Business checklist

The tough questions that need to be asked on… key performance indicators

Are our KPIs still appropriate for current conditions?

There’s every chance that if they have not been challenged recently, some of these may be out of date and new ones should come in. There’s no point in keeping indicators in your management information that haven’t forced a business decision for years.

What new KPIs are appropriate for today’s environment?

This is dependent on your business model, but “cash is king” applies more than ever, so indicators that stimulate actions on WIP conversion, billing speed and debtor collection are likely to be key.

Are our KPIs sophisticated enough?

Granularity (breaking down into smaller components) can often reveal aspects that a broader measure may not pick up on – e.g. splitting a market segment to understand better where real success lies. Judge the additional costs of enhanced management information against the better decision making that may result.

Is everyone clear on which KPIs they are being measured against?

It’s important that staff keep “front-of-mind” the one or two KPIs that are important to their appraisal – this will keep them focused on doing the right things, which in turn will help the business.

Are we certain that all reviewers fully understand the KPIs?

It’s worth ensuring that KPIs are being used properly by all users and in the same way. There should be no risk of ambiguity in the presentation of results – use clear charts to show trends and simple colour coding for good/bad/indifferent results. Confirming with all users how they interpret the data will lead to better decision making.