So what is a KPI?
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. This is the book to give you the full low-down on the ROKS Enterprise™ method.
- 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 practical help...
If you would like some specific KPI definitions to get you started, you can have a look at the free KPI definitions on this site (see top menu bar) or pick up a copy of Getting Started with KPIs for over 400 ready-built popular KPIs. If you need to create your own from scratch KPI Definition, then I'd recommend using this KPI Definition Checklist.