"Performance measurement is failing organizations all around the world," says author David Parmenter in his book "Key Performance Indicators: Developing, Implementing, and Using Winning KPIs" (2010, John Wiley & Sons Inc.) The reasons are myriad, including a failure to link the metrics to critical success factors as well reviewing the measures too infrequently, he explains.
"KPIs represent a set of measures focusing on those aspects of organizational performance that are the most critical for the current and future success of the organization," says Parmenter, who early on in this second edition of his book outlines the seven key characteristics of key performance indicators. KPIs:
Are nonfinancial measures
- Are measured frequently
- Are acted on by the CEO and senior management team
- Clearly indicate what action is required by staff
- Are measures that tie responsibility down to a team
- Have a significant impact
- Encourage appropriate action.
Not certain how to develop KPIs for your organization? Parmenter includes in his tome a 12-step model to develop and use KPIs.
See also: Five Rules for Selecting the Best KPIs to Drive Operational Improvement