KCI has a neutral connotation.

Hence a KRI if high, will indicate that the process is unstable and KPI is low, will indicate that the process is under performing and KCI will give the reason for the state of the process whether it is stable or not.

Now, the challenge faced by the business leaders is to identify the right KRI/KPI/KCI.

Which is the right metric for a given business context and how to identify it?

This article is an attempt to formalize that exercise to identify the right metric using a process driven methodology.

2.   Understanding some elements of process

2.1 Context:

Context of a process is the knowledge/intelligence surrounding the focal point that you have placed on a given process. It can be on a stage, it can be on transition, or it can be on a sub process. It can also be on a group of sequential stages.

2.2 Perspective

In a given context, perspective is the idea that you are tuning in the mind. It can be related to the success or failure of the process in the given stage. It can also be about checking the health of the executing process. This will internally translate into the identification of the right indicators- KRI, KPI or KCI.

2.3 Extraction Point

When you have a given context and a perspective, a careful analysis of the process will enable you to identify the point at which you can extract the metrics data. A sample extraction point for the metric can be before a stage or after a stage or inside a sub process.

2.4 Leading/Lagging/Coincident Indicator

An indicator of the process metric can be a Leading Indicator or a Lagging Indicator or Coincident Indicator. This is purely dependent on the context. For example, if the context is a stage, identification of indicator before the stage execution starts is considered as Leading. Similarly, identification of indicator after the stage execution is considered as Lagging. Identifying the indicator during the execution of the stage is considered as Coincident.

Though, in the above example, we have considered ‘stage’ as a context, the context can also be a sub-process, group of sequential stages and or other significant contextual elements that span the process in a certain way.

These are indicative of the Extraction Point of the metrics considered.

2.5  KRI

KRI is a indicator that we tap before the execution of a process, sub-process or a stage. Though the indicator can be leading or lagging, since KRI has a strong negative connotation, it is usually considered as a leading indicator to warn about the instabilities in the context before the execution begins.

2.6  KPI

KPI is a indicator that we tap after the execution of a process, sub-process or a stage. Though the indicator can be leading or lagging, since KPI has a strong positive connotation, it is usually considered as a lagging indicator to inform about the success in the context after the execution ends.

NOTE: A poor KPI of a current stage can be a leading KRI for the next stage. Similarly, a good lagging KRI at the end of the current stage can be a KPI for the next stage. It all depends on the context and perspective that you have focussed on.

2.7  KCI

KCI is the health indicating statistics of the current context (stage/sub-process/or group of sequential stages)