Clarity Key Performance Indicators (KPI) is a specialty that provides a framework to manage and monitor the measures that are critical to the management of your organisation. Of course this process is broader than a collection of measures, it needs to be managed as and end to end process encompassing definition, production and publication leading to improved action. This process can be known as Enterprise Performance Management (EPM) or Business Performance Management (BPM).
KPI's are usually based on a strategic or business plan and must align to the stated objectives in these plans. They are the way to measure how the business as a whole is progressing towards its stated goals - kind of like a summarised project plan. They are long term considerations that should not be changed very often; the targets may change but well defined measures should only require revision if the core business changes.
Defining relevant key performance indicators is a task that faces various challenges from within the organisation. KPI's have to be standardised, valid, actionable and relevant. Relevant data has to be identified and extracted from a variety of groups that are involved in different business processes. Even when a solution has been implemented, getting people to use it may be a difficult step and guiding them on the right direction often requires a change in the culture of the organisation. All staff members should understand how they contribute to each measure.
One of the best practices used by enterprises is the Balanced Scorecard. This methodology includes measures from each key part of the business to ensure that good performance in one area of the business is not at the expense of another. The generic measure groups within a balanced scorecard are: Financial, Customers/Clients, Processes and People/HR. The measures are often visualised in a strategy map, which is a simple graphic depiction of goals and objectives and their relationships.
1. Start with the strategy and stated objectives of the organisation or department
2. Identify the key measures that determine whether the strategy or objectives have been met
3. Identify the data to support those key measures and any derivation rules (this will tell you how you went last month etc)
4. Discover the processes that influence the key measures
5. Analyse the drivers of those processes to define leading indicators of performance
6. Identify the data to support the leading indicators and any derivation rules (this will give you a guide to how you might do next month)
The foundation of successful business performance management is based on data warehousing and business intelligence applications. Data warehouses can deliver the right information to the right members of the organization at the right moment. Integrated data from multiple sources offered by data warehouses can result in detailed reports and KPI's that display all the relevant data in formats such as dashboards or scorecards.
Even if an organisation has a data warehouse it is often the case that a large percentage of data for KPI's is not in the warehouse. Rather than relying on spreadsheets to integrate this disparate information, each organisation should invest in a centralised KPI measure capture application that can capture and store measures and commentary. This need not be a large investment if the company has access to lightweight development environments such as Sharepoint or Application Express.
Graphical dashboards or scorecards that are embedded in corporate portals are a much better way to publish metrics than word documents or spreadsheets. Using a web portal each measure can be more easily included in the relevant business process which is the best way to make a measure actionable. Ensuring measures are published in a way that promotes business action is a key success factor.
The idea of publishing results against measures is so that poor performance can be rectified. It is therefore important that the typical actions required to rectify poor performance are well understood - it is easy to assume everyone should know to do this.
Other features of good KPI publication are the ability to drill up to high level metrics and down to detail records plus drill-across to related measures. Personalisation is another useful feature, this ensures each employee sees a view of the KPI framework that is personalised to their area of interest (department, area or office).
Time is a dimension that needs careful integration into KPI frameworks as time often gives context to the current performance - have we always been this bad, are we getting better?
Finally, beware of trying to make to measures look too fancy as gimmicks such as gauges and 3D display may not very helpful for displaying complex business data.
The future of business intelligence lies in developing visualisation methods that allow interaction with data. This relies on very fast database engines coupled with highly intuitive user interface to help users dig deeper into the data to look for causes so an appropriate action plan can be put in place. Collaborative visualisation is extremely helpful as the combined expertise of more specialists can be put to use and enhanced by such methods.
Keys to a successful project
The framework in which business performance management works involves strategy, planning, monitoring, acting on and adjusting - in that order!
- Strategy & planning - Before implementing a business performance management project, ensure the organisation has a clear strategy and understands what needs to be measured to track progress towards the strategic goals.
- Monitoring - If the data to support the measures is not captured be very wary of using derivations from the most relevant data available - ensure any assumptions are clearly understood by all parties.
- Acting & adjusting - As mentioned above, make sure the results are seen in the context of the relevant business processes and that actions required to correct poor results is understood.
KPI projects can be challenging, so it is highly recommended that an organisation that is new to these practices start with a small project that can quickly deliver results.