One of the cornerstones of any IT or data-analytics project is attaching key performance indicators, or KPIs. The thinking is that attaching KPIs will help focus the technology-driven efforts on precise business metrics, such as sales per unit, increase in web traffic, length of customer visit, percent of preferred suppliers used in last 12 months, market share gain comparison, ad click-through ratio, share price, and many others. The pressure is always on to show the business benefits of technologies, so KPIs provide a handy way to show some metrics, after implementation, which hopefully are positive.
However, Bernard Marr, a noted business strategist and author, says KPIs aren’t all they are cracked up to be. In a recent LinkedIn post, he says businesses may be going down the wrong path in tying performance to KPIs. A better measure, he says, would be KPQs, or “key performance questions.”
As Marr puts it: KPIs, by definition, “provide a score, a ratio or data. In a strategy management framework, such as a balanced scorecard For every KPI we need to be clear about the question it is helping us to answer. Too often do I see companies full of KPIs that provide answers, but without any meaningful context.”
Marr offers some advice on developing meaningful KPQs to help track the value of a project:
Design between one and three KPQs for each strategic objective
Ensure KPQs are performance related
Engage people in the creation of your KPQs
Create short and clear KPQs
KPQs should be open questions
KPQs should focus on the present and future
Refine and improve your KPQs as you use them
Use your KPQs to design relevant and meaningful performance indicators
Use KPQs to refine and challenge existing performance indicators
Use KPQs to report, communicate and review performance
Marr emphasizes that developing KPQs doesn’t have to be an exhaustive or mind-numbing process. Short, simple and to the point will usually work. Leave out jargon and buzzwords. Importantly, the questions should not be answered with a “yes,” or “no,” but with a requirement for a wider search for answers. “How well are we managing our budget?” would be an example of an effective KPQ.
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