Companies can no longer afford to ignore sustainability. It is not just a trend but a major factor that drives where most businesses are headed. According to Globescan’s The State of Sustainable Business 2019, reputational risks, consumer demand, investor interest, operational risk, and employee engagement are some of the catalysts behind the sustainability efforts of most organizations.
Manufacturing is one of the industries that are pressured to realign their activities with the mounting call for sustainability practices. Sustainable manufacturing refers to developing products with minimal negative environmental impacts and maximum contribution to the conservation of natural resources. These products are expected to be economically sound and safe for employees, communities, and consumers.
Sustainable manufacturing aims to reduce the intensity of materials use, energy consumption, emissions, and unwanted byproducts while maintaining or improving the value provided for society and organizations.
Some relevant key performance indicators that are often considered when evaluating the sustainability of manufacturing companies are:
Environmental performance KPIs, such as: # Air emissions, % Energy utilization, % Hazardous waste etc.
Economic performance KPIs: % Product reliability, % Conformance to specifications, $ Material cost, % Labor cost etc.
Social performance KPIs: % Occupational health and safety, % Turnover rate, % Supplier commitment etc.
Sustainability standards are observed to ensure quality, transparency, compliance, and results in terms of making organizations accountable for their economic, environmental, and social performance.
The GRI Standards
Among the internationally renowned frameworks is the Global Reporting Initiative’s (GRI) Sustainability Reporting Standards. The GRI Standards consist of Universal Standards, which apply to all organizations and report on human rights and environmental due diligence, the new Sector Standards for sector-specific impacts, and the Topic Standards that come with the revised Universal Standards and relate to a particular topic.
Their vision is to create a sustainable future enabled by transparency and open dialogue about impacts. In this regard, they are a provider of the world’s most widely used sustainability disclosure standards.
With GRI Standards, companies can publicly present the outcomes of their activities in a structured way. This allows their stakeholders and interested parties to better see their status of how they are responding to calls for sustainability. GRI Standards can be used by any type of organization, whether large or small, public or private, or from any location or industry.
As cited in the report “A Short Introduction to the GRI Standards,” the Reporting Process for organizations using the GRI Standards involves determining impacts and their significance, identifying material topics, or topics that are relevant to the organization’s activities, and reporting disclosures. The final stages are reporting the organization’s most significant impacts on the economy, environment, and people and publishing information and GRI content index.
The GRI Standards comprise three series of Standards: The GRI Universal Standards can be applied to your reporting. The GRI Sector Standards are for sectors while the GRI Topic Standards are used to report specific information regarding material topics.
Daimler’s Sustainability Report
An example of a sustainability report that is developed based on the GRI Standards comes from Daimler, one of the biggest producers of premium cars and the world’s biggest manufacturer of commercial vehicles.
In 2006, Daimler joined the multi-stakeholder network of the Global Reporting Initiative (GRI), where it initially was an organizational stakeholder. It later became a Gold Community Member and is now a member of the GRI Community.
Their report is based on the Daimler Group’s sustainable business strategies. It contains two conceptual levels: “Spurwechsel” section, which refers to the external sustainability developments and trends into a context with the internal strategies and measures and “Reporting” section which provides a detailed description of the goals, due diligence approach, measures, and achievements.
The Reporting section focuses on six areas of action: climate protection and air quality, resource conservation, livable cities, traffic safety, data responsibility, and human rights as well as on three enabler topics, which are cross-sector themes that can influence areas of action. The enabler topics are Integrity, People, and Partnerships.
As part of the Climate protection & air quality area of action, the manufacturer frequently monitors the compliance with the internal and external environmental protection requirements. This way, they can take proactive actions to eliminate possible damage.
As a result, the reduction of air emissions is an important focus of their sense of responsibility for the environment (Figure 1).
They consider the consumption of resources in production as an important factor in the environmental compatibility of their vehicles. Thus, they are working to make production more efficient and more environmentally friendly by using less water, energy, and raw materials.
Daimler evaluates in a consistent and transparent way the economic, environmental, and social impact in order to find the best solutions to remain climate-neutral and sustainable in the future.
In addition to this, they maintain regular contact with representatives of business, government, and other interest groups that advocate for the same goal.
Daimler also plays an active role in upholding the UN Global Compact, a voluntary initiative that encourages companies to integrate sustainability practices into their activities. Daimler shares on their website that they are involved in the thematic and regional working groups and initiatives of the pact.
“In the reporting year, these included the action platforms “Reporting on the SDGs” and “Decent Work in Global Supply Chains” as well as the UN Global Compact Expert Network and the German Global Compact Network,” Daimler states.
As part of its obligation, Daimler reports its initiatives on areas like human rights, labor standards, and environmental protection in its Sustainability Report
Reporting sustainability key performance indicators constantly, in a clear and transparent manner, can provide a clear overview of the environmental, social, and economic impacts, and based on this, the organizations can take proactive actions to reduce the negative impact.
In this context, The GRI Standards offer a consistent structure for companies to report information in a way that covers the most significant impacts on the economy, environment, and people.
To learn more about KPIs, visit the world’s largest database of documented KPIs: smartkpis.com.
Any successful and developed performance management system must include the following main stages: planning, implementation, evaluation, and improvement.
Institutional performance management begins with the planning stage, which ends with the preparation of the strategic plan—a plan developed for several years that aims to bridge the gap between the current situation and the desired future vision. Determining the plan’s link with financial planning and the rest of the material, human, and technical resources and property, as well as at the planning stage there is a link with the general framework of risk management as it is necessary to determine the type of risk that could impede the implementation of the strategic objectives and how to deal with the risk during its occurrence, which requires the existence of institutional agility in leadership while dealing with it.
At this stage, the policy development guide is adopted, which is considered one of the basic capabilities to ensure the implementation of strategic objectives and government directions. Indicators and targets must also be set because of their importance in planning, monitoring and evaluation to see what has been achieved of the strategic objectives.
The execution phase involves ensuring the plan’s successful implementation of the strategy. This is where operational action plans are developed and implemented, which include strategic initiatives and projects that ultimately lead to achieving the results of the strategic objectives and bridging the performance gap in the strategic objectives that were measured through performance indicators. This phase also involves the application of a general framework for change management, which is designed to bring about a positive shift that moves the organizational unit and organization from one state to another in order to achieve the strategic objectives in an efficient and effective manner, which may deal with changing the organizational structure, policies, programs, procedures or processes in accordance with the application of the ADKAR model criteria for change management.
It is also possible to choose initiatives and projects (especially the strategy) from the reality of the organizational unit’s work plan, to which the concepts of change can be applied. At this stage, performance indicators are measured, the main purpose of which is to know the level of achieving the strategic goals. Therefore, on all indicators, whether strategic or operational, there are “Lead” indicators that measure efforts to achieve the goals or “Lag” indicators that measure the long-term results of the strategic goals, on all of them to contribute to achieving the strategic objectives of the organization. Any indicator that is far from achieving this should be excluded from the measurement.
Measuring performance indicators contributes to the enhancement of institutional learning, motivates employees to achieve higher levels of strategic performance, and enhances accountability and transparency in the institution. At this stage, implementation begins through the general framework of risk management in terms of identifying risk treatment options, the method of treatment, preparing a risk treatment plan, and following up on the extent of implementation of said plan.
Policies that support the realization of the strategy are applied through the preparation and development of an implementation plan that includes various resources, timetables, risk management, communication, monitoring, and evaluation. Monitoring is necessary to assess the effects of the policy so that there is a possibility to adjust the plan and methods of implementation (if required).
A policy follow-up mechanism must also be set up and this can be done by developing and measuring policy effectiveness performance indicators. Finally, at this stage, strategy governance was addressed, which is the framework for action that ensures the implementation of the strategy and the achievement of its objectives in terms of forming work teams, follow-up, review, accountability, reporting, and evaluation.
The third stage is the evaluation stage, and it includes auditing processes, which aims to provide accurate data on how to implement the main stages of the general framework for operations management by defining, designing, documenting, applying, measuring, and following up on the performance, improvement, and development of processes. Institutions can also measure the maturity of processes through several criteria, namely: strategic alignment, culture and leadership, personnel, governance, methodologies and methods, and information technology.
They can also evaluate services through several criteria, including: linking services to strategic directions and goals, focusing on customers, defining performance standards and indicators for services to reach customer happiness, evaluating service delivery channels, measuring and evaluating customer happiness and adding value to them, and evaluating the human resources that provide services. This stage also includes evaluating indicators and targets, as well as evaluating policies and measuring their effectiveness.
The fourth and final stage is the improvement stage, and it includes reviewing and updating the strategic plan. There are two types of review and update of the plan: periodic annual review and comprehensive update of the plan after the end of the plan period of 3 years or 5 years. This stage also includes updating and improving operations, and there are 7 main steps to do so. The processes are: selecting the work team, analyzing the current process, developing indicators of the results of the process, determining the extent of process stability, determining process viability, and determining the feasibility of an improvement.
This stage also includes the improvement of services as the mechanism for improving them depends on various improvement sources, such as suggestions, complaints, satisfaction studies, studies and analyses, the results of measuring service performance indicators, and others. As for the steps and stages of improvement, they are: describing and analyzing improvement opportunities, identifying improvement action, evaluating the priority of applying improvement action, and evaluating the possibility of applying improvement action.
And here comes the role of benchmarking, which is the process of searching for and implementing best practices that increase the rate of improvement by providing the finest models and achieving improvement goals that lead to creating outstanding performance for the organization. It is a systematic and continuous process of comparison, measurement, learning, and continuous improvement by studying different models inside or outside the entity to reach the same level or excellence by applying the developed methods based on the results of the study. Comparisons are also one of the most important drivers of change in organizations, particularly when the outputs of comparison are employed in offering initiatives and innovations that improve previous work methods or lead to unprecedented successful methods which achieve pioneering in various fields.
Finally, analysis and improvement tools must be used to analyze all the problems facing the organization, including those related to the results of performance indicators. And in addressing the cases in which analysis and improvement tools are used, some important tools in analysis were explained, such as: Pareto analysis, mind map, brainstorming, the Five Why tool, and others.
About the author: Dr. Hisham Ahmad Kayali is a Strategic & Performance Management Specialist who has worked with the Dubai municipality. He participated in the full cycle of updating Dubai Municipality’s strategic plan based on balanced scorecard (BSC) perspectives. That included linking the strategic objectives to critical success factors, key performance indicators, and initiatives for the cycles of 2010-2014, 2013-2015, and 2016-2021. He has a Phd in Economic Science at Plekhanov Russian University of Economics.
Editor’s Note: This article is originally published in the 22nd PERFORMANCE Magazine – Printed Edition. To get your own copy of the whole magazine, visit – TKI Marketplace – to download the digital copy and – Amazon – for an additional printed copy.
Key performance indicators (KPIs) are essential in assessing the performance of smart cities, which are emerging as the main drivers of economic development in several countries today. The Organization for Economic Co-operation and Development (OECD) defines smart cities as “cities that leverage digitalization and engage stakeholders to improve people’s well-being and build more inclusive, sustainable and resilient societies.”
According to the paper “Smart Cities Evaluation – A Survey of Performance and Sustainability Indicators,” more than 60% of the worldwide population lives in urban areas. However, the negative impact of urbanization on the environment is increasing. The United Nations’ Sustainable Development Goals (SDGs) encourage the increased use of technology to provide efficient services, high quality of life, and alternatives for strengthening environmental sustainability.
Analyzing smart city performance enables policymakers at both the national and local levels to set achievable targets, determine where cities stand on their goals, track progress, and adjust policies. The Institute for Management Development (IMD) in Lausanne, Switzerland, and the Singapore University of Technology and Design (SUTD) cooperate to generate the Smart City Index (SCI). The study rates 118 cities from all over the globe based on inhabitants’ judgments of how technology may enhance their lives, as well as economic and social data from the UN Human Development Index. In July 2021, the report polled 120 residents in each city, totaling roughly 15,000 people.
The first three top-rated cities by IMD according to the SCI 2021 are Singapore, Zurich, and Oslo. The main aspects analyzed through SCI 2021 include priority areas that are perceived by the citizens as priorities to be improved. The second importance is based on Structures and Technologies, which are key survey data collected and organized into five categories: health and safety, mobility, activities, opportunities, and governance. Each indicator under these categories displays the score for the city and a comparison with the top four.
There are five characteristics that are desirable to users based on a quality model for a smart city designed in the paper “Metrics and indicators to evaluate the degree of transformation to smart city of a city. An ad-hoc quality model:” business and energy, transport and traffic, public security, inclusion and security, education, and innovation and development.
All these areas could be optimized through a specially developed set of metrics that can be adapted accordingly to the specific region/country. Some examples refer to: # Wi-Fi antennas, % Solar panels, # Intelligent interrelated systems, #State drones or # Intelligent garbage containers.
The Holistic Key Performance Indicators (H-KPI) Framework was developed by the National Institute of Standards and Technology (NIST) to assist municipal managers and other stakeholders engaged in governance and social development that analyze the benefits of smart city technologies. It was created to serve as a foundation for the development of measuring methods that allow for integration, adaptation, and extension across three interconnected levels of analysis: technologies, infrastructure services, and community benefits.
Strategic planning, system design and assurance, and operations management are all applications of the H-KPI technique. According to Smart Cities Connect, five metrics are used in the H-KPI Framework: across districts and neighborhoods, KPIs are aligned with community priorities; assets that are in line with the needs of the community; effectiveness of investment; density of information flow; and infrastructure service quality and social programs. This involves a baseline assessment, a comparative study of technology options, system design, and project sequencing for strategic planning.
The U.S. Department of Commerce’ National Institute of Standards and Technology (NIST) elaborated on the data collection in the H-KPI method in a special publication. The NIST paper shows that the data collection goes through five phases: data source selection (define city data sources); data gathering (turning raw data into information); modeling (develop data sharing models for city data); characterization (listing smart city data and goals); and quantification (comprehensive analysis based of previous steps.
In conclusion, performance metrics play a key role in assessing the ability of cities and communities to deploy sophisticated technology efficiently and effectively as well as the reliability and efficacy of systems and strategies used in developing and running smart cities.
To level up your knowledge and understanding of performance metrics, The KPI Institute is continuously delivering quality content through online and face-to-face classes on Certified KPI Professional and Practitioner. Through this program’s intensive and organized approach to measuring performance, you will be provided with the required knowledge and training to advance your skills among other professionals. Visit The KPI Institute’s website for further information.
When implementing a Performance Management System (PMS) based on Key Performance Indicators (KPIs), the organization needs to create a favorable context to plan, organize, coordinate, communicate, and control performance. Such endeavor implies multiple initiatives, resources, and most of all, employee engagement. However, challenges are inevitable. These challenges often arise from the mechanisms and relations by which the KPI Measurement Framework and KPI-related processes are controlled and directed.
As such, unclear definitions and overlap of roles and responsibilities and lack of ownership, commitment, or clarity in terms of target achievement accountability are some of the most common challenges that may endanger the achievement of strategic business objectives and goals. The root cause of these dysfunctions is that KPI governance structure has never been clearly defined or described.
KPI governance structure
There are multiple parties involved in governing and managing KPI-related processes, and all play a specific role in promoting, supporting, designing, implementing, and maintaining the KPI measurement framework. A typical KPI governance structure includes the following components:
Performance Manager – Responsible for supervising the entire process
PMO specialists – Support the persons involved in the process, analyze data and check it for accuracy
KPI owner – Responsible for KPI target achievement
Data custodian – Responsible for KPI results collection/ data collection
KPI owners and data custodians have two of the most operational KPI governance roles within the organization. While the data custodians are responsible for ensuring that high-quality KPI data is gathered and communicated to all interested stakeholders, the KPI owners are mainly responsible for the KPIs under their management, making sure that they are viable and measurable.
KPI owners’ role and responsibilities
Within a standard Data Governance Framework, a data owner is in charge of ensuring that processes are followed to guarantee the collection, security, and quality of data. Frequently in a senior or high-level leadership position, a data owner has a role in planning the data, supervising access to it, ensuring data security, and defining a repository to contextualize the data.
Similarly, a KPI owner is responsible for overseeing the process, function, or initiative that the KPI is monitoring. That person has access to the data, knowledge of how that domain functions, and, most of all, is empowered to make decisions on improving operations.
In a nutshell, the KPI owner is responsible for reaching KPI targets through the following actions:
Monitoring (looking at) the measure over time
Interpreting its trends and patterns and seeking causes for them
Communicating this information to people affected by that performance area
Initiating action to improve performance in that area
Following up to be sure that actions have the desired effect on performance
Data custodians’ role and responsibilities
Within a KPI governance framework, data custodians are involved in the design of performance data collection, receipt and storage, process, analysis, reporting, publication, dissemination, and archival or deletion of data. The daily processing and management of performance data are therefore under the control of appointed data custodians. The person assigned with such a role must demonstrate high levels of data literacy as well as skills in data management software systems and tools.
Other required competencies for a data custodian are as follows:
The ability to intuitively identify and recognize any variance from the data quality dimensions
Focused on the improvement and automation of the process
Can competently apply the behaviors and skills of managing change
Uses change as an opportunity to advance business objectives
Works to minimize complexities, contradictions, and paradoxes or reduce their impact
Unifies leadership support for direction and smoothens the process of change
We may say that the data custodians are the guarantors of a sound performance data gathering process. Because of that, the profile of such an individual should also cover an analytical mind, experience in measuring and reporting metrics/ KPIs, information technology skills (basic Microsoft Excel or more advanced data analysis tools, depending on the data architecture`s level of automation), and a strong sense of integrity and ethics.
While some companies may hire specialized professionals, such as data analysts, other organizations may assign the data custodian roles to the existing employees.
Conclusion
Building a strong KPI governance team is a key part of the KPI-related processes and functionalities and of successfully overcoming the inherent challenges of implementing a PMS. Once the right people are on board, they need to be guided towards making the right decisions and focusing on the correct issues, ultimately making sure that information is being governed for a purpose that aligns with business objectives.
“If you aim at nothing, you will hit it every time.” — Zig Ziglar
When the cost of managing and measuring your performance is less than the tragic risk of hitting nothing, it pays to get your KPIs right.
KPIs, or key performance indicators, can prove that success is a result of not just one huge undertaking but a series of actions. These actions are taken by decision-makers that consistently rely on data rather than guesswork.
In this guide, you will learn the basics and benefits of KPIs and beyond. Explore the top articles, webinars, reports, and other materials produced by The KPI Institute, a leading global research institute specializing in business performance and KPI research for over 17 years.
Topics include:
What Is a Key Performance Indicator?
Why Companies Should Use KPIs
KPI Examples
Applying the KPI Best Practices
The KPI Measurement Framework
What Is a Key Performance Indicator?
The definition of a KPI, according to The KPI Institute, is “a measurable expression for the achievement of a desired level of results in an area relevant to the evaluated entity’s activity.”
“If a decision support system is put in place, users need the right data granularity and the guidelines or context for making the right decisions. All of these reasons have an underlying story, and top-performing organizations are able to clearly communicate that story to their employees.”
“As performance management & measurement is shaping up as a fundamental capability for organizations across the globe, there are still multiple challenges to be overcome.”
“Nowadays, the challenge is not about accessing information, as most companies are managing large volumes of data. The challenge is to decide which data is the most important for decision making.”
“What have been some of the changes that the Performance Management field has experienced over time? What are some one-size-fits-all style KPIs that any company can employ?”
Discover the role of KPIs in designing a rigorous Performance Management System (PMS) to ensure an optimized implementation across all organizational levels.
Compare KPIs and other performance evaluation criteria, identify the common KPI pitfalls, and discover how to use KPIs to create synergies between departments.
“In many cases, the key performance indicators (KPIs) monitored do not seem relevant as they are not connected to the strategy. To better understand how this problem can be addressed, we must first identify its possible causes.”
“What are the most important guidelines to follow when selecting KPIs for strategic objectives? What are the most efficient KPI Selection techniques, most recommended KPI selection environments, and some Value Flow Analysis technique examples?”
“A KPI implementation project plan provides a structure for the implementation of an organization’s performance management system. Once the project plan is set, all types of activities would have a clear deadline and designated responsibilities.”
“When formalizing and implementing a performance management system (PMS) based on key performance indicators (KPIs), there are multiple activities to be considered and many stakeholders to be engaged in the process. Therefore, you’ll need a project plan to make performance management an ongoing process within your organization.”
“An important component of performance measurement is represented by the data collection capability. However, when applied in the organizational context, this process is neither easy nor lacking obstacles, as practitioners often discover.”
“KPI selection is a process which seems simple, yet is inherently complex, due to the interdependencies involved. Here are 15 things to consider before embarking on this journey.”
“Just reporting performance data will not ensure the improvement of results. Improvement is only possible when decisions are made based on the insights provided by data.”
KPIs are not just about understanding and working with numbers. Using KPIs requires stakeholders to fulfill a vision and commit to ensuring success across all levels of their organization. If you would like to learn how to select the right KPIs for your organization, sign up for The KPI Institute’s Certified KPI Professional and Practitioner live online course today.
