High Performance Boards, 2nd Edition

CHAPTER 27Boards and Oversight of KPIs

KPIs are a Language – and are Indispensable for Boards

The term KPIs has been bandied about so extensively that in many executives’ and directors’ minds, it is largely synonymous with targets, metrics in general. In reality, good-quality KPIs are increasingly seen as both drivers of a company's strong performance and key outcomes of effective boards’ discussions. In the context of governance, they allow boards to assess how likely the company's strategies are to succeed in the long term. As instruments of organisational learning, KPIs help boards and companies grapple with a constantly shifting competitive, technological, geopolitical, and societal landscape.

KPIs allow a board to ensure that the company is using resources appropriately and efficiently. To that end, KPIs capture financial and non-financial performance as well as the use of budget. In today's organisational and board environments, however, there is no hiding from the strategy conversation. Studies show that in the absence of coherent, data-driven vocabulary to aid directors’ oversight, boards will often be forced to resort to proxies.¹

When properly defined and tracked, KPIs can enable boards to enforce their expanding mandate in overseeing the strategy process and the company's ability to handle risk as well as future-proof the business. Well-crafted KPIs are a source of board members’ shared understanding in their oversight of how the company is executing on its long-term ...