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Measure What Matters
by Eric Britten
It’s 2010 and most organizations have begun to enter the 21st Century. They understand that metrics are the cornerstone (or foundation) of a well managed operation. KPIs (Key Performance Indicators), when properly developed and managed, measure both strategic and operational performance. Many managers understand the concept of cascading metrics and keep their eye on the key operating metrics day-to-day and week-to-week and key strategic metrics month-to-month or quarter-to-quarter. They monitor their KPIs regularly, using secondary and tertiary indicators (not KPIs) to help them identify where irregularities are occurring when the key indicator moves outside of acceptable parameters.
There’s an art to developing KPIs. It’s important that organizations understand how to identify or develop key performance indicators. The saying, “what gets measured gets managed”, is quite true, so organizations need to be sure their key indicators are the right ones.
Here are some pointers about KPIs:
1. KPIs are like the dashboard in your car. They provide essential information required to control the vehicle safely and efficiently. They do not provide all of the information on all of the aspects of the vehicle that could be measured.
2. A KPI is most effective when it tells a story. In other words, a good KPI should be a ratio, percentage, or a balanced combination indicating effectiveness or efficiency rather than just a raw number.
3. A KPI should be accurately defined so that others can understand what it measures, what data feed it, and how it is calculated.
4. A KPI should be capable of being influenced by the person monitoring it.
5. There should be a manageable number of KPIs at any level of the organization.
6. KPIs should have a base, a plan and a target.
7. The trend line of a KPI should also tell a story.
8. KPI targets should be S-M-A-R-T. (Specific, Measurable, Achievable, Realistic, Time Related)
9. KPIs are a tool that should be used to improve performance, not to punish poor performance.
10. Organizational KPIs should be displayed on a common dashboard.
11. Managers and supervisors should be trained in the use of various tools used to analyze and improve KPI performance.
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