Key Performance Indicators (KPIs)

Definition of a KPI

A KPI is a composite of the following:

1. a measure of the performance of specific goals that a business has defined to be of critical importance to their success,
2. a target (or targets) and
3. an action resulting from that measurement.

To just talk around this briefly; If a business goal is critical, the business will want to have a target to show if that actual number is good or ok or bad. Further to this, if the target says we are in the bad performance zone then what do we do? There needs to be an understood action or set of actions that need to be taken as a corrective measure. How to select KPIs for your business is often a difficult process.

In this context a target can be a budgetary figure and comparisions between the target and actual should result in a corrective action in the marketing or sales departments.

The benefits of measuring KPIs

Can allow management to see the company or department performance in one place

May form one part of your company's business intelligence suite.

A team can work together to a common set of measurable goals.

If displayed correctly it can be a very quick way of seeing the actual performance of a goal, often at a high level.

Decisions can be made much quicker when there are accurate and visible measures to back them up.

Can be used in a positive way by management to encourage a strong team ethic.

May meet legal requirements.

What is the most common way of displaying them?

Dashboard – This is normally a screen with areas for various informational displays about the business. Often there are graphs, scorecards and report components.

Scorecard – This is usually a table of figures. This would often be included inside a dashboard and normally has an actual value against one or more targets displayed as a colour coded indicator or trend arrow. Sometimes the scorecard will be termed as a 'balanced scorecard'. This scorecard will have KPIs from all areas of the business in order to give a balanced view to the success of the business.

Report – Often included in the dashboard; this could be some high level reporting numbers supported for example with a graph.

How do I get the data to measure my KPI?

This is where we could help you as we would deal directly with your IT department to identify which data sources are required to satisfy the definitions of the KPIs to be measured. Note that some data sources may well be in Excel (for eg budget figures) and not even in the IT systems at all. In all these scenarios, technical expertise is required to extract and consolidate the data into a data warehouse. From there the presentation layer of the KPI is normally simple and because it is web based, is easily accessible from all departments in your company.

Sample KPI measures expressed as a business question

What is my average sales value in a region vs target?

Which colour widget is my best selling in higher income target groups?

Are my staff above or below the industry standard sick day targets?

How many breakages for machine M can be expected in a year and does this meet target?

How is my company doing overall on my 5 most important measures vs target?

Consolidata staff have had many years of business intelligence consulting experience including KPI selection and Dashboard design. Some industries that we have have experience in including manufacturing, telecomunications, wholesale foods, drinks retailing, healthcare and insurance. Our experience continues to broaden and you may find these links with example KPIs helpful - motor vehicle service KPIs , residential care KPIs , retail KPIs.

Take me to a relevant Case study.

If you would like help in measuring your KPIs, please get in touch with us.