Continued from "How to select the right KPI Part 1"
This blog is a two part series that explains the process that dashboard users should follow when selecting KPIs. Part 1 explains the difference between a KPI and a KRI, and how to identify success factors and critical success factors, which are the building blocks in defining your KPIs.
After you’ve identified your critical success factors, the next step is to define the KPIs that need to be monitored in order to know that your success factors are being achieved.
Defining your KPIs
In our last blog, we identified “retention of key customers” as a critical success factor because it affects several other success factors in different departments. Let's continue with this example to define KPIs. The following KPIs can be defined based on metrics related to our chosen critical success factor:
- Number of customers who left the organization in the last 24 hours
- Number of customers engaged in new business this week
- Number of customers who referred us to new clients in the past month
- Top 10 customers that have orders of more than $100k
Validating your KPIs
Next, you have to make sure that the KPIs you’ve selected to measure will actually have a successful impact on your company.
This is done by analyzing each KPI and asking the following four questions:
1. Did the KPI reduce uncertainty about how we are doing?
(does it present a clearer picture on how close you are to achieving your critical success factor)
2. Is the KPI understood by all staff?
(metrics that are understood across the board are that much easier and effective to monitor)
3. How much do you care about this KPI?
(metrics that need to be monitored more often indicate that they are typically a more critical metric to be monitored)
4. Who is responsible for implementing the corrective action?
(if the measure shown in your KPI is displaying values below the ideal target, then who in the team or department is responsible for fixing it?)
And, there you have it! You can now identify your very own set of proper KPIs instead of relying on unrelated metrics, or a KRI, for something other than results. Working with the right set of KPIs can really mean the difference between success and failure in using your dashboard, improving your department's results, and even the overall health of your company. Relying on the wrong numbers will give you the wrong results; that's why it's crucial to select the proper KPIs.
Need help choosing the metrics for your company's success? Contact one of our Solutions Specialists to learn more about our Custom Dashboard Solutions.