How+do+you+select+the+right+KPIs?

How do you select the right KPIs? ·

Principles are beliefs, codes or morals used to guide any company’s business behavior. They bring consistency, predictability, integrity and trust to performance measurements across all functions so that employees can understand their role within the system. The target is to create employee ownership and the belief in the concept of “one culture, one team”. The framework of seven principles below is an example that attempts to incorporate basic, fundamental thinking into the creation of meaningful key performance indicators (KPIs). Keeping the “end in mind”, KPIs should create value/full potential and help to establish competitive advantage. The seven principles of performance measurement really describe qualities that performance measures should have if they are honestly going to be useful.  

1. Have a clear purpose (end in mind)

Use performance measures which provide objective evidence of the results that either define or lead to success for your business so your attention can effectively stay on what matters most in achieving, sustaining and elevating that success. 2. Think systemically (holistic approach)

When you create, interpret or use a performance measure, think carefully about the unintended consequences that could result from using it, such as impacts on other areas of performance and especially for the success of your cross-functional business as a whole. 3. Align with processes (from independent to interdependent)

Use your cross-functional, interdependent business processes as the framework for selecting and defining KPIs so they can translate targeted performance results into direct, actionable and appropriate action. 4. Drive the right behavior (one culture, one team)

Create measures that will encourage and reward people to act in ways that achieve desired results, and sustain and elevate business success. People know that many business decisions are driven by performance measures. 5. Build in integrity and trust (ownership)

<span style="color: #04af04; font-family: 'Comic Sans MS',cursive; font-size: 130%; line-height: 14.25pt; margin: 0in 0in 10pt;">Ensure that your data and measures/ KPIs are valid and conform to accepted standards (both intuitively and statistically) by being unbiased, transparent and accurate enough to clearly define and fit their purpose. <span style="color: #800080; font-family: 'Comic Sans MS',cursive; font-size: 150%; line-height: 14.25pt; margin: 0in 0in 10pt;">6. Understand variation (technology, processes, people)

<span style="color: #000080; font-family: 'Comic Sans MS',cursive; font-size: 120%; line-height: 14.25pt; margin: 0in 0in 10pt;">Take account of levels of inherent variability in performance levels (predictability) when you interpret measures/ KPIs to decide if and when you need to do something about it (mostly too late and a dollar short) as opposed to reacting to rapid changes and trends. <span style="color: #800080; font-family: 'Comic Sans MS',cursive; font-size: 150%; line-height: 14.25pt; margin: 0in 0in 10pt;">7. Integrate with decision making (change, focus, speed, results)

<span style="color: #404040; font-family: 'Comic Sans MS',cursive; font-size: 120%; line-height: 14.25pt; margin: 0in 0in 10pt;">Design the measurement/ KPI process so that it provides the most useful information in the most useful way so employees can engage to explore questions, assess options, make decisions and take actions to continuously improve (CI) processes measures/ KPIs by employing proven methodologies (i.e. PDCA, DMAIC, A3, etc.).

<span style="color: #404040; font-family: 'Comic Sans MS',cursive; font-size: 120%; line-height: 0px; margin: 0in 0in 10pt; overflow: hidden;"> <span style="background-color: #ffff00; color: #0000ff; font-family: 'Comic Sans MS',cursive; font-size: 170%; line-height: normal; margin: 0in 0in 10pt;">There is one interesting statement by David Parmenter, in his book “Key Performance Indicators:Developing,Implementing,and Using Winning KPIs” that I reckon is worth to share

<span style="background-color: #ffff00; color: #0000ff; font-family: 'Comic Sans MS',cursive; font-size: 170%; line-height: normal; margin: 0in 0in 10pt;">David uses 12 steps for identifying the artefacts that are used as Key Performance Indicators (KPI) for Scorecard/Dashboard. Process covers major success BUSINESS DRIVEN factors, such as stakeholder buy-in, organic growth, and iteration instead of “get it right the first time.”

<span style="color: #ff00ff; font-family: 'Comic Sans MS',cursive; font-size: 130%;">1. Senior management team commitment

<span style="color: #04af04; font-family: 'Comic Sans MS',cursive; font-size: 130%;">2. Establishing a “winning KPI” project team

<span style="color: #800080; font-family: 'Comic Sans MS',cursive; font-size: 130%;">3. Establishing a “just do it” culture and process

<span style="color: #0000ff; font-family: 'Comic Sans MS',cursive; font-size: 130%;">4. Setting up a holistic KPI development strategy

<span style="color: #ffff00; font-family: 'Comic Sans MS',cursive; font-size: 130%;">5. Marketing a KPI system to all employees

<span style="color: #008080; font-family: 'Comic Sans MS',cursive; font-size: 130%;">6. Identifying organization-wide critical success factors

<span style="color: #008000; font-family: 'Comic Sans MS',cursive; font-size: 130%;">7. Recording performance measures in a database

<span style="color: #ff0000; font-family: 'Comic Sans MS',cursive; font-size: 130%;">8. Selecting team-level performance measures

<span style="color: #e100ff; font-family: 'Comic Sans MS',cursive; font-size: 130%;">9. Selecting organizational winning KPIs

<span style="color: #ffff00; font-family: 'Comic Sans MS',cursive; font-size: 130%;">10. Developing the reporting frameworks at all levels

<span style="color: #808080; font-family: 'Comic Sans MS',cursive; font-size: 130%;">11. Facilitating the use of winning KPIs

<span style="color: #04af04; font-family: 'Comic Sans MS',cursive; font-size: 130%; line-height: normal; margin: 0in 0in 10pt;">12. Refining KPIs to maintain their relevance

<span style="color: #0c0c4b; font-family: 'Comic Sans MS',cursive; font-size: 130%;">The most common mistake when people select the irrelevant KPIs that don’t following the strategy maps. Strategy maps are designed to link a company’s high-level goals to the KPIs that measure how the company is performing on the measures that drive the business. In case of KPI not matching the business you are tracking the irrelevant stuff