fitting in with a past or future truck going in that direction. The impact on profitability was significant.
In a scenario similar to the airline example, staff members did their utmost to avoid a career-limiting phone call from the CEO.
(Both these examples are provided in greater detail in my webcast, “Introduction to Winning KPIs,” which can be accessed via www.davidparmenter.com.)
Seven Characteristics of KPIs
From extensive analysis and from discussions with over 3,000 participants in my KPI workshops, covering most organization types in the public and private sectors, I have been able to define what the seven characteristics of KPIs are as set out in Exhibit 1.2.
Exhibit 1.2 Characteristics of KPIs
Non Financial: When you put a dollar sign on a measure, you have already converted it into a result indicator (e.g., daily sales are a result of activities that have taken place to create the sales). The KPI lies deeper down. It may be the number of visits to contacts with the key customers who make up most of the profitable business. As discussed in Chapter 2, it is a myth of performance measurement that KPIs can be financial and nonfinancial indicators. I am adamant that all KPIs are nonfinancial.
Timely: KPIs should be monitored 24/7, daily, or perhaps weekly for some. As stated in Chapter 2, it is a myth that monitoring monthly performance measures will improve performance. A monthly, quarterly, or annual measure cannot be a KPI, as it cannot be key to your business if you are monitoring it well after the horse has bolted.
CEO focus: All KPIs make a difference; they have the CEO's constant attention due to daily calls to the relevant staff. Having a career-limiting discussion with the CEO is not something staff members want to repeat, and in the airline example innovative and productive processes were put in place to prevent a recurrence.
Simple: A KPI should tell you what action needs to be taken. The British Airways late-planes KPI communicated immediately to everyone that there needed to be a focus on recovering the lost time. Cleaners, caterers, baggage handlers, flight attendants, and front desk staff would all work some magic to save a minute here and a minute there while maintaining or improving service standards.
Team based: A KPI is deep enough in the organization that it can be tied to a team. In other words, the CEO can call someone and ask, “Why?” Return on capital employed has never been a KPI, because it cannot be tied to a manager – it is a result of many activities under different managers. Can you imagine the reaction if a GM was told one morning by the British Airways official “Pat, I want you to increase the return on capital employed today.”
Significant impact: A KPI will affect one or more of the critical success factors and more than one balanced-scorecard perspective. In other words, when the CEO, management, and staff focus on the KPI, the organization scores goals in many directions. In the airline example, the late-planes KPI affected all six balanced-scorecard perspectives. Again, as I refer to Chapter 2, it is a myth to believe that a measure fits neatly into one balanced-scorecard perspective.
Limited dark side: Before becoming a KPI, a performance measure needs to be tested to ensure that it creates the desired behavioral outcome (e.g., helping teams to align their behavior in a coherent way to the benefit of the organization). There are many examples where performance measures have led to dysfunctional behavior, these are discussed in Chapter 3, Unintended Behavior: The Dark Side of Performance Measures.
For the private sector, key performance indicators that fit the characteristics I have proposed could include:
● Number of CEO recognitions planned for next week or the next two weeks
● Staff in vital positions who have handed in their notice in the last hour – the CEO has the opportunity to try to persuade the staff member to stay
● Late deliveries to key customers
● Key position job offers issued to candidates that are more than three days outstanding – the CEO has the opportunity to try to persuade acceptance of offer
● List of late projects, by manager, reported weekly to the senior management team
● Number of vacant places at an important in-house course – reported daily to the CEO in the last three weeks before the course is due to run
● Number of initiatives implemented after the staff-satisfaction survey – monitored weekly for up to three months after survey
● List of level one and two managers who do not have mentors, reported weekly to the CEO – this measure would only need to be operational for a short time on a weekly basis
● Number of innovations planned for implementation in the next 30, 60, or 90 days – reported weekly to the CEO
● Number of abandonments to be actioned in the next 30, 60, or 90 days – reported weekly to the CEO
● Major projects awaiting decisions that are now running behind schedule – reported weekly to CEO
● Complaints from our key customers that have not been resolved within two hours – report 24/7 to CEO and GMs
● Key customer enquiries that have not been responded to by the sales team for over 24 hours – report daily to the GM
● Date of next visit to major customers by customer name – report weekly to CEO and GMs
For government and nonprofit agencies, key performance indicators could also include:
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