KPI is the abbreviation for key performance indicators; I think that is probably one of the most abused words in the business language. I can safely say that it has gained the status of the so-called buzzword. Nowadays, practically there is no presentation of IT system or service system for, which does not use the term. In my opinion marketing experts have to believe, that if you use KPI term in a presentation, article or advertising, it will automatically show that their products are business oriented.
What in this case is the “mythical, real KPI”? Let’s examine the term piece by piece.
Let’s start with the simplest and that is the I for the Indicators – KPIs have to be expressed in numbers.
P for Performance – means both efficiency and effectivness – this means that ‘true KPI’ should answer the question whether the process is effective, ie. whether the anticipated outcome is realized and that the process is economical, what is the cost of the process in relation to the obtained results? It all together gives you process performance measure.
However, the most important in KPI is the word ‘key’, In my opinion this is the most forgotten part. KPIs should be the key measures for the clients of process(recipients of a process outcome). Therefore, constructing KPIs should be guided by the expectations of the customer, translated into measurable requirements (how to know what the customer wants from the process is a completely different story).
Creating process’ KPIs one should keep in mind that the requirements of customers in relation to the process can be always described in three categories:
- Q – Quality
- D – Delivery – is it on time, is the quantity right?
- C – Cost – The cost of product delivery process
What conclusions can we have from this? It is difficult to imagine a good process indicator that meets all these demands, but who said that we only have to have one KPI? Therefore, for a single process there should be created a KPI group, about 10 KPIs but not less than three (minimum one in each category), all have to satisfy the following conditions:
– Can be classified into one of the three above-mentioned categories,
– Are relevant to the client perception of the process
– Can be expressed through numbers.
There are also other advices that should be followed when building KPIs: do not complicate – KPIs would be easy to report, analyze and understand, their quantity should be sufficient (not too much, once I saw more than 100 KPIs within report – it was almost impossible to manage (and how to say what was the ‘key’ one…), but also not too little – it is a mistake to create a very complex one KPI, which is difficult in the later analysis, and hard to understand).
It is also good to begin with the review of KPI libraries already available before creating new KPIs, good source of KPIS are: for the management of IT – ITIL and COBIT, and if you need HR KPIs or finance KPIs or in any other type you shall go to KPILIBRARY where you’ll find more than 2000 KPI already made and reviewed.
IF you’re looking informations about KPIs please check following links: