Conversations from the Mirror42 Team

How does one come to a set of KPIs for their own specific company?

Setting KPIs is not easy and it is not always wise to simply copy what others have done and rely on best-practices.

In general, KPIs are related to the corporate strategy of a company. What is the goal of the company for this year? Is it to break-even, to grow marketshare?, to deliver new products to the market, to be the most customer friendly company in the market?

A company can be broken down in core processes and supporting processes. The core processes make the difference with the competition, it is what makes your company unique. The supporting processes are often not unique. This differs per industry. In the finance and telco industry, the IT processes are core processes and allow them to compete, think about better financial analysis applications or faster networks, however in most industries IT is not a core process and simply supporting.

For your supporting processes (HR, Finance, IT) it is often ok to standardize on best-practices. However for your core processes you should perhaps start with best-practices but think about your KPIs as an extension of your corporate strategy. What are your goals? How are you going to measure and quantify those goals. And if your goal is to make a big profit, then do not make the mistake to call profit an indicator. financial outcomes are not often indicators, but results. The indicators are “more sales meetings, bigger quotations, more leads, more partnerships, more projects. These indicators lead eventually to more profit. A KPI is a Key Performance Indicators, not a Key Performance Outcome.

You can use KPI Library to find best practices for your processes and perhaps your industry. Use this as a starting point, a source of inspiration to start your internal discussion with some examples. Dont expect the KPI Library to be your destination, but the start of your journey.

1. Measurement directs behaviour. Most employees consciously or unconsciously operate on the following assumption: “tell me how you measure me, and I will tell you how I will behave.”

2. Measurement makes performance visible. If it’s not being measured, it simply can’t be managed

3. Measurement focuses attention. When people are faced with so many competing demands on their time and resources, what is measured tends to get their attention – particularly when it is linked to reward systems.

4. Measurement clarifies expectations. Measures are a primary means by which management can communicate its expectations to employees, in a clear and unambiguous manner.

5. Measurement increases objectivity. Measurement is essential to “managing by fact” – otherwise you are left to lead with charm and personality.

6. Measurement improves execution. As former Allied Signal CEO and co-author of Execution Larry Bossidy has remarked “when I see companies that don’t execute, the chances are that they don’t measure.”

7. Measurement promotes consistency. Unmeasured systems tend to be highly variable systems, with all the negatives for quality that implies.

8. Measurement facilitates feedback. Feedback in the form of timely, relevant measures is the basic navigational device of any individual or organisation.

9. Measurement improves decision-making. One of the major causes of failure in decision-making is poor or non-existent use of data. One accurate measure can be worth a thousand opinions.

10. Management promotes understanding. Quality guru W. Edwards Deming thought that systematic process measurement led to the “profound knowledge” that was essential to top quality outcomes.

This post by Stacey Barr describes some ideas to the reduce cycle time of performance measurement implementation.

The sooner you have your colleagues using measures they value, the faster you’ll ramp up the performance culture and the faster everything else will improve!

In trying economic times, most IT departments are faced with shrinking budgets. How do IT executives determine where to cut costs without significant impact to business continuity and IT availability? If they have already implemented IT Performance Management best practices, they can simply turn to their executive dashboards and analyse their Key Performance Indicators.

Where should companies be looking for cost reduction? What questions should they be asking?

• Which SLA’s are easily and consistently met and over-performed? Can we maintain quality with fewer resources?
• Which projects are not going to deliver an ROI in the next 12-24 months and should be reviewed in light of revised priorities? Can we stop them?
• Which of my external resources / suppliers / outsourcers have the worst cost/quality ratio? Can we renegotiate the contract or replace them?

For IT organizations that do not have KPI trend analysis in place, answering these questions is far more difficult. Now is the time to implement KPI trend analysis. If you do, you’ll be far better equipped to make sound decisions and effectively manage supplier performance if you are considering outsourcing as a way to reduce costs.

I know what you’re thinking: doesn’t implementing IT Performance Management require big investments in time, resources, and capital? If you go about it with a traditional Business Intelligence stack, the answer is YES. However, there is an alternative. Mirror42 OnDemand delivers IT performance management as a service – you no longer need to invest in software, hardware, and maintenance or worry about keeping your application up and running. With Mirror42 OnDemand, you can simply use your executive dashboards to make sound financial decisions based on facts, not guesswork.