KPI's and performance metrics have been used for years helping companies focus on goals and hold managers accountable. They are typically misused for a number of reasons.
They:
• Are not understood
• They are too complex
• They do not address strategy
For these reasons they are not effective.
Performance measures need to be carefully thought out - they need to drive profitability and strategy. They need to be simple, visible, and understood by the entire company.
Many companies don't address these correctly – most haven't thought them completely through - some companies have abstract measures that are not understood or can not be affected.
The key here is to look at the revenue areas and determine the simplest attributes of each category. Ensure the driving data is easy to obtain on a timely basis and someone owns the driver. People need to take full responsibility for their results. We make assumptions to develop targets for each driver and then measure actual performance. The assumptions need to be reviewed quarterly and adjusted based what we've learned over the previous quarter. This provides a powerful tool that drives results.
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