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How To Develop KPI

If KPI are important and the name:

  • Key
  • Performance
  • Indicators

gives the game away, it begs the question, how do you develop KPI?

What Erica Olsen Has To Say

I thought this was a nice, short introduction video on how to develop KPI from a strategic perspective.

The key points Erica (from mystrategicplan.com) makes are:

  • KPI are the scorecard part of your balanced scorecard system
  • There are three types of indicators – raw numbers, progress numbers and change numbers
  • The measures need to be linked to actions
  • You need to consider the source of the measure and whether you already have it or whether it is a new number that needs to be collected or calculated.
  • How often will you report the measure – weekly, monthly, quarterly?
  • What is the target? What are you trying to achieve?

Performance Indicators and Critical Success Factors

Business level KPI should be based on the critical success factors for the entire company or business unit.

What are the few things that are individually necessary and together sufficient to achieve your overall mission?

Measures Should Be Rolled Down The Organisation

The most effective organisations align performance requirements and measures throughout the organisation to help guide the right decisions and actions.

You can have performance indicators for:

  • Functions – to monitor the performance of your senior management
  • Processes – to monitor cross functional issues
  • Teams – to monitor what’s happening in the areas of responsibility for individual managers and supervisors
  • Individual employees

Who Is Responsible For Calculating The KPI

I prefer self measurement and reporting upwards to the monitoring being done by a separate person or department.

It keeps ownership for the results and for taking action to improve performance where it should be.

There can be an integrity issue so it can be useful to have a few measures done externally so that there can be a check for consistency or to have the measures audited in some way to make sure that there isn’t any deliberate manipulation.

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