As an executive leader, you don’t want to make decisions without the right data. But you've heard the saying "garbage in, garbage out" - are you sure you’re using the data and measures that matter most?
“Key Performance Indicator” (or KPI) is a widely overused buzzword. Breaking down the term into separate parts can help you understand exactly what it means, and guide you in crafting effective metrics to track the performance of your processes:
“Key” signifies that your indicators should be the critical few metrics with the most importance. Your KPIs should be only the highest priority indicators that provide more insight than any other measure or metric.
If you find that you have a long list of KPIs, you’re not using KPIs correctly. Most organizations only have three to five KPIs that are the most predictive of success. Unless your list of KPIs is limited to a very small number, it may include great metrics but they can't all be considered key performance indicators.
Within the same organization, a low-level department might have different KPIs than a higher-level group, but within those levels, no department or group should have more than five KPIs.
“Performance” means that your KPIs must measure the achievement or success of a process. While a particular metric might be interesting or even useful, an effective KPI must be tied to the success of your organization’s mission.
The performance aspect of a KPI assumes that you know what you’re trying to achieve as an organization. If you don’t know where your organization is headed or you aren’t sure what defines high performance, you first need to establish your definition of success before you’re able to select effective KPIs.
“Indicator” does not mean an answer or a result – it denotes a direction of results. Many organizations base metrics and dashboards entirely on lagging measures and not predictive ones. The results are KPIs that fail to help you improve or change direction, if necessary.
Your key performance indicators need to forecast future performance within your organization. They don’t necessarily have to be perfectly aligned or correlated with your final results, but they need to be the most predictive of those results.
For example, suppose you’re trying to measure the timeliness of delivering intelligence data to government decision makers or providing analysis reports on attempted cyber breaches to the head of corporate security. Tracking how many reports you delivered last month would be a poor KPI in this situation, because that measure isn’t indicative of how well you’re performing now or how you might perform next month. A better KPI would be to measure the volume of pre-report data that your employees have processed, as this predictively indicates how many reports you will complete in the next month.
5 Solid Examples For Better KPIs
Now that you know how to select and develop better key performance indicators for your agency, here are some examples of effective KPIs to integrate into your data dashboards and analysis tools:
Costs (including hidden costs)
Return on investment
Selecting the best KPIs for your organization is rarely a clear-cut task. The payoff for investing time to do so is your organization's improved ability to realize goals more efficiently and advance the mission more effectively.
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