A Key Performance Indicator has to be unique, relevant, and insightful to be Key. It should tell you something meaningful, impart knowledge, about your operations that demonstrates clear business impact. It should be the final sum of many calculations, the square root and the root cause. And they should be few and constantly monitored.
If you are tracking more than 5, max 10, KPI's chances are many of them aren't that important. And if you're classifying nebulae like "how many meetings you're Data Governance Council has had" as a KPI you need a glossary exercise on what makes up a KEY PERFORMANCE INDICATOR.
Lets decompose the term to shed light on the components from the bottom up:
INDICATOR: This is a metric. A field in a log. The output of a sensor. Raw data collected from many inflection points in your information supply chain. In and of itself, it has little or no meaning. It is like each word in this sentence.
INDICATOR 1: IT
INDICATOR 2: IS
INDICATOR 3: LIKE
INDICATOR 4: EACH
INDICATOR 5: WORD
INDICATOR 6: IN
INDICATOR 7: THIS
INDICATOR 8: SENTENCE
INDICATOR 9: .
On their own, each word has a dictionary definition. But you don't get a complete thought unless you correlate them into a sentence.
INDICATOR = DATA
Examples of INDICATORS from the Data Governance World:
Percentage of paper documents under records management:
Percentage of electronic documents under records management:
Percentage of email under records management:
Average time in days to turn around e-discovery requests
Total storage (GB) and total cost of storage (USD in thousands)
Interesting? Perhaps. Relevant? Who knows.
PERFORMANCE INDICATOR: To continue our grammatical metaphor, a PERFORMANCE INDICATOR is a sentence whose correlation of facts yields insight into what's going on. It is the result of mathematical analysis, where the sum is indeed greater than the meaning of the parts. You use Performance Indicators to tell you how the things you are measuring are performing. I know this is a self-fulfilling sentence, redundant and just so obvious. But a lot of people don't get this.
PERFORMANCE INDICATOR: IT + IS + LIKE + EACH + WORD + IN + THIS + SENTENCE + . = INFORMATION.
Information is a the organization of data into meaning.
PI = INFORMATION
RECORD RETENTION COSTS = ((((% PAPERDOCS x $STORCOST)+ (% EDOCS x $STORCOST)+ (% EMAIL x $STORCOST))))
Interesting? Yes. Relevant? Getting there.
KEY PERFORMANCE INDICATOR
I'll make this short and easy. There is a reason this acronym starts with "K"
KPI = KNOWLEDGE
KPI's tell you things about things. It's the ueber analysis, the trend of change, the ups and downs of how PERFORMANCE INDICATORS oscillate over time. You want these KPI's to be few and you want everyone to know their name, hotly debating what they mean.
VALUE AT RISK is an example of a KPI. Before the credit crisis, 99% of bankers knew how to spell VAR, saw regular reports on VAR, knew VAR was very important, and made decisions based on VAR. VAR is a ratio of Risk. It is calculated from tens of thousands of INDICATORS, and hundreds of PERFORMANCE INDICATORS.
One or two people in a bank (not the CEO) maybe understand how VAR is calculated and where the data comes from. But that's not important. What's important is that monitoring VAR is KEY to understanding the RISK PERFORMANCE of a bank.
KPI's need to be like VAR. One number everyone cares about.
KEY PERFORMANCE INDICATOR: $ We are wasting on redundant storage costs
Interesting? Hell yeah! Relevant? Absolutely.
If you have more than 5 KPI's, most of them are either INDICATORS or PERFORMANCE INDICATORS and no one remembers or cares about them.
Make sure your KPI's really are KEY.