“What constitutes a good KPI example?”, “How should KPIs be measured?”, “Which KPI is suitable for our organization?”, and “How well will employees understand and participate in tracking these KPIs?” These questions often loom large for companies seeking to select the right KPIs to accurately measure their performance and progress toward strategic objectives.
According to The KPI Institute’s (TKI) State of Strategy Management Practice Global Report – 2023, choosing the right KPIs ranks as the second most significant obstacle in strategy planning.
The report further reveals a concerning trend regarding the challenges associated with working with KPIs. Results indicate a surge in the hurdles associated with KPI selection compared to the previous year.
Several factors contribute to the challenging nature of KPI selection, including the need to align with strategic objectives; the common practice of defining initiatives before KPIs rather than defining KPIs and targets first and then developing initiatives to reach them; clearly differentiating between strategic and operational KPIs at the departmental level; and focusing too much on task-related KPIs rather than impact KPIs at the employee level.
3 stages of KPI selection
Selecting the right KPIs requires careful planning, analysis, and collaboration across various organizational areas. A rigorous KPI selection process typically involves three major stages (see Figure 1).
Your initial step in the process is to set a clear direction for KPI selection by recognizing the business objectives and goals that must be attained. This is essential to ensure that all personnel are working towards the same objectives and that progress can be efficiently monitored. This stage clarifies the necessity and application of measurement while precisely defining the intended purpose of the KPIs.
Next, conduct thorough research to gather a range of KPI examples. This serves a dual purpose: educating your internal stakeholders and fostering meaningful discussions about KPIs. This process, labelled as the KPI expo, entails compiling a comprehensive list of KPIs that will later be filtered based on a set of criteria.
You should review both internal and external data sources (see Figure 2) to leverage existing practices while also gaining insights into industry best practices. The KPI expo can include existing KPI lists from various organizational levels, which may already be in use or have been tested within your organization.
In the next stage, use intelligence gathering and conduct workshops to identify suitable KPIs. You can obtain insights from a diverse range of stakeholders, including clients, suppliers, employees, and management. This approach will foster broader buy-in and support.
TKI recommends the following selection methods to ensure the identification of relevant KPIs:
Question framing: Guide discussions toward relevant contexts and gather participant perspectives. Questions might include, “How many KPIs should we select?” or “What is the procedure for validating the selected KPIs?”
Value flow analysis: Examine the flow of value within business processes—from inputs to outcomes—to understand how objectives can be measured from different perspectives.
KPI balancing: Avoid narrow perspectives by selecting at least two complementary KPIs per objective, ensuring the measurement of both quantity and quality, subjectivity and objectivity, and efficiency and effectiveness.
Additionally, among the existing criteria in practice, TKI suggests using these five to ensure KPI relevancy:
Measurable: Can the KPI result be quantified?
Accessible: Can your organization feasibly gather the necessary data?
Specific: Does the KPI address a specific issue you have?
Actionable: Does it provide information for decision-making?
Balanced: Does it reflect various facets of performance?
The final stage in the KPI selection process involves monitoring the selected KPIs for necessary recalibrations. This can be achieved through two key activities: KPIs documentation and the performance review meeting.
KPI documentation can reveal limitations associated with data collection or reporting and gaps in the cost-benefit analysis of the KPI’s usage. Develop a comprehensive set of information for each selected KPI to facilitate data collection, reporting, and analysis.
Use a standard template, known as a KPI documentation form (see Figure 3), capturing each KPI’s details, definition, calculation formula, target, data source, reporting frequency, KPI owner, and data custodian. For more examples, you can explore TKI’s comprehensive repository of KPIs at smartKPIs.com.
The first reporting and performance review meeting for the new KPIs will reveal their utility for decision-making. It provides managers with an overview of how the KPIs cover all aspects of the business and helps identify necessary adjustments to the corporate scorecard, ensuring that the most relevant data is available for decision-making. Facilitate this first meeting through your strategy office.
After this final stage, your KPIs can be maintained as initially selected, recalibrated and updated, or even phased out of use based on their effectiveness and relevance to your organizational goals.
By following these stages, you can select and implement KPIs that accurately measure performance and support strategic objectives, ultimately driving your business success and growth.
Ready to take your KPI selection to the next level? Head over to the KPI section on our website for more in-depth articles and expert advice.
To be competitive in today’s fast-changing business environment, companies must continually increase efficiency. Reengineering workflows and business processes may help accomplish this. Business process reengineering is a company management technique that analyzes and redesigns workflows and processes. It completely restructures company operations to increase quality and improve costs, service, and speed. In the early 1990s, BPR was introduced to identify, evaluate, and restructure an organization’s essential business processes to eliminate redundancies, reduce mistakes, and boost efficiency. It rigorously analyzes, rethinks, and redesigns mission-delivery processes. Business process improvement (BPI) differs from BPR. The latter rejects rules and revamps processes from a high-level viewpoint, unlike BPI, which only makes incremental adjustments.
Identifying the Triggers for BPR
Figure 1. BPR Triggers | Source: Adapted from LinkedIn
Businesses may realize the need for BPR when they observe certain signs that indicate inefficiencies or bottlenecks in their current processes. Here are some key indicators that suggest a business might benefit from BPR:
Non-value-added activities: These are tasks or processes that do not add value to the business or its customers.
Too many hand-offs: Processes involving too many hand-offs or transfers between different departments or individuals can lead to delays and miscommunication.
Process bloat: Overly complex or bloated processes can slow down operations and reduce efficiency.
Difficulty in scaling up: This occurs when a business struggles to scale its operations due to inefficient or poorly integrated systems.
Repetitive tasks: These are characterized by employees finding themselves doing the same thing repeatedly, especially tasks that could be automated.
Process mapping: This involves defining the scope, purpose, and goal of the project, and then mapping out the sequence of tasks or steps that are performed to achieve a certain goal or outcome. This can help identify gaps, redundancies, bottlenecks, delays, errors, and rework in the workflow.
Analyzing current processes: This involves reviewing the current workflows and processes to identify inefficiencies and areas for improvement. This includes looking for common inefficiencies such as overproduction, waiting, transportation, overprocessing, and motion.
Identifying redundancies: Redundancies are any processes, procedures, roles, reports, meetings, or other business activities that are duplicative, outdated, or otherwise unnecessary. Once these are identified, they can subsequently be eliminated.
Using workflow analysis tools: Workflow analysis tools can help visualize, analyze, and improve business processes. These tools can identify inefficiencies, streamline operations, and automate manual tasks.
Implementing automation: Workflow automation tools can help streamline routine business processes for optimal efficiency. These tools can reduce busy work and optimize processes, allowing employees to focus on more important tasks.
Benefits of BPR
Improved collaboration: Optimized processes, particularly those that are automated, provide a centralized system for tracking tasks and sharing data. This shared access to information can improve collaboration among departments, reducing the risk of miscommunication and errors.
Enhanced productivity: Process optimization can lead to significant increases in operational efficiency. By streamlining processes and automating routine tasks, employees can work more effectively and deliver quality work in a timely manner.
Empowerment: Reengineered processes often involve redistributing power and authority among functions and levels, empowering individuals to think, interact, use judgment, and make decisions. This fosters innovation and creativity among employees, leading to better solutions to problems and faster problem-solving times.
In 2008, Domino’s stock price hit an all-time low, rendering it nearly bankrupt. The transformation began with a complete overhaul of its ingredients, recipes, and menu, but the real game-changer was its focus on digital transformation.
Domino’s focused on three key areas for its digital transformation: customer experience, data analytics, and technology infrastructure. The company implemented a unified digital platform that integrated online ordering, customer feedback, and delivery tracking.
One of the most significant steps in this transformation was the introduction of the “Pizza Tracker” technology in 2008, which kept customers updated on the progress of their orders. This innovation, along with others, changed the brand perception of Domino’s from a pizza delivery company to a technology-driven company.
By 2018, Domino’s overtook Pizza Hut as the largest pizza delivery company globally, with a market share of 18.6%. The company’s revenue grew from $1.4 billion to $3.5 billion, and its net income increased significantly. The company’s stock price also saw a dramatic increase, from around $3.00 a share in 2008 to $211 in 2018-2019.
In Conclusion
BPR is a critical component of any organization’s quest for maximum efficiency. By identifying and eliminating inefficiencies, streamlining processes, and fostering a culture of continuous improvement, organizations can successfully reengineer workflows, enabling them to stay competitive in today’s rapidly changing business landscape.
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In an era when environmental concerns are at the forefront of global discussions, businesses are being called upon to integrate sustainability into their operations. Developed as an extension of the traditional Balanced Scorecard (BSC), the Sustainability Balanced Scorecard (SBSC) aims to provide businesses with a tool to align their environmental, social, and economic objectives, driving positive impact while ensuring long-term success.
The Genesis of the SBSC
The concept of the BSC was first introduced by Robert Kaplan and David Norton in the early 1990s as a framework to measure business performance beyond financial metrics. The BSC aimed to provide a more holistic view of an organization’s health by incorporating four hierarchical perspectives: Financial, Customer, Internal Processes, and Learning & Growth.
A decade later, as sustainability became a critical global concern, scholars started looking into the possibility of integrating sustainability considerations into the BSC. They agreed on the potential of extending the focus of the well-established BSC to include measuring business performance through the lens of environmental stewardship, social responsibility, and ethics. Thus, the concept of the SBSC began to crystallize.
When it comes to the best architecture for the SBSC, there have been conflicting discussions ever since the concept was introduced. Two major approaches took prominence: one is to add a fifth perspective to the traditional BSC that was dedicated to sustainability; the other is to integrate sustainability objectives and KPIs into the already existing perspectives.
A 2009 study showed that in the fifth perspective approach, sustainability KPIs tend to be overlooked by management in organizations with no established sustainability culture. That is why the four-perspective approach can be a safer choice, especially for organizations that are only starting to integrate sustainability in their measures.
In a 2021 article, Kaplan supported the four-perspective approach, introducing a suggested restructuring of three out of the four perspectives to make them more relevant to environmental, social, and governance (ESG) elements:
From “Financial” to “Outcomes” to include environmental and societal objectives besides the financial aspect
From “Customer” to “Stakeholder” to reflect the value of different members of the whole ecosystem
From “Learning & Growth” to “Enablers” to encompass the various capabilities across all stakeholders in the ecosystem
Reaping these sustainability integration benefits can be a bit of a long shot, and further studies are needed to prove such benefits even exist. However, the only way to reap said benefits is to plant the seeds of sustainability integration. To help accomplish this, the SBSC can be a potent tool that allows organizations to measure, manage, and optimize their sustainability performance. As global challenges such as climate change, resource depletion, and social inequality loom larger, businesses must go beyond profits and consider their broader impact. The SBSC empowers organizations to embrace sustainability as a strategic imperative, paving the way for a more responsible, resilient, and prosperous future.
For more on utilizing the Balanced Scorecard, The KPI Institute has developed the Certified Balanced Scorecard Management System Professional to help organizations maximize the tools’ potential. And if you are interested in expanding your toolkit further, consider subscribing to smartkpis.com and gain access to the world’s largest database of documented KPIs, which includes a thorough collection of sustainability metrics.
All performance frameworks—whether it is the Balanced Scorecard (BSC), Objectives and Key Results (OKRs), Management by Objectives (MBO) or the Performance Prism—have a shared DNA and purpose: to create synergy in the organization to optimize key results. However, two important questions need to be asked: which performance framework should a company implement and what should one consider when selecting a performance framework?
A well-defined performance framework enables the organization to achieve its desired goals, and having various performance frameworks in hand can make it a bit tricky to choose the right one. Thus, one might be tempted to try implementing what big companies such as Google have implemented and attempt to do the same within their own organization without contextualizing the company culture, size, and business nature.
This article will illustrate the four things to consider when selecting a performance framework for the organization.
It would be silly to start furnishing an empty room without first understanding its intended purpose. Is it going to be for dining or a personal workspace? The same thing can be said when selecting a performance framework. Understanding the company’s goals and objectives is crucial as it will give you a sense of direction. For example, if the company’s goal is to have a disruptive, innovative product or achieve fast growth, then you might consider the OKRs framework as it will enable you to set challenging objectives and provide flexibility to support innovation. On the other hand, if the company’s objectives gravitate toward stability and sustaining the current market share with modest growth, then the BSC is more suitable for this type of environment as it will assist in cascading the objectives from the top down and preserve company status quo while supporting growth at the same time.
Consider the company size and structure.
When we talk about company size, we are not only talking about its capital and asset value, but we are also talking about its workforce size and how they are structured into various functions. If the company has a huge hierarchical structure where each employee is expected to perform a very specific and specialized task that is repetitive and operational, then selecting a framework that exhibits this nature of work will enable the company to create clarity and focus for the employees. A framework to consider for this purpose is MBO, which is defined by The KPI Institute as “clearly setting and defining objectives agreed by both management and their employees.”
Involve internal stakeholders in the selection process.
Highly engaged employees produce substantially better outcomes, are more likely to stay at their organization, and experience less burnout, according to analytics and advisory firm Gallup, Unfortunately, employees can’t reach that level unless they feel that their day-to-day tasks are linked to the company’s purpose and that they have an impact on the results. A good performance framework should be able to convey this to the employees. Asking employees what they value the most and involving them in the decision-making process will result in a highly engaged organization and limit the silo work environment. A performance framework should not be imposed but rather tailored to serve the company’s goals and its human capabilities.
Review and assess the performance framework.
Just like a strategy review, a performance framework needs to be reviewed regularly and not ossified and treated as set in stone within the organization. As the company’s strategy, size, and market grow and change, the performance framework needs to be updated and changed as well.
In conclusion, selecting a performance framework is only the first step. It is a tool for enablement, not a purpose. All performance frameworks can be customized to fit the company’s needs—these are not off-the-shelf products that must be implemented as-is. Nevertheless, other factors play a huge role in executing performance frameworks, such as employee engagement, company structure, and business processes. All these factors influence and impact which framework to select.
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This article was written and submitted by Ms. Wedad Alsubaie, who works at the Strategy Management Office of the National Unified Procurement Company in Saudi Arabia.
Today’s fast-paced and rapidly changing business environment is characterized by uncertainty and the interdependence of economies, societies, and markets. Thus, organizations are facing numerous challenges that can threaten their ability to survive and thrive. According to the Harvard Business Review, the key forces stressing the business landscape include the pandemic and geopolitical instability along with other factors, such as technological disruption, climate change, and globalization. Unsurprisingly, given these difficulties, business leaders decided to focus on organizational resilience in order to adapt to this dynamic environment, leverage opportunities, and deliver sustainable performance improvement.
In a report from Cranfield School of Management, Professor David Denyer defines organizational resilience as the ability of an entity to anticipate, prepare for, respond to, and adapt to incremental change and sudden disruptions to survive and prosper. His paper underlines the idea that organizational resilience requires special control over multiple independent and redundant layers of protection for all critical assets (people, products, property, information) and compliance (standard operating procedures, processes, and training).
Organizations can increase their resilience by adopting various frameworks and models (see Figure 1).
To increase resilience, organizations should develop capabilities, competencies, and principles that are aligned with their chosen resilience framework or model. Some of the capabilities and competencies that can enhance resilience include leadership commitment, risk management, business continuity planning, incident response planning, communication, training, and awareness, according to Stephanie Duchek’s article from 2019. In addition, the six principles stated by Harvard Business Review for enhancing organizations and decision processes to become more resilient can be consulted (see Figure 2).
The International Consortium For Organizational Resilience (ICOR), a global consortium of business continuity and resilience professionals, developed a model based on ISO 22316. The model is composed of three dimensions (leadership & strategy, preparedness & managerial risk, and culture & behavior) with nine strategies directly subordinated to them and six sets of corresponding behaviors. One benefit of the ICOR model is its structured approach to resilience management, which can help organizations better understand their vulnerabilities and develop more effective risk mitigation and response plans. The model also emphasizes the importance of ongoing evaluation and improvement of resilience plans, which can help organizations stay ahead of evolving threats.
There are some limitations to the ICOR model that may not be suitable for all types of organizations— particularly smaller or less complex ones—because, in comparison with big enterprises, most SME owners do not have access to resilience training and tools or their employees are not involved in the development of strategies to increase an entity’s resilience, as stated by the International Labour Organization. Additionally, the model may not adequately account for potential cascading or interdependent risks.
Despite its limitations, the ICOR model is widely used to measure resilience in a variety of industries, including healthcare, transportation, and manufacturing. It is important to mention that this model is not used in most cases by itself, but rather in combination with one or more frameworks or models mentioned above, depending on the needs and the industry in which the organization operates.
To thrive in today’s tumultuous business environment, organizations must develop the capabilities and competencies necessary to anticipate, prepare for, and respond to disturbances effectively.
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