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So What Is a KPI?

Author: Bernie Smith

What is a KPI? You see them every day, but probably don’t even think of them as KPIs.

  • If you are watching your weight, then the figure on the scales is a KPI – it’s a measure that you think is important.
  • If you want to keep your driving license, the speed on your dashboard is another of your KPIs.

A KPI is just a performance measure that you CARE about. For a business, this could be any number of things, from profit through to customer complaints.

So which performance indicators are ‘key’ and which are…. ‘meh’?

It comes down to what you are trying to achieve, which is why the absolute best way to choose your KPIs is to work backwards from your goals or objectives.

KPI Trees are a brilliant way to work backwards from your strategic goals or objectives. KPI Checklists is the book to give you the full low-down on the ROKS Enterprise™ method.

KPIs should…

  • Be clear and easy to understand.
  • Use numbers and be tangible.
  • Encourage behaviours that have a positive effect on the business.
  • Have ownership by those that influence their outcome.
  • Be something that focuses a team on a common goal.

KPIs should not be

  • Ridiculously hard to compile, taking valuable resources away from other activities.
  • Used as a weapon for political ends.
  • Confusing, ambiguous or discredited.

Or, cause people to find “a way around” to make the number look good or drive self-defeating behaviours (See this article- The science of setting targets for a great example of this backfiring!

KPIs for complex situations

Sometimes you need one number to give you a snapshot picture of a complex situation. I call these ‘Index KPIs‘. Examples of Composite KPIs include..

  • BMI – Body mass index. It gives an indication of “lean-ness” in a single number
  • FTSE 100 – A stock exchange index showing how the UK stock market is performing
  • Weight Watchers Points – using a measure that mixes calorific content, fat and fibre content to give a “food healthiness score”
  • OEE – Overall Equipment Effectiveness – A measure of efficiency that factors in quality, uptime and speed in production operations.
  • Fitness “scores” used by fitness monitoring gadgets like Fitbit
  • Eco Score on a Toyota Prius dashboard

Getting some more help…

If you would like to learn more from Bernie Smith about KPI’s, HREN has several courses including a Micro-Credential all taught by Bernie Smith. You can check out Bernie’s website and you will understand why we think he is an expert in this field.

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