Key performance indicators (KPIs) only help when people can act on them. Most organizations have too many, defined too loosely, reviewed too rarely.
Start from objectives
Each KPI should answer the question: how will we know we are achieving this objective? Build a KPI tree from strategic objectives down to the processes and teams that move them.
Define every KPI precisely
- Name and purpose
- Formula and units
- Data source and owner
- Frequency and target
- Thresholds for green, amber and red
Balance leading and lagging measures
Lagging indicators, such as profit or customer satisfaction, show results. Leading indicators, such as on-time delivery or training completion, predict them. A good set has both.
Review with a rhythm
Hold short, regular reviews where the owner explains performance, causes and countermeasures. A dashboard without a review routine changes nothing.
Common mistakes
- Measuring what is easy rather than what matters
- Targets with no link to capability
- Using KPIs to blame rather than to improve
