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How to build a KPI template (part 2)

ABOUT HUYEN DUONG

Im w orking as program manager

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October 2014
After considering how Key Performance Indicators link to corporate objectives, now we come to the
process of writing down KPIs in a KPI template.

August 2014

KPI basics

July 2014

For each KPI, there should be:

May 2014

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KPI ID

April 2014

This unique identification number helps keep track of indicators and facilitate automation systems
Indicator name

March 2014
February 2014

This is a short name which explain clearly the gist of the indicator
KPI owner

January 2014
December 2013

This identifies the person/department responsible for delivering the performance against this indicator.
Data collection

November 2013
October 2013

This is a more technical aspect of designing KPIs. Organisations need to carefully evaluate the strengths
and weaknesses of different measurement instruments and pick the most suitable one. The following
aspects need to be considered:
Data collection method

September 2013
August 2013
July 2013

Depending on the nature of the value driver for which you are determining KPIs, you may use methods that
yield more qualitative data than others. Although quantitative data is easier to quantify, rich and qualitative
data can generate invaluable insights and contexts.
Some popular methods are: data tracking and collection systems, surveys, questionnaires, in-depth
interviews, focus groups, external assessments, observations, peer-to-peer evaluation.

June 2013
May 2013
April 2013
March 2013

Source of data
Organisations need to identify if data is readily available for collection and if the source is reliable. In case
there are barriers that may challenge the validity of data, you may consider an alternative method or
combine different methods together.
Formula/Scale/Assessment method
This dictates how performance levels are determined or how data is captured. For quantitative data, it is

February 2013
January 2013
December 2012
November 2012

possible to apply formulae (e.g. net profit margin, ROI) or scales; while for qualitative data, you need to
identify the assessment criteria.
Some popular scales being used include Nominal, Ordinal, Internal and Ratio. In addition, the Likert scale

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which measures the extent to which respondents agree or disagree with statements, is also common.

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Frequency
You need to think about how often KPIs are collected and this depends on the nature of each KPI. For
instance, internal KPIs are often measured more frequently while external KPIs (e.g. brand ranking) may
only be available once or twice a year. It is also important to consider what frequency yields enough data to
answer the outlined Key Performance Questions (KPQs).
Targets/performance benchmark
The most important rationale behind KPIs is that they lead organisations towards the set goals. Therefore,
you cannot simply identify what and how you want to measure, how the performance indicator is captured
without saying where you want it to go. This is the step in which you state the desired level of performance
in a set time period. A good target is:
Specific and time-bound
Aspirational but attainable
Based on quality information
Targets can be set as absolute (e.g. increase by 100), proportional (e.g. increase by 20%), relative to
benchmarks (e.g. in the top 100 in the sector), relative to costs/budgets (e.g. reduce by 10% same level of
budget).
Some advice for setting targets:
Review historical data and trends
Take into account fluctuations in performance, e.g. peaks, troughs, seasons
Consider global, national, local targets, best practice benchmarks etc.
Take into account cause-effect relationships

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Consider any dependence on other factors

When certain KPIs hit or miss the set targets, there are colours, known as traffic lighting to indicate the
levels of performance. Hence, KPI designers also specify the thresholds for underperformance (Red),
medium performance (Yellow), good performance (Green) and even over performance (Blue).
Posted b y Rick Yvanovich on TRG
This entry was posted in Blog and tagged KPI

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