Performance Metrics that Do the JobI'm always on the outlook for serious, clear presentations of important subjects (as opposed to hype-ridden, low-nutrition write-ups). Today I came upon an exemplary treatment of performance metrics in the February 2006 issue of Intelligent Enterprise.
The author, Wayne W. Eckerson, is the director of Research and Services for the Data Warehousing Institute. Last year he published a book on the subject of performance metrics: Performance Dashboards: Measuring, Monitoring, and Managing Your Business.
Eckerson's whole article is worth reading if you need a compact review of how to make intelligent use of KPIs (key performance indicators). As a sample of what awaits you, below is a lightly edited list of the characteristics of effective KPIs that Eckerson identifies.
Please note that instituting use of KPIs should be accompanied by training for all employees covering your organization's strategic direction, the KPIs you are tracking to measure progress, and the outcomes that constitute success.
Wayne Eckerson's 12 characteristics of effective performance metrics:
- Aligned KPIs need to be aligned with corporate strategies and objectives.
- Owned Every KPI is "owned" by an individual or group on the business side accountable for its outcome.
- Predictive KPIs measure drivers of business value. Thus, they are leading indicators of desired performance.
- Actionable KPIs reflect timely, actionable data so users can intervene to improve performance before it's too late.
- Few in number KPIs should focus users on a few high-value tasks, not scatter their attention and energy on too many things.
- Easy to understand KPIs should be straightforward, not based on complex indexes that users don't know how to influence directly.
- Balanced and linked KPIs should balance and reinforce each other, not compete and confuse. Otherwise, you will degrade process performance.
- Transformative A KPI should trigger a chain reaction of positive changes in the organization, especially when it is monitored by the CEO.
- Standardized KPIs must be based on standard definitions, rules and calculations so they can be integrated across dashboards throughout the organization.
- Context-driven KPIs put performance in context by applying targets and thresholds so users can gauge their progress over time.
- Reinforced You can magnify the impact of KPIs by attaching compensation or incentives to them. However, do this cautiously, applying incentives only to well-understood and stable KPIs.
- Relevant KPIs gradually lose their impact over time, so they must be reviewed and refreshed periodically.