Key Performance Indicators are NOT the same as performance
targets. Performance targets should form an integral part
of an objective definition and describe a desirable end
state. Key Performance Indicators are the means by which
progress towards a desirable end state, as specified in
an associated objective,
can be assessed.
Performance Management Demands "Systems"
Thinking
One of the misconceptions of the use of KPI's is that they
are to be used to monitor performance of one aspect of an
orgnisation, typically the outputs of personnel. While it
is often the case that KPI's are used in that way, it is
not best practice. To successfully implement performance
management, organisations should be looking to gain improvements
across the whole organisation from any sphere of activity
against any resource. An organisation is a SYSTEM that consists
of many different components, any of which could fail, all
of which can usually be improved.
Tolerances and Values
KPI's will have a core value, the core value should be
the anticipated and achievable mean given the current working
environment. Associated with the mean may be upper and lower
level tolerances. The purpose of the tolerances is to give
an indication of greater than anticipated success or failure.
The aim of identifying success or failure is to identify
and adopt best practice, or channel additional resources
to eliminate the causes of failure. Over time, as performance
improves, the achievable mean should be expected to move
towards the tolerance that is used to detect success. Moving
the mean towards "best practice" is the management
control mechanism which will lead to overall improvement
in performance.
Data Collection, Processes and Measurable
Transactions
If performance measures are to be used to indicate progress
towards the achievable end state as defined by an objective,
it follows that there should be a mechanism in place to
support data collection to feed into a performance based
management reporting system. The place data collection should
occur is at the process level. In each and every process
there will be some form of measurable transaction that can
be used for performance reporting purposes.
Management Reporting
An key activity associated with KPI's is the manipulation
of raw data into reportable form for use by decision takers.
It is unlikely that KPI's will stand alone. There will be
interdependencies between (say) a financial indicator and
those used to monitor improvements in efficiency as a result
of spend. It makes sound sense to try and identify those
interdependencies and to group indicators into some sort
of coordinated reporting mechanism. The Balanced
Scorecard is one such mechanism, there are others (the
French "table du bord" for example), but the advantages
offered by grouping indicators should not be underestimated.
Developing a Business Driven Information
Architecture
Assuming acceptance of the principles outlined above, it
follows that one of the spin off products of the design
of a performance management regime is that a business based
management reporting system will emerge. The reporting system
that emerges will have the advantage that it will reflect
the key information needs of the organization and all other
supporting information systems can be then be aligned to
it to produce an information architecture that truly reflects
what the organisation needs to know in order to be confident
that it is succeeding in achieving its objectives..
