book

Key Performance Indicators For Dummies

by Bernard Marr

March 2015

Beginner to intermediate

320 pages

7h 25m

English

For Dummies

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About This BookFoolish AssumptionsIcons Used in This BookBeyond the BookWhere to Go from Here
Why Every Company Needs KPIsThe Fishing AnalogyThe Datafication of our WorldKPIs as vital decision support toolsMaking KPIs Work in Your BusinessCreate a KPI cultureDecide on the right KPI frameworkDevelop the right KPIsAnalyse and reportAssessing Your Financial KPIsRevenue and profitLiquidity and cash flowShareholder valueFinancial efficiencyAssessing Your Customer KPIsCustomer satisfaction and loyaltyMarket shareAssessing Your Operational KPIsProject performanceEfficiency and qualityITAssessing Your Employee KPIsEmployee engagementTalent retention
Understanding that KPIs can be Strategic or OperationalThe pear tree analogyWhy we can measure everything and how to do itCreating the Right Set of KPIsWhat is a good number of KPIs?Tracking the tangible and intangibleThe leaders and the laggersSetting the Right Targets for Your KPIsKPIs vs. targetsMaking targets specificMaking targets realistic and achievableKnowing Where People Go Wrong with KPIsMeasuring everything that walks and movesCollecting the same measures as everyone elseNot choosing the relevant KPIs
Implementing the Key Components of Fact-Based ManagementEstablishing senior management buy-inIntroducing KPIs for the right reasonsEstablishing the processes and cultureCreating Improvement and Performance Preview MeetingsIntroducing strategy revision meetingsEstablishing strategic performance preview meetingsPutting in place operational performance improvement meetingsAligning personal performance discussions
Understanding the Need for KPI FrameworksWeighing the optionsSelecting the right frameworkIntroducing the Balanced ScorecardGetting a grasp of the four BSC perspectivesTackling the financial perspectiveMaking sure you’re delivering to your customersLooking at your internal processesImproving and driving future valuePutting it on paper and mapping it outLooking at Alternative KPI FrameworksUsing Quality or Lean FrameworksUsing Project Management FrameworksThe Risky Side of Business
The Question is The Answer: Developing Key Performance Questions (KPQs)Harnessing the power of questionsCreating good key performance questions (KPQs)Deciding on the Right KPIsStep 1: Linking KPIs to strategic objectivesStep 2: Identifying the unanswered questionsStep 3: Isolating the decisions to takeStep 4: Checking for existing data and methodsStep 5: Collecting meaningful data in timeStep 6: Assessing the usefulness to answering the questionStep 7: Assessing the usefulness to decision-makingStep 8: Creating awareness of cheatingStep 9: Are the costs and effort justified?Step 10: Collecting the dataMaking it work: the ten-step template in actionDeciding on How to Collect the DataIdentifying types of dataApplying quantitative methodsUnderstanding qualitative methodsCombining data to improve insightsThe big data challengeFinalising Your KPIs: Applying the KPI Design TemplateThe basicsCompleting your KPI TemplateHow good is the indicator?
Testing Cause and Effect RelationshipsWhy strategies are just assumptionsTesting your assumptionsTesting Business Assumptions at Google, Inc.Learning from Business ExperimentsRemoving Bias through Business ExperimentsBusiness Intelligence and AnalyticsDataficationAnalytics
Getting the Attention of the Decision MakerThe importance of communicatingKeeping in mind the target audienceUsing best practice performance reportsPublishing analogyHeadline, photo and narrativeVisualising KPIs: Using Graphs and ChartsBar graphLine graphPie chartScatter chartBullet graphSpeedometer dials or gaugesUsing innovative ways to visualise dataDeveloping Management DashboardsSeven dashboard design tipsMaking use of software tools

The Bottom Line – Gauging ProfitProfit means prizesUnderstanding the different perspectives on profitWhy profit only matters in contextMeasuring profit in practiceMeasuring Profit MarginsWhy margins are so vitalKnowing the different profit marginsMeasuring profit margins in practiceThe Top-Line: Measuring Revenue GrowthWhen revenue isn’t everythingWhy you should track revenue over timeMeasuring revenue in practice
Tracking Your CashWhy cash is kingWhat cash flow tells you about your businessMeasuring cash flow in practiceLooking Out for LiquidityThe often unseen dangerMeasuring liquidity in practice
The Ultimate Value Metric: EVAWhy profitable companies might not create valueUnderstanding opportunity costMeasuring opportunity cost in practiceKeeping an Eye on Your Share PriceIt’s all relative: comparing businessesMeasuring P/E ratio in practiceTracking Total Shareholder Return (TSR)Competition is stiff on the stock marketMeasuring TSR in practice
Assessing the Return on InvestmentEvery investment must yield a returnMeasuring ROI in practiceMeasuring the Return on Capital EmployedUnderstanding ROCEMeasuring ROCE in practiceGauging Return on Equity (ROE)Why should you measure ROEMeasuring ROE in practiceUnderstanding Return on Assets (ROA)Why does ROA matter to companies?Measuring ROA in practice
Asking if Your Customers Would Recommend You (NPS)How NPS drives loyalty and profitabilityUnderstanding the NPS formulaMeasuring NPS in practiceMeasuring How Satisfied Your Customers Are (Satisfaction Index)Identifying what makes your customers happyCreating your unique indexMeasuring CSI in practiceTracking How Likely Your Customers are To Leave (Retention/Churn)Churn and retention matters!Measuring it in practiceGauging Whether All Customers are Equal (Profitability)Understanding where the profits are madeTracking customer profitabilityMeasuring it in practiceCalculating Your Customers’ Value (Life-Time Value)The ultimate customer KPI!Measuring it in practiceMeasuring Whether Your Customers are Truly EngagedUnderstanding the different levels of engagementMeasuring engagement in practice
Painting a Picture of Your Market (Market Growth Rate)Understanding the health of your marketOptions for measuring market growth rateMeasuring market growth rate in practiceUnderstanding Your Place in the Market (Market Share)Why market share mattersGetting a good picture of your market can be toughMeasuring relative market share in practiceGauging Your Market Success (Customer Acquisition KPIs)Knowing the cost of finding new customersOptions for gauging customer conversionMeasuring cost per lead in practiceCharting the Power of Your BrandWhat brand equity means for your businessFinding your unique formulaMeasuring brand equity in practice
Why Project Performance MattersIntroducing the Three Components of Project PerformanceTracking whether your projects are on time (Project Schedule Variance)Measuring whether your projects are on budget (Project Cost Variance)Checking whether your projects are delivering the right value (Earned Value)Measuring the KPIs in practice
Assessing Quality, Lean and Six Sigma KPIsWhy Lean mattersWhat does Six Sigma really mean?Finding your ways to track qualityMeasuring the KPIs in practiceCalculating Your Internal ProductivityLooking at waste levelsMonitoring rework levelsScrutinizing order fulfilmentDissecting deliveryInvestigating inventoryAsking Yourself Whether You’re Future ProofYour innovation pipeline
Why IT Matters More Than EverMeasuring IT service deliveryMeasuring IT project performance
How Satisfied and Engaged are Your People?Satisfaction and engagement mattersMeasuring satisfaction and engagement in practiceWould your Employees Recommend Your Business?Measuring the trendsMeasuring staff advocacy in practiceLooking All Around – 360 Degree FeedbackUnderstanding the need for a full pictureMeasuring 360-degree feedback in practiceHow Much Value Are Employees Generating?Measuring the value your employees generate in practice
Charting How Well You’re RecruitingFinding and keeping talentMoving beyond the trivialMeasuring recruitment effectiveness in practiceAnalysing How Well You’re TrainingThe pitfalls and challenges of measuring trainingMeasuring it in practice
Map Your StrategyIdentify the Questions You Need to AnswerDefine Your Data NeedsEvaluate All Existing DataFind the Right Measurement MethodologyAssign OwnershipIdentify the Right Measurement FrequencyEnsure Costs and Efforts are JustifiedFind the Right Supporting DataFinding the Right Picture to Communicate your KPI
Measure Everything That is Easy to MeasureMeasure Everything Everyone Else is MeasuringNot Linking KPIs to StrategyNot Separating Strategic KPIs from Other DataHardwiring KPIs to IncentivesNot Involving Executives in the KPI SelectionNot Analysing Your KPIs to Extract InsightsNot Challenging Your KPIsNot Updating Your KPIsNot Acting on Your KPIs
Revenue Growth RateNet Profit MarginCash Conversion Cycle (CCC)Net Promoter ScoreCustomer EngagementCustomer ProfitabilityRelative Market ShareCapacity Utilisation Rate (CUR)Staff Advocacy ScoreSustainability Index