Five steps to create a KPI

Since I've started this blog I've been asking around about the usage of KPIs. When I ask people whether the KPI is a goal or a tool they say; No no! It's just a tool!

Really? When was the last time you considered using something else then a KPI to measure performance? Not using KPIs is almost never an option. KPIs are created as easy as emails are written. Consider the number of KPIs that you encounter daily. Maybe KPI adapts won't admit it, but really, the KPI has become a goal in itself. They are created for the sole purpose of creating them.

If creating KPIs is your goal, you'd better have a solid creation process. The next five blogs will be focussing the creation process. How do you create a KPI? And what pitfalls do we encounter when we create one? This blog will focus on the steps needed. In the next blogs I will discuss each step in more detail.

Have a critical look at the KPIs you currently use. Did you develop them yourself? Or were they forced upon you by someone else (your boss perhaps?). Or you might have copied them from another department or found them via Google. Even if you did develop your KPIs, did you follow a structured approach? Here are five steps that you could follow. We will see that each of these steps require you to do research and make some crucial decisions.

1. Determine the goal you want to achieve
In step one we set the scene. Important questions need to be answered. What vision do you have for the future? And what strategy do you have in mind to arrive at this to-be situation? Are there specific goals that you have to meet as part of this strategy? What are the desired results? Are there specific problems you have to solve?

2. Choose the KEY performace that influences your succes
Many factors influence your success. All these factors can serve as a performance indicator. Question is which one is the real key influencer.

3. Develop the indicator that measures the performance
Once the performance indicator has been chosen, you'll have to decide how to measure it. What numbers do you need that can indicate how things are going.

4. Choose the threshold that tells you how you are doing
In the next step you determine when you are happy with the numbers you see. Choose the threshold above/below which your indicator is telling you "All Well!" and at what point it is shouting "PANIC!"

5. Implement the KPI
This is the more practical side of things. Implementing the KPI means that you have to decide about the "look-and-feel" of the KPI. Do you use Excel? A graph? Is it part of a dashboard? How many times will you "run" the KPI?

Next time we'll have a look at step one Determine the goal you want to achieve.