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Inspectioneering Journal

Key Performance Indicators – Understanding is Key

By Greg Alvarado at Inspectioneering Journal, and Michael O. Nichols at Marathon Petroleum Company. This article appears in the November/December 2014 issue of Inspectioneering Journal

Key Performance Indicators or KPIs are important for businesses to track measurable progress, or a lack thereof, as compared to pre-defined goals or benchmarks. For those of us in the inspection, fixed equipment reliability world, the same holds true. Often the efficacy of our inspection programs is measured against such goals.

Just to set the stage, let’s review the definition to make sure we are on the same page. Why? Because if we are to use and/or compare KPIs, it is important that the context is clearly understood as part of the basis for their creation. For instance, if we are trying to say something about the efficacy of our inspection program and we are tracking pipe leaks, it will be important to know the reason for the leak in order to use the KPI to improve our inspection program performance. For example:

  1. Pipe leaks due to wall thinning from internal corrosion.
  2. Pipe leaks due to CUI (corrosion under insulation).
  3. Pipe leaks due to mechanical damage.
  4. Pipe leaks due to improper gasket selection.
  5. Pipe leaks due to improper gasket installation/bolt-up procedures.
  6. Etc.

I think you get the picture. So try this definition on for size:

Wikipedia definition:

“A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization, a department within an organization or of a particular activity in which it engages. Often success is simply the repeated, periodic achievement of some levels of operational goal (e.g. zero defects, 10/10 customer satisfaction, etc.), and sometimes success is defined in terms of making progress toward strategic goals. Accordingly, choosing the right KPIs relies upon a good understanding of what is important to the organization. 'What is important' often depends on the department measuring the performance - e.g. the KPIs useful to finance will really differ from the KPIs assigned to sales. Since there is a need to understand well what is important (to an organization), various techniques to assess the present state of the business, and its key activities, are associated with the selection of performance indicators. These assessments often lead to the identification of potential improvements, so performance indicators are routinely associated with 'performance improvement' initiatives. A very common way to choose KPIs is to apply a management framework such as the balanced scorecard.”

Context and Understanding

So context is important. One department’s reason for tracking piping leaks for example, might be different than another’s. Of course, if I am an inspector, I don’t want to get “dinged” for a leak when it was caused by a change in operating conditions that were not foreseen (of course a robust IOW, or integrity operating window, program should indicate a need for adjusting the inspection strategy to avoid that leak. We’ll get into IOW KPIs in a minute.) nor was anyone informed about the change in advance.

KPIs are a difficult subject to write about, particularly in the context of plant reliability or mechanical integrity, and mostly because it is difficult to keep things relevant in one discipline, let alone all the other reliability (and maintenance) disciplines. 

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Comments and Discussion

Posted by Edward Clark on December 10, 2014
The article is an excellent discussion of KPI's... Log in or register to read the rest of this comment.

Posted by Andy Gysbers on December 31, 2014
Good discussion. With regard to leading... Log in or register to read the rest of this comment.

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