Mining the Facts: Using KPIs to Monitor Progress, Control Costs, and Drive Performance
Mining organizations are complex operations — a lot is happening both in the field and in the office, so it’s sometimes difficult to stay on top of it all. How can you ensure that you’re on a course of continual improvement, meeting your stated goals, and differentiating your mining organization from the others? One effective way is to establish Key Performance Indicators (KPIs), and then monitor and measure your performance against them. In our continuing series on ways that mining companies can use technology to drive down costs, we look at the value of KPIs.
KPIs are a set of quantifiable measures that companies can use to monitor and compare their performance to their strategic and operational goals. KPIs help establish the benchmarks you can use to continually measure and track your mining company’s activities so that you can identify problem areas, anticipate potential setbacks, and respond quickly to both.
What KPIs Should You Be Monitoring?
Mining industry companies will have some different KPIs than, say, most companies in the retail sector, but even within the mining industry, different companies will place different value on various indicators.
One way to select the KPIs that your company should be monitoring is to list your goals for the next year. The process of identifying and measuring KPIs forces you to look at what specific actions and behaviors will drive the company towards those goals. For example, if improving job site safety, or increasing equipment utilization are goals for the coming year, you’ll want to include KPIs to help you monitor and measure these.
Leading and Lagging Indicators
In performance management, there’s frequent talk about both leading and lagging indicators, but what are they? A leading indicator is a predictive measurement, while a lagging indicator is an output measurement. For example, the percentage of people wearing hard hats on your site is a leading safety indicator. The number of accidents at your site is a lagging safety indicator. The difference between the two is that a leading indicator can influence change, while a lagging indicator can only record what has happened.
Leading indicators are typically harder to gather than output indicators, but both are important. Tracking the number of accidents (a lag indicator) without monitoring the percentage wearing hard hats (a lead indicator) will provide no early warnings about how you are tracking towards meeting a strategic goal (improving safety). And conversely, monitoring the percentage wearing hard hats without monitoring the number of accidents won’t tell you if increasing the percentage of hard hat wearers is delivering on its goal. Your ability to enter and monitor this type of non-financial data is a valuable component of any mining ERP solution.
What Are the Benefits of KPIs?
KPIs can provide insight into your mining operation, but insight doesn’t pay the bills. To be truly useful, KPIs need to provide timely business intelligence that helps you lower costs, boost production, improve safety, maximize equipment utilization, optimize labor resources, and more. Careful structuring of what you measure and how often you monitor what you measure will help ensure you’re reaping the benefits of KPIs, which can include:
- Earlier problem identification — including cost overruns, compliance risks, or slow production down
- Clarifying individual/department performance expectations
- Focusing your attention on what’s important
- Holding people accountable
- Tracking your improvements over time
- Gaining a competitive advantage
By regularly monitoring your mining operation’s KPIs, you’re able to make timely business decisions and make operational pivots, minor tweaks, or even significant adjustments to your procedure to keep your business tracking towards its goals. But your managers are busy people, and complex KPIs can be challenging to interpret. Your managers need information that is both easy to consume and available to them when and where they need it.
Many business management software applications offer configurable dashboards that can include a wide variety of KPIs, often in easy-to-digest graphical format. The dashboards can be customized for each manager, giving them access to the data they are responsible for, and helping them monitor that data continually. Consider adding alerts surrounding your KPIs, to trigger a notification to the manager when a particular metric or date is met.
Encourage Accountability Using KPIs
Holding employees accountable for improving the KPIs under their control provides them (and their managers) with a way to measure their performance. Not only does the employee have a way to quantify how he or she has contributed, but managers can see which employees are helping the most towards goals. To be most effective, KPIs should:
- Relate to specific corporate goals
- Be visible and accessible anywhere and anytime
- Provide proactive flagging or alerts when varying from set parameters
- Be regularly evaluated and adjusted
The Profit Impact
Industry-leading performance is the best way to differentiate your mining operations from the competition. To achieve best-in-class results you need to establish benchmarks and continuously measure progress. KPIs delivered to managers and decision makers, increase your operational agility, provide a foundation for accountability, and offer clear ways to measure progress against operational goals.
Caron Mining Solutions is a comprehensive, robust and easy-to-use mining industry ERP solution, built on Sage 300, that addresses the challenges modern mining operations face. Learn more about Caron Mining Solutions here, or by contacting us here.