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Evaluating Your Measurement System & KPI's

By Alan Gehringer

    Mon, May 20, 2013 @ 05:36 PM KPIs & Dashboards
    Evaluating your measurement system and selecting the right KPI’s and critical numbers is essential to ensure you are monitoring the right metrics to successfully grow your business.  Too often, we spend a lot of energy capturing data that is not turned into information or not useful in making the necessary adjustments to move the business forward. 

    According to the Baldrige Award criteria, there are six balanced categories to include when designing your scoreboard:Baldrige Award

    • Customer Satisfaction
    • Employee Satisfaction
    • Financial Performance
    • Operational Performance
    • Product/Service Quality
    • Supplier Performance
    • Safety/Environmental/Public Responsibility

    Interestingly enough, these are very similar to the six categories we use at Rhythm Systems on the “One Page Strategic Plan.”  

    • Customers
    • Employees
    • Shareholders
    • Make/Buy
    • Sell
    • Keep Score

    Kaplan & Norton take a slightly different approach by narrowing down to four categories:

    • Customer
    • Financial
    • Internal
    • Growth/Innovation

    These categories may be different for your business and should be customized to achieve your desired outcomes.  The key is to balance the indicators between the needs of your shareholders, stakeholders, customers and employees.  You also need to balance between past and future oriented measures, hence the terms lagging and leading indicators.  Lagging indicators tell us where we have been and can be useful in making future decisions.  Leading indicators can usually better predict the results we can expect in the future.  Leading indicators also give us the ability to make the necessary “adjustments” during the quarter to achieve our desired outcomes.

    My colleagues and I have been discussing KPI’s and whether there is a standard set for each business to have.  We have concluded that although there are common measurements used, each dashboard needs to be customized to fit your organization.  I encourage you to conduct an audit of your indicators.  And, remember, fewer are better along with identifying the one or two critical numbers that are most important to the business.

     Rhythm Systems KPI Creator Tool (Key Performance Indicators)

     

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