What difference between KPIs information data and measures ?
To define a Key Performance Indicator – KPI, it is first necessary to speak a common language. Data, measures, information, metrics and KPIs are different notions that need to be precised. If we take the example of a hotline :
Data : data are simple information units. Those are raw numbers and very few have a significant enough value to be used.
For example : number of calls answered, number of employees…
Measures : measures are a little more precise than data but still rarely used.
For example : number of calls answered per day, number of cases closed per employees
Information : information provide generally comparative data. Those are basic indicators.
For example : number of calls answered per day compared to the number of employees, average resolution time per type of problem…
KPI : The performance indicators add a real value to the information (built on measures and data). They are the answer to a specific question from the company’s board of directors. They are presented generally through a graphical representation and explanatory comments easy to understand. They are always related to a strategic goal and appear in the company dashboards. They are needed for the management of an activity and must lead to action.
Examples of good and bad KPIs
Example of bad KPI:
- Title of KPI: Sales increase
- Define: The change in sales volume from one month to another
- Measure: Sales per region and total sales
- Target: Increase each month
Why is it a bad example of KPI ? Because it is absolutely not clear, this synthesis doesn’t allow to answer the following question :
Do we consider an increase in sales in monetary value or in units sold ? If we consider a value, is it at the catalog price or at the real sales price ?
Products returned by customers are taken into account ? If yes how do they adjust the KPI ?
What is the targeted increase value ? (in percentage, value…) ?
Example of good KPI:
- Title of KPI: HR turnover
- Define: The total number of resigning employees, whatever the reason, more the number of employees dismissed for performance reason, and this total divided by the number of employees at the beginning of the year. The employees lost because of restructuring plans are not taken into account.
- Measure: The registering of each employee in the HR information system is done by the HR department. The reason and the date (of the last appointment with HR) of the separation is inscribed for each employee that does not belong to the organization anymore. Each month, or on demand, the analysis department make a query in this IS and provides to the head of departments reports about HR turnover. The graphs are posted on the Intranet by the analysis department.
- Target: Reduce the HR turnover by 5% per year
What to do with KPIs ?
Once the good key performance indicators are defined : the ones related with the company’s goal, measurable,… what can be done ?
KPIs are used as management and performance steering tools, but also as a motivation tool. They give to everyone inside the organization an clear view of what is important, of the situation that need to be reached.
It needs to be assured that all the staff is focused during the KPIs analysis meeting. If they are discerning, KPIs also help to share information inside the company and during meetings. As everybody is using the same report from week to week, the analysis is quicker and the information better shared. Then everybody is focused on the same problem, working more efficiently at its resolution.
KPIs have to be posted : inside the canteen, on the meeting rooms walls, on the company intranet, even on the company internet website for those that can be made public. To show what is the target of each KPI and to show the progress made is a major factor of teams motivation.