KPIs must be Key Success Factors

A lot of things are measurable, it doesn’t make them being at the origin of the success of the organization. At the moment of selecting the KPIs it is critical to limit them at those essential to reach the organization goals.

In parallel, it is important to limit the number of KPIs to maintain the attention of everybody focused on the same goals.

This doesn’t mean that, for example, a company will have only three or four KPIs. It means that there will be three or four KPIs for the management committee and each unit will have its own three or four or five KPIs that measure the achievement of the company’s goals once broken down at the department and unit level.

If one company’s goal is to “Increase customer satisfaction”, the corresponding KPI will be oriented in a different way in each department. The manufacturing department can have a KPI about the “Number of units rejected by the quality control », whereas Sales will have a KPI about the »Time waiting for a customer before a salesman takes the call ». If the sales and manufacturing departments increase their respective KPIs, it will help the organization to increase its KPI at the aggregated level.

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KPIs presentation

KPIs presentation is fundamental. It has to be particularly careful at the moment to chose the way of presenting the significant evolution that will need attention and action.

More generally, Key Perfomance Indicators that present colors are more attractive for the audience and simplify the reading, giving the first keys of analysis. Standard colors are :

  • green : positive evolution
  • red : negative evolution
  • yellow : worse situation

Moreover the evolutions have to be underlined :

  • ascending arrow: increasing
  • descending arrow : decreasing

A KPI must present an evolution. The previous value are generally never memorized by people. It is moreover important to underline its evolution in comparison with a milestone related to the organization and the measured activity (the day before, last week, last month, last year..).

The evolution percentage from a period to another must also be presented. It simplifies the reading and allows to identify more quickly the extent of the situation.

If the definition of crisis points is possible, then the KPIs would present alerts, using colors to express the criticality of the situation.

Goals must be viewable on the KPI and thus allow the comparison real vs objective.

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Indicators specificities

To be efficient the key performance indicators or KPIs should respect the following prerequisites :

The KPI is always related with the organization’s objectives

An organization which goal is to offer the best service to its customers will have among its KPIs the customer service rate. An humanitarian NGO will have as KPI the children vaccination rate.

Those two KPIs are fundamentally different. The first doesn’t apply to the second organization and vice versa.

This shows that it is fundamental for the organization to define its strategic objectives before implementing KPIs that will have to measure those objectives achievement.

The KPI is quantifiable

A Key Performance Indicator must reflect a valor, it must exist a way to define it precisely and to measure it. As an example, a KPI about customer loyalty is useless if it is impossible to distinguish the new from the old customers.

It is also important to maintain the KPI definition from year to year to guarantee the data historical coherence.

Each KPI must have its associated target. Thus, a company that wish to obtain a good social climate will have among its KPIs the HR turnover rate. Once its calculation formula defined and its measurement parameters established (which data, which publication frequency, which calculation tool…), the goal that has to be reached is clearly defined and understood by the process participants (in this example, it could be to “reduce the HR turnover by 7% per year”).

When the objectives are clearly established by the organizations, the KPIs are evident.

The KPI allows to take critical decisions regarding to organizations strategy

Good KPIs generate action.

In the contrary (if an sudden change in the KPI does not trigger action), it is not worth to continue the measurement, it is the sign of an useless KPI.

There is no lack of information inside the companies, the challenge is to be able to define the information that will help to take good decisions.

KPIs must be created in a limited number to assure their efficiency

Discerning dashboards include around ten KPIs maximum. The ideal is between 5 and 8.

KPIs have been created with a synthesis goal in comparison with the spreading of available information inside the organizations.

It is important to make sure that the KPIs :

  • are sent to the good persons and not to people not involved in the process (their productivity will be lowered).
  • really add value to the information and guarantee, as explained previously, the possibility of action.
  • are really used by their recipients.

The KPI must be updated and communicated regularly

KPIs are efficient only if people consult them sufficiently often to remember to use them when a decision has to be taken.

Except for sales activity that need a close follow-up and then a daily reporting, KPIs generally need to be communicated once a week.

KPIs, once communicated, must be discussed during weekly meetings.

It is thus wise to communicate them with sufficient advance to guarantee that the people will have enough time to analyze them.

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