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concepts:kpi
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Key Performance Indicator

Information Dashboards

Information Dashboard is an information management tool to visualize Business Intelligence. It often provides an overview of KPIs which are relevant for a specific business process. Dashboards show all important information at once. They are designed to give business managers a quick and fully overview of a whole business process like e.g. sales, production or marketing.

KPIs

KPI is the short term for “key performance indicator” and evaluates the success of a company or particular activity, in other words KPIs “track the progress of established goals”1). They are frequently evaluated over time. For example the sales department of a company may use monthly gross profit as a KPI where else a different department uses another KPI which is effective to show the department’s success2). For a company it is important to choose the right KPIs depending on the company’s success description. Either the success is measured by simple repetition of a progress or by making process. Too many companies make the mistake and just adopt industry-recognized KPIs and wonder why they don’t reflect their own business3). KPIs are a “form of communication”4) in the most efficient way, because they only communicate the relevant information. An example for a KPI in Marketing and Sales would be “new customer acquisition” which measures the company’s success by the number of acquisitions in a specific time.

The characteristics of effective KPIs

There are seven characteristics that describe effective KPIs5): they should be simple not only by understanding, but also by measuring. KPIs should help a company to make decisions and not to raise more questions. Further KPIs ought to be aligned to their specific use. This can be any representation from a strategic dashboard down to an operational dashboard. KPIs should be also relevant and measurable so that the information can be analyzed and leads the company to success. The last three characteristics are achievable, timely and visible. Achievable means to encourage the employees by setting small goals instead of unachievable goals. Most important is the visibility of the KPIs throughout the whole company. Other than the seven characteristics there is a similar way to describe effective KPIs, it is being “SMART about your KPIs”6). It says that KPIs must say if your objectives are specific, if they measure the progress, if the goal is attainable, if it is relevant for the company and if it is time-framed.

Which KPIs and how many

As mentioned before it is very important for a company to choose the right KPIs to measure its success. First the right key performance indicators should be those which the Board uses to manage the business7). They should reflect the company’s success in a clear and easy way and should be visible for everyone. How many key performance indicators are necessary for a company is individual to each company and its strategy and cannot be generalized8). However experience shows that about four to ten measures are likely to be key9).

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concepts/kpi.txt · Last modified: 2015/07/27 09:44 (external edit)