What is the connection between operational visibility and KPIs? Visibility is the ability to track activities within an organization. KPIs on the other hand, show performance of an organization. Performance of an organization reflects its activities. If KPIs are representative of activities within your business, then KPIs give you visibility. If your KPIs neglect to show performance in certain areas of your business, then they don't give you complete visibility.
When do KPIs fail to give you visibility?
1. When KPIs neglect certain areas of business. In some cases, businesses tend to assign KPIs only to major parts of their operations. Running entire portions of a business without KPIs limits visibility and control. In such cases, KPIs don't provide adequate visibility.
2. When KPIs are oversimplified/generalized. Sometimes businesses oversimplify KPIs for convenience. However, this can come at a cost of missing factors that influence performance. In other cases, businesses tend to generalize KPIs for all their departments. This is convenient but can miss important indicators specific to one department.
3. When the connection between KPIs and real performance breaks down. In some cases, KPIs don't get changed as a business evolves. Over time the connection between KPIs and real performance breaks down. In such cases, KPIs provide myopic visibility to operational activities.
For KPIs to provide you adequate visibility, you need to peg your KPIs to core issues affecting performance. If not, you at least need to understand how KPIs are related to real performance. For example, cost KPIs are popular in logistics management. To get the best out of logistics cost KPIs; you need to understand that productivity is the real cost driver and cost KPIs only show the impact of productivity. High productivity reduces operational costs while low productivity has the opposite effect. If your logistics cost KPIs are showing bad results, productivity is your culprit.