CIPS L4M3 Chapter 2 (2.2)

Question 1

What measures should be considered in contract specific Key performance Indicators (KPIs)?

Answer 1

• Number of payments made within terms (common complaint among suppliers is late payment)
• Timeliness of orders, e.g. number of urgent orders as a percentage of total orders
• Accuracy and completeness of orders

Question 2

According to Laura Tyson, what should useful KPIs do?

Answer 2

• Be Important
• Relate to a potential improvement or a potential problem
• Fall within the authority or ability of the parties to influence the results. Monitoring KPIs simply involves looking at what they tell us about performance; to manage them you must act on those results

Question 3

Explain KPI measurement

Answer 3

KPI measurement is about improvement. The measures must be about things which are important and relate to potential problems and improvements, and which can be influenced. The costs of capturing the information using a KPI must never outweigh the potential benefit from avoiding the problem or generating the improvement. Part of the purpose of having KPIs is to drive improvements in performance

Question 4

Where can the data for KPIs be collected?

Answer 4

• Cost data from financial systems
• Delivery of goods and services evidenced through ordering and receipting records
• Health and safety records required to be kept by law
• Help desk and complaints departments will retain records

Question 5

What are the key things to consider when collecting and storing KPI data?

Answer 5

The data must be easily accessible, accurate (capable of being trusted by both parties) and cost effective

Question 6

What does converting a measure into a score involve?

Answer 6

An understanding of what ‘good’ means to the organization concerned

Question 7

What is a common method of converting KPI measures into performance scores?

Answer 7

• The 0 to 4 scales i.e.

0= unacceptable

1= poor

2= meets the requirements

3= good/very good

4= excellent

Question 8

What is the meaning of the acronym SMART used when setting targets?

Answer 8

Specific, Measurable, Attainable/Achievable, Realistic/Relevant, Timely

Question 9

List the Five steps to defining KPIs

Answer 9

1. Decide what matters: what are you going to measure?
2. How are you going to measure it?
3. Who is going to measure it?
4. How often or over what period will it be measured?
5. How does the measure convert into a score?

Question 10

What is a Service Level Agreement?

Answer 10

An agreement between the provider and the user of a service that details what performance and quality will be provided; this agreement is legally enforceable if it is referred to in a contract

A ‘service level agreement’ may also mean a non-contractual agreement, a schedule or section of a wider contract, the whole contract, or a side agreement.

Question 11

How do SLAs work?

Answer 11

• The word Service is used in its widest sense
• The recipient of the service may or may not be the purchaser (could be a third party)
• The word quality is used in its widest sense
• Standards

Question 12

What are the core elements of an SLA?

Answer 12

• Service definition
• Quality definition
• KPI details (what is measured, how it is measured, who measures it, how often it is measured, targets)
• KPI management response
• Operational performance
• Operational performance management response
• Constraints or mitigating

Question 13

To ensure that the SLA is effective, it must

Answer 13

• have the same force as any other part of the contract. It must be legally binding

Question 14

What should the SLA clearly state if it is the only document setting out the requirements?

Answer 14

1. KPIs: how they are to be measured, who measures them and how often
2. How the measurements convert into scores
3. Any other service level standards, which may be of lesser importance than KPIs
4. Minimum acceptable standards or scores in each case
5. Range of scores both above and below the minimum acceptance
6. Any mitigating factors which might apply in the event of poor performance
7. Any period permitted in which to remedy a situation of poor performance
8. Remedies available to the injured party if the situation is not remedied
9. Process to be followed to access the remedies
10. How any inconsistencies or conflicts between the KPIs and any standards referred to are to be dealt with

Question 15

What is an Alternative Dispute Resolution (ADR)?

Answer 15

• method of solving a problem by bringing in an impartial outsider but not using the court system

Question 16

What are the situations that can cause the need for a stand-alone agreement in respect of a separate contract?

Answer 16

• Where, for reasons of urgency, a contract has been put in place prior to full KPIs being established and agreed
• Where there are several separate contracts and a single SLA is needed to ensure consistency of approach