KPIs and management information are not normally subject to legal definition. Critical success factors are determined by the company’s strategy. A balanced scorecard is created from management information, including KPIs. The following rules apply when determining key performance indicators:
- Wherever possible, KPIs should be analysed over a reasonable length of time (up to five years). Historically, actual and future data provide the best basis for information.
- KPIs should always have the same base and calculation methodology. Apples should always be compared with apples, not pears.
- All relevant KPI definitions, methods of calculation, Excel files and graphics should be in a central location (the single source of truth). This avoids duplication of effort and unnecessary errors. It also provides visibility and control over KPI definitions, the starting point for audit and version control.
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- There should be clear and transparent accountability (especially for cross-country reporting) of who owns the definition of the KPI, who can change it and who approves exceptions relating to its calculation.
- KPI analysis should be done holistically; a company or a business activity cannot be judged from just one measure.
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- It makes sense to benchmark your own company against other companies in the same sector
- KPIs have the same basis and calculation methodology.
Same key performance indicator, but different meaning!
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