Key Performance Measures

Every business has some performance measures, but do they have KEY performance measures?  Below we talk about

• Why all organizations should have Key Performance Measures (or KPIs)
• The difference between Key Performance Measures (or KPIs) and simply Performance indicators, and Key Result Indicators
• We discuss David Parmenter’s four foundation stones for implementing and using Key Performance Measures (or KPIs)
• Parmenter’s 12 step model to developing and using Key Performance Measures (or KPIs)

Why Your Organization Needs Key Performance Measures (or KPIs)

• You need good measures to know where you stand as an organization.
• People need to know “their score”
• Key Performance Measures (or KPIs) are a necessary ingredient of continually improving performance.
• Many organizations make measurement irrelevant by getting lost in a sea of data and numbers that nobody understands, or that don’t tell a story.
• Key Performance Measures (or KPIs) are a necessary part of your Balanced Scorecard

KRAs, PIs and KPIs

David Parmenter is one of the foremost thinkers on Key Performance Measures (or KPIs).  Here is how he defines various types of indicators:

• Key Result Indicators: tell you how you have done in a perspective
• Performance Indicators: tell you what to do
• Key Performance Indicators: tell you what to do to increase performance dramatically

Seven Characteristics of True Key Performance Measures (or KPIs)

1. They are non-financial
2. They are measured frequently (hourly, daily)
3. Acted on by the CEO and the Management Team
4. There is a clear understanding of the measures by all
5. Assigns clear accountability
6. It has a significant impact on performance and results
7. Positively impacts other performance indicators.

Four Foundation Stones for Implementing and Using Key Performance Measures

1. Partner with staff, unions, key suppliers and key customers for the development of Key Performance Measures
2. Transfer of power to the front line for the influence and monitoring of Key Performance Measures
3. Integration of measurement, reporting, and performance improvement.
4. Linkage of performance measure to strategy.

Twelve Step Model for Implementing and Using Key Performance Measures

1. Establish and maintain senior Management Team commitment
2. Establish a Project Team
3. Establish a “just-do-it” culture and process
4. Set up holistic KPI development strategy
5. Market the KPI system to all employees
6. Identify Critical Success Factors (“CSFs” or Key Result Areas)
7. Record measures in a database
8. Pick team level performance measures
9. Select organizational winning KPIs
10. Develop reporting framework
11. Facilitate use of KPIs
12. Refine KPIs to maintain relevance

David Parmenter describes each of these steps in much more detail in his book Key Performance Indicators:  Developing, Implementing and Using Winning KPIs (John Wiley & Sons, 2007)  OR http://davidparmenter.com/

3 Things to Remember About Key Performance Measures

1. Don’t let your metrics take on a life of their own.  Having hundreds of measures that people don’t understand or use is a waste of time
2. You can do this at the departmental or regional level.  If your organization is not ready to use KPIs on a widespread basis, you can do it in your area.
3. Do not discount Key Result Indicators – you need to understand your results and what you are achieving.  Just ensure you continue to drive those results through the use of Key Performance Measures.

Watch the ‘3-Minute Crash Course’ about Key Performance Measures (CLICK THE ARROW TO START THE VIDEO):

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