Benchmarks And Metrics

KPIs in isolation provide little value – it is the value of the KPI compared to a relevant target or benchmark that delivers its value. For example, a financial services company may have a baseline customer cross-sell index of 2.20 that must be reached or exceeded by the second quarter of the next financial year. To reach this long-term goal, the company establishes intermediate targets for each quarter of the next 12 months. It then identifies three business initiatives - marketing, product development and customer service – to meet the increased customer cross-selling goals.

Targets are the result of deconstructing the strategic vision into meaningful objectives and goals that link strategy and day-to-day operations. They guide the business to focus on those areas that determine your overall business success. Once targets are reached, the goal should be redefined and a new target associated with the indicator.

Setting a single large-step target can be demotivating; better performance is achieved from setting a series of interim targets - these communicate more achievable milestones. More importantly, the shorter the term of the target cycle, the sooner any deviation from performance expectation will be detected. Targets vary from business to business depending on their specific strategic objectives for that period. This is why, even in identical businesses KPI will vary, as no two sets of strategic objectives are the same.

Measurement must be customized to your specific circumstances and objectives. Setting ambitious, but achievable targets will motivate employees, and be seen as fair by those held accountable for reaching them. Accountability must be accompanied by mandated control to influence performance to that KPI.

Making targets time-bound facilitates a greater sense of urgency, and another measure along which progress be assessed. Just be careful that these milestones are seen as ‘events’ and not the KPI themselves. When setting targets for KPIs it is important to remember:

• To use the baseline as a starting point to ensure targets are realistic
• That targets should be fact-based wherever possible i.e. use reasonable estimates such as peer comparisons
• That targets should be consistent with consolidated targets
• To explore the possibility of using interim targets, which can be a useful short term stepping stones to the final target

Once a KPI Program is in place, benchmarking is often the next step. Benchmarking against other similar businesses is a valuable way of improving your understanding of your business performance and potential.

Approach benchmarks the same way you do KPI – only apply those benchmarks that are relevant to your current strategic objectives and avoid being tempted to benchmark everything that is available.

External Benchmarks

Be very selective in the businesses you benchmark against - they must be in the same industry sector, supply similar products and services, and most importantly be aligned in common strategic objectives. For instance, there is no point benchmarking profitability and customer satisfaction against a new entrant whose strategy may be more focused on customer acquisition.

Internal Benchmarks

Also benchmark internally within your own business. For example, comparing absenteeism rates between departments may highlight better work hygiene and satisfaction factors that can be identified and applied to other parts of the business. However, be cautious in your interpretations - the high absenteeism could also be the result of a disparaging manager, rather than poor work practices by their team.

Getting Benchmark Data

Benchmark data is widely available today using:

1. Trade Stats - most trade associations collate sectorwide statistics
2. Commercial market reports – can be very costly but provide far greater detail
3. Online forums – are becoming valuable contact points with like businesses in non-competing markets to establish a relationship to share information Using Benchmarking Data Benchmarking data should be used like any other KPI data, to drive improvement in the way your business operates. This means setting interim targets to help you reach the benchmark values you want.

Setting Baselines

When base-lining KPI’s it is important to consider:

• The seasonal nature of the KPI - if the KPI is influenced by seasonal factors then a long term average of the data may be required to normalize seasonal variances
• The availability of data - if it is too hard or too costly to get good data, a long term baseline average will give you confidence in the value of your data Now that we have a focused set of KPI, defined by the business and made accessible from a central repository we can start to construct the presentation of performance results to the business. In the next chapter we look at the principles of visual perception.

This is an excerpt from "Effective Dashboard Design: Design Secrets to Getting More Value From Performance Dashboards" - by Gail La Grouw

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