How to Choose the Best KPI: Steps in Choosing the Perfect Indicator Performance Focus

Access your KPIs online;
Measure your success;

Navigation: All Balanced Scorecard Articles > BSC Guides

There are various steps in choosing the best indicator performance unit. Performance Indicators are used in monitoring development in every activity level. Check additional information about indicator performance.

Basically, there are four effective ways in successfully picking the best indicator performance unit. Although picking is pretty much a fairly straightforward process, like in any decision-making, it requires a lot of thought, consensus building, collaboration and iterative refining. Remember that an indicator performance unit is a KPI, hence it does the task of helping an organization define and evaluate their success by providing a concrete and specific report consisted of quantifiable measures. Also, indicator performance units serve as one of the key parts of a measurable objective which is consisted by KPI, benchmark, target and time frame.

Below are the four steps that you have to follow in order to select the best indicator performance unit and what you should do to ensure them:

1.Clarify the results statements.

a.Review the exact result desired by ensuring that you understand the wordings and intention of the objectives and intermediate results of the KPI.

b.Do not use overly broad statements so that the KPI will specify only the main aspects that it is focusing on and confusion will be avoided.

c.Clarify what is expected to be change. It can be a situation, condition, knowledge level, behavior or attitude.

d.Clarify where the changes should appear and if it is an absolute, relative or no change.

e.Identify precision of the targets for change.

f.Analyze the activities and strategies related to that change.

2.Make a list of possible indicator performance focus.

-Because of so many possibilities for KPIs, it may be difficult to pick which one to use. Doing the following can remove this hassle:

a.Internal brainstorming of the management team;

b.Seeking consultation for experts, and;

c.Seeking consultations and tapping through the experience of other units with similar indicator performance focus.

3.Assess each KPI candidate using criterias.

-Use a numerated scale to assess each and every criterion. Usually, this is being done with the lowest number being the least illegible candidate and the highest being ranked as the best one respectively. There are seven guidelines that can help you assess an indicator performance focus:

a.Direct - A good KPI should measure as closely as the possible result that was agreed on.

b.Objective - KPI should be uni-dimensional and precise, operationally speaking.

c.Adequate - Ask yourself this: "How many measures should be used to measure any given result?" The answer to this, however, may vary depending on the complexity of the result being measured.

d.Quantitative - This is usually being confused upon. Quantitative indicators are measurements that are represented by numbers while qualitative indicators are usually represented by descriptions. Quantitative indicators are often picked more due to its capability to execute more concrete measurements because it can be calculated accordingly.

e.Disaggregated - It is important for the KPI to be aware that it is important to know their target markets when developing intermediate results. The people-level program varies depending on age, gender and location.

f.Practical - This is pretty much self explanatory. A good indicator should exhibit cost-efficiency and data should be obtained in a timely manner.

g.Reliable - The indicator should be reliable in order to let the organization have a wise decision-making capability.

4.Narrow down the list of indicator performance focus.

-This is the final step because as soon as you narrow it down, it will be easier for you to track the best one since there will be lesser options. The only thing left to do is to re-assess the remaining candidates in order to pick the most suitable KPI for the intermediate results.

If you are interested in indicator performance, check this link to find out more about key performance indicators. Also, you can check other articles in BSC Guides category.

Balanced Scorecard Toolkit includes step-by-step manuals, documents, presentations, check lists designed to help business professionals with successful development and implementation of Balanced Scorecard. Learn more about BSC Toolkit.