The characteristics of KPIs
KPIs represent a set of measures focusing on those aspects of organizational performance that are the most critical for the current and future success of an organization. There are only a few KPIs in an organization (no more than 10) and they have certain characteristics.
KPI characteristics include:
- Non financial measures (not expressed in $s, Pds etc)
- Measured frequently e.g. daily or 24/7 (KPIs are not measured monthly)
- Acted upon by the CEO and the senior management team on a daily or 24/7 basis
- All staff understand the measure and what corrective action is required
- Responsibility can be tied down to a team
- The KPI has a significant impact on the organization e.g. it impacts on most of the critical success factors and balanced scorecard perspectives
- Positive movement affects all other performance measures in a positive way
When you put a Pound or Dollar sign to a measure you have not dug deep enough. Sales made yesterday will be a result of sales calls made previously to existing and prospective customers, advertising, amount of contact with the key customers, product reliability etc. I label any indicator expressed in monetary terms as result indicator, see below for more explanation.
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About the Author
David Parmenter, author of Key Performance Indicators: Developing, Implementing, and Using Winning KPIs and Pareto’s 80/20 Rule for Corporate Accountants, is an international presenter who is known for his thought provoking and lively sessions, which have led to substantial change in many organizations. He is a leading expert in developing winning KPIs, replacing the annual planning process with quarterly rolling planning, accelerating month-end processes, and converting reporting to a decision based tool.
David’s work on KPIs has received international recognition with clients in Auckland, Wellington, Sydney, Melbourne, Brisbane, Adelaide, Canberra, Perth, Kuala Lumpur, Singapore, Tehran, Prague, Dublin, London, Birmingham, Manchester and Edinburgh. David is a fellow of the Institute of Chartered Accountants in England & Wales and has worked for Ernst & Young, BP Oil Ltd, Arthur Andersen, and Price Waterhouse Coopers.
David’s recent thinking is accessible from www.davidparmenter.com. He can be contacted at [email protected] or telephone +64 4 499 0007.
This articles is an extract from his “Implementing winning KPIs” whitepaper which can be downloaded from http://davidparmenter.com/how-to-guides)
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