Top Ten Tips for governing an organization using KPIs (Key Performance Indicators)

KPI

You may use these steps after setting your strategy (See prior post “10 Steps to create an effective Product Strategy”). Once you have identified your strategy and assigned resources aligned with your budget, you need the right governance to ensure delivery against plan. Use these to identify, measure, track, and report on KPIs. A KPI is a metric that is used to evaluate factors that are crucial to the success of an organization or initiative.

1. Ensure that a KPI is measured in a given time frame, encourages appropriate action and ties accountability to a team.
2. For enterprises, establish a central team to govern across BUs or cross functional teams.
3. A KPI measures one or more critical success factors for a given initiative/project that is tied to the strategy.
4. It is a good practice to use both leading and lagging indicators. Leading indicators usually measure intermediate activities that drive performance. They are predictive and allow an organization to make adjustments if required. Lagging indicators are historical and lack predictive power as they show results at the end of a time period.
5. For an organization, one may use KPIs using a Balanced Scorecard approach that covers Product, Customer, Learning and Growth and Finance.
6. An executive sponsor is recommended for the success of tracking progress using KPIs. Ensure there is regular cadence of governance with the executive sponsor.
7. If the organization is large and has a number of KPIs covering different perspectives of the Balanced Scorecard, use metadata with ID #s to track and report. This metadata could be in a simple database.
8. Each KPI has an owner/steward who is accountable for all aspects of the KPI; definition, if quantitative, the formula to calculate it, the data source, reporting cadence, and target audience who will benefit from the information.
9. Baseline the current value of the KPI and establish a target to be reached within a given timeframe. Provide a rationale for the proposed target. This target is then mapped to the initiatives/projects that are linked to the strategy. This helps to “connect the dots” between strategies, initiatives, critical success factors, KPIs, and status.
10. After implementing the above, periodically refine and maintain relevance. Establish a change control process to adapt as you learn.

Reading Reference: Key Performance Indicators by David Parmenter

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s