[Whitepaper] Key Performance Indicators (KPIs): Best Practices

This is an exclusive document to the FlevyPro community - http://flevy.com/pro
Framework Primer
Key Performance Indicators
(KPIs): Best Practices
Presentation created by
1
2
3
4
Focus on Customer
Experience (CX)
Foster Enterprise-wide
Discussion of KPIs
Identify Top Enterprise and
Top Functional KPIs
Treat KPIs as a Special
Class of Data

2This document is an exclusive document available to FlevyPro members - http://flevy.com/pro
Contents
 Overview
 KPI Alignment Index
 KPI Best Practices
 Templates
The content on this page has been partially hidden.
FlevyPro members can download the full document here:
http://flevy.com/browse/flevypro/key-performance-indicators-kpis-best-practices-4010

Key Performance Indicators (KPIs) best practices are the parameters
to engaging customers beyond the sales funnel
Presentation Overview
The 4 best practices around KPIs demonstrate the effective use of KPIs to reflect and
illuminate strategic priority of organizations.
There are clear and measurable differences that exist between organizations that use Key
Performance Indicators (KPIs) to monitor and assess performance and those that use KPIs to
guide and drive performance improvements. Data-driven and customer-oriented leaders use
KPIs to transform their organization, while those more concerned with hitting their numbers
remain focused on efficiencies. Who is better positioned to adapt, evolve, and compete?
More sophisticated managers explicitly use KPIs to promote cross-functional—not just vertical—
alignment. For them, KPIs are the means and methods for rigorously defining and measuring the
fundamentals that matter. To be effective, KPIs must be able to clearly communicate how it tracks
Value Creation and delivers value for our stakeholders—customers, employees, and investors.
This framework provides practical and actionable next steps for organizations to obtain greater
value and returns from their KPI investments. It discusses 4 best practices around KPIs:
The 4 KPI best practices are every organization’s guide to using KPIs to guide and drive
performance improvements.
This deck also includes slide templates for you to use in your own business presentations.
1 Focus on Customer Experience (CX)
2 Identify Top Enterprise and Top
Functional KPIs
3 Foster Enterprise-wide Discussion of KPIs
4 Treat KPIs as a Special Class of Data

KPIs are foundational to performance measurement—they are metrics
used to evaluate the success of an organization, activity, or function
A critical skill is to determine the appropriate set of KPIs to measure.
Key Performance Indicators (KPIs) – Overview
A Key Performance Indicator (KPI) is a type of performance measurement metric. KPIs are used to
evaluate the success of an organization, activity (e.g. project KPIs), or function (e.g. financial KPIs,
customer KPIs) in which it engages.
A KPI can represent any
dimension in which
Excellence is crucial for
competitive success.
Examples include:
• Parts of the marketing
mix
• Research and
development
• Low-cost manufacturing
Analysis of KPIs is crucial
in most studies of
Competitive Strategies.
 If rigorously applied,
clarifies what capabilities
or skills companies need
to compete successfully.
 Index allows us to quantify
competitors’ relative
strengths against KPIs.
 Index provides a
structured, concise
technique for comparing
competitors.
STRENGTHS
 The KPIs and comparative
index are only as good as
the business
understanding and
judgment used to develop
them.
LIMITATIONS
The important
insights come
from
understanding
what is key to
success in the
industry or
segment.

Contents
 Overview
 Templates

The KPI Alignment Index indicates how well a company has aligned its
use of KPIs
KPI alignment is critical for successful strategy execution and lasting performance
improvement.
KPI Alignment Index – Overview
As the name suggests, the KPI Alignment Index is built on the concept of KPI alignment.
SCORING
• Higher index score given to those
with higher scores on all 6
questions.
• Lower index score given to those
who scored lower.
RATINGS
1. Bottom quintiles: Measurement
Challenged.
2. Middle 3 quintiles:
Measurement Capable.
3. Top quintile: Measurement
Leaders.
TECHNICAL DESCRIPTION
• Consist of 6 questions.
• Answers are selected using a 5-point scale.
• Z-scores calculated for each of the 6 questions and their respective means.
KPI alignment helps
achieve the following:
 Determines what
leading organizations
are doing.
 Illuminates and
highlights how their
actions set them
apart from the rest
of the pack.is a
 Measures whether
KPIs within an
organization correctly
relate to one another.

The KPI Alignment Index set of 6 survey questions are focused on
measuring the organization’s alignment with its KPIs
A 5-point scale method is used in selecting answers to the 6 questions raised.
KPI Alignment Index – Survey Questions
The KPI Alignment Index Score is determined based on responses made on 6 survey questions.
Source: Leading with Next-generation Key Performance Indicators, Schrage and Kiron, MIT Sloan Management Review, 2018
To what extent do your organization’s KPIs
drive how you lead and/or manage your people
and processes?
1
To what extent do you believe your function’s
KPIs are explicitly and directly aligned to your
organization’s strategic goals and business
outcomes?
2
To what extent do you agree with this
statement: “I feel empowered and enabled to
achieve my KPI business objectives.”?
3
To what extent do you determine and/or set
your function’s KPIs?
4
To what degree do you agree with the
following statement: “I am satisfied with how
the KPIs that I manage/report on inform and
influence decision making across the
enterprise.”
5
To what extent do you (as stakeholder) trust
the accuracy and reliability of your KPIs?
6

Contents
 Overview
 Templates

The KPI best practices are actionable next steps to obtaining greater
value and returns from KPI investments
The 4 KPI best practices will enable organizations to have a clear KPI portfolio that tracks
Value Creation and delivers value to stakeholders.
KPI Best Practices – Overview
KPIs must reflect and illuminate the strategic priorities of the organization. It must truly be “key”
performance indicators, not ordinary metrics or measures.
There are 4 KPI best practices of data-driven and customer-oriented leaders in transforming organizations.
1
2
3
4
Focus on Customer
Experience (CX)
Discussion of KPIs
Identify Top Enterprise
and Top Functional KPIs
Treat KPIs as a
Special Class of Data

Focus on CX is our initial KPI best practice focused on increased
understanding of customers’ wants and needs
KPIs that focus on customers beyond the sales funnel encourage organizational
realignment around sharing, coordination, and collaboration.
1. Focus on Customer Experience (CX) – Overview
GUIDELINES
• Reengineer the brand with the customer
at the very heart.
• Have a profound rethinking of the
company’s culture.
• Elevate the priority of customer-focused
KPIs.
• Shift towards measures beyond the
traditional sales funnel.
KEY QUESTIONS
• How can you articulate your progress in
the mind’s eye of consumers?
• How can you align internal processes
with external customer behaviors?
DESCRIPTION
• Renewed emphasis on learning
more about users of products.
• Turning customers into brand
advocates and evangelists.
Focus on
Customer
Experience (CX)
KPI Best Practice

Customer Focus takes priority
There is a growing recognition that KPIs must begin aligning internal processes with
external customer behaviors.
1. Focus on CX – Customer Focus
Customer Focus was identified as the top KPI by executives.
Customer
38%
Number
6%
Market share
6%
Cost
6%
New
8%
Profit
5%
Gross
5%
Net
5%
Revenue
8%Sales
9%

Identifying our organization’s top 3 enterprise KPIs and top 3 functional
KPIs helps us with KPI prioritization
It is imperative that leaders understand how KPIs interrelate and align.
2. Identify Top KPIs – Overview
GUIDELINES
• Step up and push top managers to
identify, in writing, the 3 enterprise KPIs
and the 3 functional KPIs regarded as
most important.
• Encourage focus and prioritization.
• Agree on the vital handful of metrics that
truly account for business success.
KEY QUESTIONS
• Is there consensus on how KPIs affirm
and support strategy?
• Are enterprise KPIs primarily financial?
• Do customer metrics play an equivalent
role?
• Who owns those metrics and their
underlying dynamics?
• How well do the functional and
enterprise KPIs align?
• Are the functional KPIs largely
decoupled from the enterprise KPI
outcomes?
• How directly do the functional KPIs
contribute to enterprise success?
DESCRIPTION
• Identify the appropriate number
of KPIs to prioritize.
Identify Top
KPIs
KPI Best Practice

Creating a process for ongoing enterprise-wide discussion of KPIs is the
3rd KPI best practice focused on reinforcing the organization’s culture
If KPIs are not front and center at a management meeting, something is wrong with the
meeting, the management, or the KPIs.
3. Foster Enterprise-wide Discussion of KPIs – Overview
GUIDELINES
• Affirm commitment, not compliance.
• Demonstrate that the organization holds
itself accountable for getting the
maximum possible value from its KPI.
• Make each management meeting
explicitly linked to a KPI (case example:
GoDaddy).
• Ensure that KPIs guide discussions of
how the organization will manage
innovation and change (case examples:
1-800-Flowers and Colgate Palmolive).
• Use KPIs and Net Promoter Score to
reinforce the company’s cultural and
operational focus on clients.
KEY QUESTIONS
•Start with a scorecard or a dashboard
that says, “How are you doing on the
metrics that matter?”
DESCRIPTION
• KPIs are central to leadership
conversations around driving
organizational behavior and
change, not merely assessment
tools.
Foster Enterprise-
wide Discussion
of KPIs
KPI Best PracticeThe content on this page has been partially hidden.

Lastly, treating KPIs as a special class of data asset is a KPI best practice
essential in process transformation and automation
In the years to come, data capabilities that support more complex KPIs will become
a source of Competitive Advantage.
4. Treat KPIs as Special Class of Data – Overview
GUIDELINES
• Continually revisit the fundamental
elements and attributes of your KPIs.
• Top managers must ask whether you are
better off using KPIs to inform and
manage people or train machines and
automate processes.
KEY QUESTIONS
• How will access to new data alter
expectations around enterprise KPIs?
• How will mobile customer touch points
affect how marketing measures
engagement and experience?
• How will data governance change as
real-time access to data and analytics
evolves?
DESCRIPTION
• Data and analytics are raw
ingredients of KPIs.
• KPIs special class as a data
asset will become even more
important as they become a
input to ML algorithms and
process automation.
Treat KPIs as
Special Class
Data
KPI Best Practice

Contents
 Overview
 Templates

Insert headline
Insert bumper.
KPI Best Practices – TEMPLATE
1
2
3
4
Focus on Customer
Experience (CX)
Discussion of KPIs
Identify Top Enterprise and
Top Functional KPIs
Treat KPIs as a Special
Class of Data

Insert headline
Insert bumper.
KPI Best Practices – TEMPLATE ALTERNATE
Focus on
Customer
Experience (CX)
Identify Top
Enterprise and Top
Functional KPIs
Foster Enterprise-
wide Discussion
of KPIs
Treat KPIs as a
Special Class of
Data
1 2 3 4
• Insert filler text, filler text,
filler text.
filler text, filler text, filler
text.
filler text.
text.
filler text.
text.
filler text.
text.

Insert headline
Insert bumper.
KPI Best Practices – TEMPLATE ALTERNATE
Focus on
Customer
Experience (CX)
Identify Top
Enterprise and Top
Functional KPIs
Foster Enterprise-
wide Discussion
of KPIs
Treat KPIs as a
Special Class of
Data
1 2 3 4
filler text.
text.
filler text.
text.
filler text.
text.
filler text.
text.

Download 100s of similar frameworks from the
FlevyPro Library:
https://flevy.com/pro/library/frameworks

Need more frameworks? Download our Complete Business Frameworks
Reference Guide, a 350+ slide compilation of 50+ frameworks, on Flevy
The Complete Business Frameworks Reference
Guide is a best selling document on Flevy. It is 350+
slides--covering 50+ common management consulting
frameworks and methodologies. A summary is
provided for each business framework.
The frameworks in this deck span across Corporate
Strategy, Sales, Marketing, Operations, Organization,
Change Management, and Finance.
This reference guide is great for those who need a
refresher on common frameworks, as well as be
introduced and learn new useful frameworks.
You can find this document here:
http://flevy.com/browse/business-document/complete-
consulting-frameworks-toolkit-644

Flevy (www.flevy.com) is the marketplace
for premium documents. These
documents can range from Business
Frameworks to Financial Models to
PowerPoint Templates.
Flevy was founded under the principle that
companies waste a lot of time and money
recreating the same foundational business
documents. Our vision is for Flevy to
become a comprehensive knowledge base
of business documents. All organizations,
from startups to large enterprises, can use
Flevy— whether it's to jumpstart projects, to
find reference or comparison materials, or
just to learn.
Contact Us
Please contact us with any questions you may have
about our company.
• General Inquiries
support@flevy.com
• Media/PR
press@flevy.com
• Billing
billing@flevy.com

1
Flevy (www.flevy.com) is the marketplace
for premium documents. These
documents can range from Business
Frameworks to Financial Models to
PowerPoint Templates.
Flevy was founded under the principle that
companies waste a lot of time and money
recreating the same foundational business
documents. Our vision is for Flevy to
become a comprehensive knowledge base
of business documents. All organizations,
from startups to large enterprises, can use
Flevy— whether it's to jumpstart projects, to
find reference or comparison materials, or
just to learn.
Contact Us
Please contact us with any questions you may have
about our company.
• General Inquiries
support@flevy.com
• Media/PR
press@flevy.com
• Billing
billing@flevy.com

[Whitepaper] Key Performance Indicators (KPIs): Best Practices

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to [Whitepaper] Key Performance Indicators (KPIs): Best Practices

Similar to [Whitepaper] Key Performance Indicators (KPIs): Best Practices (20)

More from Flevy.com Best Practices

More from Flevy.com Best Practices (20)

Recently uploaded

Recently uploaded (20)

[Whitepaper] Key Performance Indicators (KPIs): Best Practices