Key Performance Indicators, 4th Edition

CHAPTER 1The Great KPI Misunderstanding

Overview

Many companies are working with the wrong measures, many of which are incorrectly termed key performance indicators (KPIs). It is a myth to consider all performance measures to be KPIs. This chapter explores how the four types of performance measures differ with examples of each type. The seven characteristics of KPIs are defined. The confusion over whether measures are lead or lag indicators is addressed. The questions How many measures should we have? and How many of each measure type? are answered. The importance of timely measurement is also covered.

Key learning points from the chapter are:

1. Clarity over the different types of measures, result indicators and performance indicators
2. The definition of a KPI
3. British Airways late planes KPI story
4. The seven characteristics of KPIs
5. The 10/80/10 rule
6. The lead or lag debate is finally buried
7. The need to have more current- and future-oriented measures that act like a fence at the top of the cliff
8. Avoid measuring too much and measuring too late

For far too long organizations have measured too much, with the cost often outweighing the benefit of the measurement. They have relied too much on financial measures and have used “bottom of the cliff” monthly measures that are too late to change events. Added to this mix is often a balanced scorecard, driven by consultants, at great expense and populated by measures designed by managers to keep the boss happy. A mess of epic proportions. ...