Key. Performance. Indicators. You Need All Three

You can measure almost anything these days. But more measurement does not necessarily mean better management.

The term “Key Performance Indicator” consists of three words – and all three of those words matter.

Key

A key is a small, but powerful little device that enables you to unlock, or start something much bigger. You unlock your house with a single key and get access to all the rooms and facilities in that house. You start your car with a tiny key and the whole thing comes to life.

Key Performance Indicators are firstly: KEY.

Before you start implementing any performance management process, take the time to identify which are the key things that you need to measure and manage. Which levers, if you pull those, have the highest likelihood of directly impacting the performance of your business. How are you performing on those levers? Those are your key measurements.

Performance

Performance relates to successfully achieving a desired outcome.

It answers questions like:

What would “done” look like, v.s what you have done?

What would “done well” look like, vs. how you have done it?

What does “good” look like vs. what you are doing?

What does “fast” look like vs. the speed you are going?

What does “enough” look like vs. the amount that you have done?

So it is typically observed in some kind of relative context. A comparison against expectation. Or a comparison against someone else.

Indicator

An indicator is something that points in a direction. It helps you make decisions. It tells you what you should be doing in response to it.

The purpose of measuring KPIs is to improve performance. “Improve” means better than it is now. To make something better, you will have to change something.

Indicators tell you what to change, and in what direction to change it.

Key. Performance. Indicator.

So putting these together, a Key Performance Indicator is a piece of information related to an entire business or large parts of the business, that clearly shows me a comparison between actual vs. desired results or outcomes, that informs my decisions and actions going forward.

This immediately makes it clear that not all performance indicators are key, not all key indicators relate to performance, and not all key performance measurements are indicators. You can go one level further to make the point even more obvious: Not all keys are performance indicators. Not all performance produces key indicators. Not all indicators are generated by key performance.

The power of the idea of a Key Performance Indicator is that it meets all three of these criteria:

1. It is key
2. It measures and reports performance
3. It indicates direction – it informs decisions and action

If you have an elaborate measurement system, you might improve performance by testing your measurements against this, and reducing the things you measure to true Key Performance Indicators on which you can take decisive action.

If you do not measure performance, start by identifying a few of the most important things that you could manage better, that would improve performance. Define your Key Performance Indicators on that, start measuring, and start taking action based on the indicators.

To your Success

Ashton

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