SEVEN CHARACTERISTICS

A Key Performance Indicator (KPI) is a metric that measures the performance of a particular activity or process. The objective is for this to serve as a reference depending on the process or activity on the basis of the objective you want to achieve.

From extensive analysis and from discussions with over 1,500 participants in my KPI workshops, covering most organization types in the public and private sectors, I define seven KPI characteristics:

1. Nonfinancial measures (not expressed in dollars, yen, pounds, euros, etc.)

When you put a dollar sign on a measure, you have already converted it into a result indicator (e.g., daily sales are a result of activities that have taken place to create the sales). The KPI lies deeper down. It may be the number of visits to contacts with the key customers who make up most of the profitable business.

2. Measured frequently (e.g., daily or 24/7)

KPIs should be monitored 24/7, daily, or perhaps weekly for some. A monthly, quarterly, or annual measure cannot be a KPI, as it cannot be key to your business if you are monitoring it well after the “horse has bolted.” KPIs are therefore “current-” or future-oriented measures as opposed to past measures (e.g., number of key customer visits planned in next month or a list by key customer of the date of the next planned visit). When you look at most organizational measures, they are very much past indicators measuring events of the last month or quarter. These indicators cannot be and never were KPIs.

3. Acted on by the CEO and senior management team

All good KPIs make a difference; they have the CEO’s constant attention, with daily calls to the relevant staff. Having a “careerlimiting” discussion with the CEO is not something the staff wants to repeat, and in the airline case, innovative and productive processes were put in place to prevent a recurrence.

4. Understanding of the measure and the corrective action required by all staff

A KPI should tell you what action needs to take place. The British Airways “late plane” KPI communicated immediately to everyone that there needed to be a focus on recovering the lost time. Cleaners, caterers, ground crew, flight attendants, and liaison officers with traffic controllers would all work some magic to save a minute here and a minute there, while maintaining or improving service standards.

5. Ties responsibility to the individual or team

A KPI is deep enough in the organization that it can be tied to an individual. In other words, the CEO can call someone and ask “why.” Return on capital employed has never been a KPI, as it cannot be tied to a manager —it is a result of many activities under different managers.

 

6. Significant impact (e.g., affects most of the core critical success

A good KPI will affect most of the core CSFs and more than oneBSC perspective. In other words, when the CEO, management, and staff focus on the KPI, the organization scores goals in all directions.

7. Positive impact (e.g., affects all other performance measures in a positive way)

A good KPI has a flow-on effect. An improvement in a key measure within the CSF of customer satisfaction would have a positive impact on many other measures. Timely arrival and departure of planes gives rise to improved service by ground staff, as there is less “firefighting” to distract them from a quality and caring customer contact.

Source KPI Book

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