How to develop effective Key Performance Indicators

How to develop effective Key Performance Indicators? This KPI tutorial shows you the big picture of key performance indicators, and provides five key insights to focus on when you develop KPI’s with your team.

⏱️TIMESTAMPS⏱️
0:00 KPI tutorial
0:19 How Key Performance Indicators work
0:46 KPI levels
0:58 KPIs and data overload
1:13 KPIs and SMART criteria
1:24 Effective KPIs
1:45 Align KPIs to strategy
2:16 Process metrics vs outcome metrics
2:44 What gets measured gets done
3:36 Team-based KPIs
4:01 Dynamic vs static KPIs

Key Performance Indicators evaluate the success of an organization in executing its strategy. Your strategy must spell out how each business unit intends to achieve its goals. When a strategy fails, it's usually due to poor execution. Execution is the discipline of getting things done, a practice that can be mastered. It involves linking people, strategy and operations to achieve common goals. Key performance indicators provide you the visibility on the progress.

Key Performance Indicators can be set at various levels: corporate, divisional, functional, product, project, etc. There should be logical consistency between the KPI’s at these various levels.

We live in an era with abundant data. However, the problem is not data overload, but failure to filter. In my opinion, it is better to have 5 to 7 Key Performance Indicators than 20 to 25. Create focus!

Key Performance Indicators can follow the SMART criteria: Specific, Measurable, Achievable, Relevant, and Time-based. KPI’s are quantitative.

Effective Key Performance Indicators are measured frequently, encourage appropriate action, are simple (all staff understand the measure and what corrective action is required), and have significant impact.

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!