The common mistake many companies make is to start creating a bunch of Key Performance Indicators (KPIs) for their company. They start with a burst of energy, gather together the team and work on KPIs in a quarterly planning session. They ask, "What do we need to measure in each department?" This produces 18 to 25 KPIs, a couple for each key executive to work on. Convinced they have changed the company, they dash off excited to see what results they will generate in the upcoming quarter. What they should be asking is "How do I create a KPI that measures my team's performance?" A quarter later, many are demoralized and not much progress has been made measuring these KPIs. They lose steam and by the 3rd quarter, it's back to business as usual.
How to create a KPI that drives performance with these five steps:
- What problem do I need to solve? Pick one for the company that is really bugging you.
- How do I measure progress? Use a leading indicator to measure.
- What is the Red-Yellow-Green success criteria?
- What actions should I take to get it Green when it is off track?
- What actions should I take to solve it when it's Red or Yellow?
Rhythm Systems KPI Resource Center