Good Business Intelligence (BI) projects start with good KPIs, and it's from that premise that Jane Griffin writes this article featured on Information Management. A “good” KPI is one that fulfills the needs of the organization, compares like data across the board, and provides essential insight for the progress of the organization with strategic objectives. Griffin lists a few definitions and qualities of good KPIs, starting with the seemingly simple statement that a good KPI must relate to organization performance:
The first characteristic of a good KPI is that it is relevant to the performance of the organization as a whole. Sounds pretty obvious, doesn't it? On the surface, it is. However, you'd be surprised at the political infighting that goes on when organizations try to achieve consensus on which KPIs are really important, simply because the management and workers in each business unit have different perspectives on what measures best define organizational success. For example, finance may define success as better financial-ratio or revenue- assurance numbers. Alternatively, marketing may define success as improved response to various promotions and better campaign management strategies. Neither view is wrong; they're just stovepiped.
KPIs that truly have a positive impact are those that provide a “benchmark by which you can judge the performance of the entire business,” according to Griffin. In short, does the KPI align to a measurement of success or failure for the entire organization's goals and objectives? If not, you probably don't have a good KPI to work with. Along with this characteristic is that of interrelatedness: relevant KPIs are not isolated, but have many touchpoints between executive management targets, enterprise business processes, internal and external parties and Other KPIs. This interrelatedness, Griffin explains, is an important quality of KPIs; it allows them to more accurately show the impact and status of efforts within the organization. Griffin finishes by stating that defining KPIs isn't rocket science: it's a matter of knowing what information is important, which information is going to help your organization succeed, and how to make sure those KPIs are the ones that are used.