Thursday, October 3, 2013

Three Challenging Aspects of KPIs

KPI is not a number, it's a story...

You can only manage what you measure, metrics & KPI (Key Performance Indicator) management is not a simple task though, approximately there’re 17, 000 KPIs around today, a bit overwhelming, let's not forget that there is a "K" in KPI for a reason, what’re the most challenging aspects of working with KPIs?



1.    Selecting the Right KPIs 

Selecting the right KPIs is one of the most important steps in measurement, as this process includes to answer why you are choosing that, how you will use them and weather you have enough resources to manage data. If you think through properly, the rest will just fall in their rightful places.

KPIs should be set according to the strategic strengths of the company, what resources the company has, in which it can fully utilize. But certainly, you shouldn't select a KPI when you don't have the mechanism to collect data. If KPIs would be set as per the resources available, it would be realistic, smart and hence achievable. This would make it easier to evaluate the results against the KPIs. So if the KPI selection has been effectively carried out, all the remaining aspects would fall in place. 

2. Root Cause Analysis & Insight Generation  

KPIs being used could have several ramifications, especially when conducting a Root Cause Analysis. The other most challenging aspect of KPI is to determining or understanding what root causes would be contributory in influencing the KPI before they are being selected.

As well as how to capture business insight from the set of KPIs, do they measure the right things at the right way; do they follow the SMART principles  in order to get the critical things measured, or do they not only just to measure data, but also convey the information-based business insight which can help business leaders to make optimal business decisions. 

3. Decision-Making based on KPI Results 

Once the KPIs are selected & finalized, decision-making based on the results of the KPIs is of utmost importance. If the decisions are not made correctly, it will lead to KPI calculation & presentation only a formality & will not contribute or help in improving the business result. KPIs drive behavior, very often organizations fail to define the outcome of the KPIs. Therefore, remaking decisions constantly based on KPI result is also very challenging. 

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