Evaluation of Research, Development and Engineering through KPIs
Key Performance Indicators (KPIs) affect decisions, research efforts, and are strongly related to the goals of the RD&E activity, as they can differ based on the type of the project, e.g. applied projects, research explorations, and so on.
When considering applied projects, the KPIs that relate to market outcome – like customer satisfaction, for example – are only considered to be relevant if they are adjusted through corporate subsidies. In addition to this, for those programs that create technological competence, KPIs should be moderated with “effort” KPIs. Hence, in order to achieve good results, one should balance market-outcome KPIs with those KPIs that measure research effort more directly.
Research, Development and Engineering (RD&E) KPIs represent an important pillar of a company’s success for various reasons, such as:
- Documentation of the RD&E value and justification of investments;
- Evaluation of people, objectives and programs for ensuring a proper allocation of resources;
- Behavioral influencers.
When RD&E staff is being evaluated according to specific KPIs, they take decisions or change their behavior in order to improve performance results. It is very important to choose the right KPIs for evaluating performance, as wrong KPIs can be counterproductive, and also because they are short-term oriented.
Moreover, managers and researchers have stated that, in order to succeed, the RD&E should be more customer driven. Therefore, it is recommended to use KPIs that measure “outcomes” and that relate to incremental profit, sales or customer satisfaction.
In addition, managers should ensure that a proper amount of scientific, engineering and process effort is correctly allocated and that there is a balance between this “effort” and “outcomes”. “Effort” KPIs can be related to publications and patents, and it is recommended for companies to increase the relevance of their performance results by using a combination of “effort” KPIs.
Therefore, the best performance management system in RD&E uses a combination of “effort” and outcome KPIs. Moreover, it guides the RD&E actors to spend wisely their resources both on internal ideas and external explorations.