Understanding this is the central issue and the reason that so many ‘KPI projects’ fail.

 KPI is an acronym of Key Performance Indicator. They are designed in such as way as to give you a snapshot of your organisation in relation to the goals you have set for it. From it you should be able to see exactly how you are doing against pre-defined criteria be that historical data, goals or competitors.

But first you need to decide what it is you want to measure – you need to define your KPIs. There are three things that you need to think about and keep in mind during every stage of defining a KPI project. It should also be noted that KPIs should not be confused with a critical success factor – that is, something that needs to be in place to achieve an objective; for example, recruiting skilled resource may be a critical success factor for an objective related to business expansion.

Rather, a KPI is a measure of the effectiveness of this objective in contributing to business growth; for example, sales revenue or market share. 

When setting out the KPIs for your business, ask yourselves some questions: 

Is it KEY? Is this the KEY to your business success? What are the issues that will make a REAL difference to the success of your business? Looking at your financial and management information reports (no matter HOW you generate that information) is the right place to start. If you have a benchmark you can use for comparison – either industry research or previous personal experience – find the items that are out of step from your expectations and mark them out. Which of these is pushing your business forwards and which is holding it back? 

Is it about PERFORMANCE? Is the measure something that actually affects or is affected by your business performance? Is changing this measure by say 10% going to alter the success of your business? Is it something that you can control or something that is specifically impacting your business? Or is it something environmental that affects everyone in your market equally? Can you respond to this or are you better focussing attention elsewhere?

Is this really an INDICATOR? How is it conveying information to you? Are you actually measuring something in a realistic manner? Can you put a numeric value on the measure so you can track progress and change? And if you can understand that something is changing, can you understand how that change has come about? Once you have a list of potential KPIs you’ve done half the work.  But now you need to step back and make some truly strategic decisions.