I see the following two reasons to use KPI's :
- Instead of making decisions based on instinct you want to make decisions based on facts
- Set goals in order to monitor and measure against a target
What KPI's you use depends on the area you are working in (see below for some examples). For Software Development you will have different KPI's than for the Sales Team or for the Project Management Team.
In any case it is important that you agree on a set of KPIs that you want to monitor. This direction should come from the Senior Management Team since they set the goals of the company. The first step is to have clear goals. The KPI's then serve as a compass to tell you (and most importantly the Senior Management Team) if you are on or off track.
Here are some tips you might want to take into account (based on my experience) before you set any KPI's
- Ensure your Senior Management Team (in all regions) is actively supporting the capture of your KPIs
- There should be a regular review of KPI's with the Senior Management Team
- Ensure that everyone understands that you (and the Senior Management Team) want to use the KPI's to keep the team on track and aligned to your common goal
- Otherwise there is a risk that different teams are comparing themselves against each other and losing sight of the common objective. While some rivalry is good it is important to ensure this only happens if that brings you (the company) closer to that goal.
- Talk to every (regional) leader separately to explain what is measured, why it is measured and how you intent to measure it. It is important to have a high degree of buy-in from these leaders because otherwise the risk is too high that the KPI's get 'manufactured' to show better than actual results
- Our objective is to reach our goal, NOT to make team A look good and Team B look bad
- Ensure you have KPI's that are understood by all impacted teams
- Ensure the KPI's are aligned to the major goals in your area (only measure what is really important to you!)
- Think if you really need 100 PowerPoints to review the KPI's in your area. If they are supposed to be meaningful less is probably more.
- Clearly identify WHAT is measured (and ensure that all regions are able to measure this in the same way)
- Agree WHEN the measurement starts and ends
- Agree HOW the measurement is performed (e.g. live of via a report)
- Agree if the results will be published and who will see the results first
There are many books about KPI's and the above is a huge simplification BUT in order to make them work for your team (depending on the maturity of the team) I think a simplification helps to get better results.
Here are some interesting examples for various KPI's
