The New Thinking on KPIs, part 2 of 4

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)

The New Thinking on KPIs, part 1 of 4

“Show me a company who thinks they have KPIs, which are measured monthly and quarterly, and I will show you measures that do not create change, alignment and growth and have never been KPIs”

David Parmenter
Internationally renown presenter and expert on Key Performance Indicators

From my research, very few organizations really monitor their true KPIs. The reason is very few organizations, business leaders, writers, corporate accountants, and consultants have explored what a KPI actually is. This brief paper hopefully will help you unearth what a KPI is and point where to look for them in your organization.

Let me explain what a KPI is through two KPI stories.


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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)

Get Data Directly from the Source

The accuracy and subsequently the trustworthiness of organizational performance measures is founded on the quality of their underlying data. While performance measures are uniquely sensitive to changes in data, even the smallest error in data accuracy undermines a metric’s credibility if not its output.


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Predefined and Reinforced Data Standards

You’ve heard it a million times, “garbage in, garbage out.” But this axiom couldn’t be more true than in the case of organizational performance measures where in so many instances even a minute change in the data entered results in a profoundly different indicated performance. So how can an organization’s leaders be confident in the accuracy of their performance measurement data and the resulting measures? By defining and reinforcing a comprehensive set of organizational performance measure data standards.


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Source Data Manipulation

All organizational performance measurement systems rely foundationally on their source data. And like a house built on sand, these performance measurement systems fail if their source data becomes corrupt.


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