October
15
2008
You get what you measure, but don’t be surprised if people are ingenious in destructive ways in how they get there.
Read this interesting blog post here.
The author gives a great example:
Let’s say the “management by measurement” leader thinks there is too much working capital tied up in excess inventory.
His countermeasure would be to set a key performance indicator (KPI) of inventory levels, or inventory turns, and “hold people accountable” for hitting their targets.
Since there is little interest expressed in how this is done, the savvy numbers-focused subordinate understands the accounting system and sees that inventory levels are taken at the end of each financial quarter, and those levels are used to generate the report of inventory turns. This is also the number used to report to the shareholders and the SEC.
His response is to take actions necessary to get inventory as low as possible during the week or on the day when that snapshot is taken. It is then a simple matter to take actions necessary. A couple of classics are:
- Pull forward orders from next quarter, fill and ship them early.
- Slow down (or even stop) production in the last week or two of the quarter.
- Shift inventory from “finished goods” to “in transit” to get it off the books.
While, in my opinion (which is all that is), actions like this are at best deceptive, and (when reported as true financial results) possibly bordering on fraud, the truth is that these kinds of things happen all of the time in reputable companies.
September
29
2008
“We now know that there is a positive relationship between the EMPATHY index and ROCE. Furthermore, every point increase on the EMPATHY index will have a 16.4% impact on ROCE. This finding suggests that the EMPATHY index is not only a good measure for assessing customer experience with call centres but also a key performance indicator for managing profitability.”
Read more here.
September
17
2008
Interesting blog post on Occam’s Razor. He mentions his 8 rules for KPIs:
The Eight Avinash Rules for Entering KPI Heaven:
1: Start simple, start direct, and please start with Outcomes!
2: Leverage metrics that identify success for areas where you spend the largest efforts.
3: Wean your Marketers off the “one night stand” mentality, do pan session analysis.
4: If you can’t segment a Key Performance Indicator, you have picked the wrong one.
5: Even “brand” and “site usage” can be measured, Loyalty rocks!
6: If your short list of KPI’s don’t include a couple that report customer voice directly then you will Never be as successful as you should be.
7: Using KPI’s that can tie back to the “old world” and “traditional metrics” and help you bring people to the current age.
8: Not using Competitive Intelligence KPI’s can be considered a crime against humanity!
September
16
2008
KPI Library News, September 16 2008
The best rated KPIs in the category ‘Project Portfolio’ as rated by our users are as follows:
- 1- Return on Investment (ROI)
- 2- % of projects with post-project review
- 3- % of overdue project tasks
- 4- Break-even time
- 5- Cost of managing processes
- 6- Average deviation of planned ROI of projects
- 7- Modified Internal Rate Of Return (MIRR)
- 8- Number of milestones per project plan
- 9- % of projects with a testing plan
- 10- Deviation of planned hours of work
If you would like to contribute KPIs or rate KPIs in the library, please join us.
