KPI's are very important components of our strategy to monitor and report our organizational effectiveness. Wikepedia has a great definition that links to the similar ideas of BAM (Business Activity Monitoring) and Scorecards.
In context these often seem like very daunting tasks as often you are aligning to best practices to compare say utilization vs best in class, others are counting customers, churn and cycle time against targets.
One of the interesting starting points when I look to understand a business is to read their annual report as well as their competitors. Annual reports are a great starting point as public companies have often identified some early KPIs that they report to the street. It's a great place to start, but certainly not even close to the finish. This often allows a quick win for the Business Intelligence team to then leverage the time it takes to properly identify and align to others for the organization.
There are two dysfunctions I often see in these types of exercises:
- The Measurement Sets the Behaviour – often what we measure will set the behaviour of our teams. In Sales I have seen people move new business to January as one of their KPIs was Annual Booked Revenue (revenue realized in the year the business was signed). This often moved business from Dec. to Jan. Not what the organization wanted I would think.
- Too Many KPIs – How can you have 500 KPIs? Often every metric and fact are determined to be a KPI as opposed to just being metrics and facts. Often aiming for less than 10 will give you less than 20 as the result.
Otherwise, you want to leverage the Rapid BI and iterative approach to developing these so that the organization can learn as you work and evolve these measures of success and improvement. So guide the discovery and iterate from the learning. This is one of the approaches we have found successful at Project X Ltd.