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12 Steps For Getting Started With KPIs
The simple and practical way for beginners (and busy people) to measure what matters for business performance

by Stacey Barr, Performance Management Specialist, Stacey Barr Pty LtdMonday, November 1, 2010

Introduction

Before we can throw ourselves into developing corporate-wide performance measurement or KPI (key performance indicator) systems, or get the best return from business intelligence (BI) and dashboard applications, we have to know how to meaningfully measure what matters. And for novices, this means starting small and learning quickly so you build towards a corporate-wide system that will be meaningful and sustainable.

Are you a KPI novice?

Some years ago, a client of mine invested $2,000,000AU in a custom-made management dashboard application that everyone stopped using a mere two weeks after it launched.  If that was your business or organization, wouldn’t such a waste make you feel sick to your stomach?

The problem was that this client was a KPI – or performance measurement – novice. The client thought measuring and KPIs were all about having a flashy set of dials and gauges that updated in real time and were available 24/7 at the click of a mouse button.  They didn’t realize that performance measurement is a process, a series of deliberate steps to design the information you truly need for decision making; a process that has several essential steps that come BEFORE the development of a dashboard application.

There are a few symptoms that KPI or performance measurement novices display.  And if you tick several of these boxes, guess what that probably means for you?

  • You’re not sure why measuring performance is important – you suspect it’s just a fad, a bureaucratic process or imposition on doing your “real work.”
  • You think that milestones like “implement customer relationship management system” or actions like “train staff” are measures or KPIs.
  • You are comfortable to have things like “survey results” or “customer loyalty” in the KPI or measure column in your business plan.
  • You don’t have a KPI or measure column in your business plan.
  • You identify some measures or KPIs but fail to implement them (they never get graphed or reported).
  • You don’t have clear links between measures and goals.
  • You believe your goals aren’t measurable.
  • You couldn’t confidently define or describe what a performance measure really is, distinct from goals, initiatives, targets or results.
  • You’re not sure what should be measured – actions, goals, people, processes?
  • To find measures or KPIs, you do brainstorming, look at your existing data, search for KPI libraries, or try to find out what other organizations in your industry are measuring.

If you did tick a few of these boxes, don’t feel bad.  The majority of people still struggle to get their heads around what good performance measurement is all about – and indeed why we should even bother doing it.  But the good news is that it’s easier than you think and it will make a bigger difference than you think.

What good performance measurement means

Performance measures (or KPIs – the terms are more often used interchangeably these days) are objective evidence of the degree to which a performance result is happening over time.  They are feedback about your progress in improving aspects of your business.

Without regular and objective feedback about our progress in pursuing the results we want, we are at the mercy of hope and chance.  With good performance measures, we can make the right decisions at the right times to pursue our results and not waste time or money or effort (or even sleep) in doing so.

Usually we use goals to describe the results we want, or the improvements we want, in our business or organization.  We set up measures of those goals so at any time we can see where we are.  We also set targets for our measures, so we can know when we’ve done enough to achieve the results we want (or to know when we’ve arrived at our results).  And graphs that track your progress through time are the most powerful way to display this information.  Here’s an example:

Goal:

Reduce the time it takes to convert a lead into a customer.

Measure:

Lead Conversion Cycle Time = The average number of days from when we receive an enquiry from a lead to when the lead makes their first purchase (and therefore becomes a customer).

Target:

Two days

Graph:

Line Chart Graph

Of course you also need a strategy or an initiative or some action you’ll take to move from the current level of performance (in this example it started out at six days and has improved to three days) to the targeted level (of two days).  Your measure’s graph will show you the success of your chosen actions, or lack of success as the case can sometimes be!

The graph of your performance measure is a powerful, revealing, insightful tool – it shows you what’s really happening, quickly and easily, so you can take the right action at the right time.

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