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The last classification we give is based on the issues addressed by a KPI.
Thus, we may have:
Process KPIs, which refer to the eciency or productivity of a business
process. Examples are
sales growth
or
shipping eciency
.
Quality KPIs, which describe the quality of the production. Examples are
number of production interruptions
or
customer satisfaction
.
Context KPIs, which are not directly influenced by the processes of the
organization. Examples are
size of market
or
number of competitors
.
There are many other classifications of KPIs in the literature, although
the list we have given above covers the most common ones.
9.2.2 Guidelines for Defining Key Performance
Indicators
To be able to define a good set of indicators for an organization, we need to
identify the sources from which we can obtain relevant information. These
sources of information can be classified into primary, secondary, and external,
as follows:
Primary sources:
- Front-line employees. They are at the core of the value chain and know
what are the important factors to achieve the operational goals.
- Managers. They provide their perspective across the value chain and
their strategic knowledge.
- Board. It defines the organizational goals and suggest specific KPIs that
are highly prioritized and sometimes nonnegotiable.
- Suppliers and customers. They bring an external perspective to what
should be measured and improved.
Secondary sources. These include strategic development plan, annual
business/strategic plan, annual reports, internal operational reports, and
competitor review reports.
External sources. These include printed catalogs, on-line catalogs, annual
reports of other organizations, expert advice, and questions in discussion
forums.
When the sources have been identified, we can follow the steps below in
order to define the indicators for the problem at hand:
1. Assemble a (preferably small) team.
2. Categorize potential metrics, basically to look at the business from many
different perspectives. For example, we may want to define metrics that
capture how the organization is performing from a financial perspective,
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