Key Performance Indicators
Is less more?
I have been studying about Key Performance Indicators and I found myself consistently questioning whether more KPIs equals more real value for determining a company’s strategic, financial, and operational achievements.
Bauer (2004) defines KPIs as quantifiable metrics which reflect the performance of an organization in achieving its goals and objectives.
Today with the big data too many things are easily measured, and it generally brings the first big challenge when choosing the KPIs which is to decide what to measure.
“What gets measured gets improved.” — Peter Drucker
This is one of my favourite quotes, however, I believe we should also take into account one reflection here, just because we can measure something, it does not automatically mean that it is important. Otherwise, we would have millions of indicators and would lose focus on what really matters to the company.
Saying that, choosing the right KPIs and getting the right numbers with good data integrity is a challenge that should not be underestimated. Sadly, random indicators and sampling can result in inaccurate analysis.
KPIs vs Metrics
Bringing another reflection to our attention, it is crucial to consider that a goal is an outcome that we are willing to achieve, whereas a KPI is a metric or indicator that will point us whether we are on track to achieve that goal.
SMART and Effective KPIs
Goal and KPI setting is commonly suggested based on S.M.A.R.T. factors (Shahin, 2007):
By starting with SMART goals, we will probably be feeling that all the rest will fall into place easily. This thinking is incredibly common in the industry, but SMART goals do not always translate into good KPIs. We need to consider the strategy of our company, not trying to base on other company’s strategies, KPIs, etc. It begins with the top-level strategy with our unique company’s mission and vision statements.
References:
Bauer, K. (2004), KPIs: The Metrics that Drive Performance Management. DM Review.
Sharma, R. (2008), The Greatness Guide: 101 Lessons for Making What’s Good at Work and in Life Even Better, Harper Collins.
Shahin, A. and Mahbod, M.A. (2007), “Prioritization of key performance indicators: An integration of analytical hierarchy process and goal setting”, International Journal of Productivity and Performance Management.
Bruno Elias | linkedin.com/in/brunoelias
