Wednesday 26 August 2009

(1) KPIs, KRMs and KPDs – what’s the difference?

The term “Key Performance Indicators” (KPIs) is often used to refer to any key business measures.

However the most useful definition of KPIs is “Measurements that tell you what to do to increase performance dramatically.”

This means thinking about what drives the business – the business “drivers” that you can directly control and action. These can be in commercial, operational or financial areas.

The “drivers” can be financial or non-financial in nature, for example margin%, conversion rate of sales leads to orders, and the % of products/services supplied on time. These reflect activities that you can directly control.

Conversely you cannot directly control measurements like revenue and profit, which result from actions taken in individual aspects of the business. These type of measurements are therefore called “results metrics”.

This means it is useful to think of KPIs in two groups:
KRMs - Key Results Metrics
KPDs – Key Performance Drivers (the true KPIs)

There’s then the significance of the word “key”. There should only be 5-10 KPIs at each level of the organisation, which link into the “Critical Success Factors” (CSFs) – the things that must happen (or not happen) for the organisation, division or department to be successful in pursuit of the strategic objectives.

So having determined the strategic objectives and CSFs of your business, what are the KRMs and KPDs needed at each level of your organisation to increase performance dramatically?

1 comment:

  1. Hi

    Tks very much for post:

    I like it and hope that you continue posting.

    Let me show other source that may be good for community.

    Source: Financial controller KPI

    Best rgs
    David

    ReplyDelete