Measuring goals through Key Performance Indicators

Measuring goals through Key Performance Indicators

 

Many organizations define their priorities and goals and then leave them there on a document or a website but they fail to follow up and see if they are executing that plan or not.

The best way to keep track of that progress is to define the Key Performance Indicators and be able to roll those KPIs up to the Goals that have been defined.

We know already that there are different type of indicators and they can be measured in different ways. We have percentages, whole numbers, rates, etc. and they can be cumulative, single month values among other options that could complicate the consolidation of those KPIs into a single entity.

First of all we need to take in consideration the key figure that the KPI is giving us. We have an actual and a target, but the number that really indicates performance is the difference between those two, which is a formula that people us to see how well or bad we perform.

We usually recommend that formula to be based on percentages. That approach facilitates creating a standard across the entire organization which is going to make the performance review meetings more efficient.

If you are able to convert all your KPIs’ performance to percentages, it would be easy to just roll up those percentages to the goals. This is assuming the percentages are using the same scale (i.e. all are based on 100% or all are based on percentage deviation).

If the KPIs cannot be standardized, then a way to roll them up is to assign a weight to each potential result based on the KPI.

Examples:

For KPIs that are based on 100%, a result from 90% to 100% will have a value of 5. From 90% to 80% will have a value of 4 and we continue assigning values like that.

If the KPI is based on deviation, we can say that, from 10-20% will have a value of 5. From 10% to 0 will have a value of 4 until we cover all the ranges we need.

After that assignment is done, those weights are used to calculate the status of the goal. You can use an arithmetic average or any other calculation you want.

One you measure your goals, you can roll them up to priorities and even have an overall performance indicators to your organization.

 


Hector Guerra - Consulting Services Director

Mr. Guerra has extensive experience designing and implementing decision support systems using Business Intelligence, Data Mining and Performance Management technologies. He has developed solutions in many areas including financial models, costs, expenses, sales, and inventory. All these deployments involved model designing, ETL tools, data warehousing and reporting capabilities. His expertise currently is focused on designing and implementing Performance Management solutions, helping companies build scorecards, initiatives, dashboards and reports in order to achieve overall goals. Mr. Guerra holds a bachelors degree in Systems Engineering.

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