Finance professionals talk to FSN contributing editor Lesley Meall about the whys and wherefores of Key Performance Indicators.
Matches won and number of goals scored; fee income and work in progress; visitors through the door; advertisements placed for the following month; the difference between agreed delivery time and actual delivery time; the valuation to instruction conversion rate. Key Performance Indictors (KPIs) are as many and varied as the different approaches businesses take to selecting and monitoring them, and the software and systems they use to do this.
At the East London charity Discover, finance director Abbylee Widger gets most of the KPI information she needs from the till system (Gamma). ‘Visitor numbers and the income this generates are my most important KPIs,’ says the FD of the children’s discovery centre, because the number of visits by families and schools are the main source of income and an indication of how successfully the charity is providing creative, play and learning opportunities to children and their carers.
Widger checks advance bookings from schools and her other KPIs on a weekly basis. ‘We are a small charity and things are very hand to mouth, so I want to know right away if there is a drop off in visitor numbers or income,’ she says, though figuring out what’s behind any variations and being able to do anything about it do not necessarily go hand in hand. ‘We are an indoor centre so we are at the mercy of the weather,’ she explains, and we all know how tricky this can be to control or predict.
But the KPI information that Widger has collected over the past few years does make the charity better able to predict and plan for seasonal fluctuations. ‘We recently had the building refurbished,’ she says, and this was done during a 4-week period known to be quiet. ‘We get very few visitors in March, and we have no idea why, but during the last two weeks of February we had so many visitors we could have filled two visitor centres,’ says the FD.
Nick Rawlins is finance director at the Lincs FM Group, a regional network of nine radio stations (and the sixth largest radio group in the UK), so he monitors a very different set of KPIs, with the support of very different systems. ‘As a commercial radio network we have two customers. The listener, who pays for nothing, and the advertiser, who pays for everything,’ says Rawlins, and these two customer groups are reflected in two of his most important performance indicators: listening figures and the number of booked advertisements.
‘We have listening figures for any point during each 24-hour period,’ says Rawlins; these are provide by an external organisation, RAJAR, (the Radio Joint Audience Research), and they are used along with listener demongraphics to help Lincs provide the best possible service to its two customer groups. ‘Advertisements are targetted at certain types of listener and need to reach specified numbers of listeners, so if we can play an ad when the right listening figures are at their highest, we don’t need to play so many ads,’ he explains.
As orders for ads are a very significant KPI, the Lincs FD and the chief executive both keep a very close eye on their status, with the help of a trafficking system (developed especially for broadcasters) and the accounting system the station uses (TAS Books). ‘The ad orders are entered into the system as they arrive, and we look on a daily basis at what’s on board for the next month and the one after,’ says Rawlins, and these are compared to the figures for the last year for each calendar month.
On the second week of each month, when Rawlins does the management accounts that consolidate the results of the nine radio stations in the group, he looks at a different set of KPIs. ‘I monitor turnover and gross margins,’ says Rawlins, explaining: ‘The radio group has very high fixed costs, so turnover is very important,’ not least because this relates directly to a percentage of its variable costs, such as the royalties the Lincs FM Group has to pay on the music it plays. Even so, he is more concerned with cash flow. ‘We are just like any business in this respect,’ he adds.
In the public sector, at NHS Wakefield District Primary Care Trust (PCT), the approach to KPIs – and their monitoring – is very different, as Rachel Spilsbury, head of information explains. ‘They are used by all sorts of people ranging from the board of the PCT, to individual commissioning managers, so the KPIs are very diverse,’ she says. They span from benchmarking information about Wakefield’s local population to PCT compliance with Department of Health and regulatory requirements, and this results in requests for information on numerous performance indicators.
These range from the number of hospital stays and readmissions, to figures for childhood obesity and deaths from chronic obstructive pulmonary disease, and the people using them don’t just want the figures for these KPIs, they also want to to access and analyse the underlying data. ‘At the moment this can be quite difficult, and time consuming, because most of the information is in multiple systems and accessed using Microsoft Excel,’ explains Spilsbury, ‘and people need to get someone in information services to create the reports for them.’
But this is changing. ‘There is a lot of focus in the NHS at the moment on monitoring and meeting KPIs,’ says Spilsbury, so Wakefield is consolidating its multiple systems with a business intelligence system (from COA Solutions). ‘We will only need to store any piece of information once and there will be just one version of the truth,’ she reports, ‘and once we have these set up a series of dashboards for people, they will be to create their own reports, and drill down into the underlying data, and be self-sufficient in exploring the reasons for good or poor performance.’
The project is at an early stage, so just six KPIs are being monitored: the number of hospital stays, their cost, length of stay, excess bed days (over the expected), and the number of 14 day readmissions and 28 day readmissions after the initial stay. ‘This is just a very small proportion of what we will eventually be monitoring,’ says Spilsbury, and as the project moves forward ‘these will become more diverse, covering a wide range of health topics,’ and they will be used to continuously drive improvements and efficiencies at the primary care trust.
‘In agreement with the strategic health authority all primary care trusts need to be very aware of how they are performing, so that where they are performing badly they can set challenging targets in terms of improvements,’ explains Spilsbury. ‘As the aim overall is to improve on health outcomes, our KPIs are all to do with measuring results against our outcome indicators,’ she adds, so in addition to all of the other things you can learn from KPIs, they can also be good for your health.
