What are KPI Trees?
KPI Trees are a graphical method of managing KPIs. They are essentially a tree diagram, on which KPIs are positioned in order that there is a clear structure amongst them. Modern organisations often have lots of KPIs. Without a clear structure, there is a danger that the organisation won’t know where to focus; they might be monitoring all of the KPIs with equal importance, or none at all!
So, KPI Trees can be very useful in bringing:
- Clarity – helping to understand what KPIs are available, and what they measure.
- Hierarchy – providing a clear ‘ladder’ of KPIs, with the most important KPIs are at the top.
- Balance – ensuring that a range of KPIs are in place that reflect both effectiveness and efficiency.
An example: The diagram below shows a KPI Tree for a Fault Repair Process.
Figure 1: A KPI Tree for a Fault Repair process (from p36 of the Lean Six Sigma and Minitab book).
The first thing to note is the grey shaded boxes at the top of the three key branches. These are not actually KPIs, but instead indicate the ‘Logical Category’ that is reflected in that particular branch of the KPI Tree. Please note that, generally, most KPI Trees do not include these ‘Logical Categories’. This is an approach recommended by OPEX Resources, because it helps in the development of a balanced KPI Tree.
So, in the example above, the KPIs fall into three key ‘Logical Categories’ that cover aspects of:
1) Fixing the fault
2) Interacting with the customer
3) Managing the business.
Within each Logical Category, the KPIs are then structured into a clear hierarchy. So, for example, the % Fixed Within 4 hours is the most important KPI within the Fixing the fault category, and there are then several other KPIs associated with Fixing the fault that are less important (and therefore positioned further down the KPI Tree).
Where are KPI Trees used within Six Sigma improvement projects?
- At the beginning of the Measure Phase;a KPI Tree is developed that details the metrics that will be monitored during the project. It’s important to note that a KPI Tree doesn’t just include the KPI that will be improved – it should include a balance of KPIs that cover all aspects of the process performance. So, for the example above, the project may be looking at improving the % of faults fixed within 4 hours, but the average resource hours per fault and % customers satisfied with repair service KPIs are also included in the project KPI Tree.
- During the Control Phase;the Project KPI Tree is merged back into the general business KPI Trees that should be in place, accompanied by updated Control Plans.
More information on KPI Trees can be found on pages 35-36 of the Fourth Edition of the Lean Six Sigma and Minitab book).