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Performance Management Strategies
"How to Create and Deploy Effective Metrics" (TDWI, 2008)

by Wayne EckersonThursday, March 19, 2009

Frame the Project. Prior to starting the performance management project, the KPI steering committee needs to create a KPI development team and define the scope of the project. The KPI development team typically consists of three to five business managers or analysts who define the requirements for the KPIs and work with a KPI technical team to encode the KPIs in software and populate them with data.

According to survey respondents, senior executives, managers and analysts are the most likely candidate to define KPIs, although only 21% indicated they assigned these participants to a formal KPI team, which we feel is a shortcoming. Only 11% used an outside business or IT consultancy and only 7% used a strategic management firm, such as McKinsey & Co or Palladium, which are typically called in to create a top-down performance management system.  Our respondents indicated that the IT department, managers and analysts are responsible for implementing the KPIs. (See figure 16.)


Figure 16 - Based on 271 respondents who have partially or fully deployed a KPI initiative.

In terms of scope, the KPI development team should strive to model between five and seven objectives per project, each of which may create multiple KPIs. For example, a team may model profit margin, but it may multiple legitimate ways to measure it. “There’s a lot of overhead involved in gathering data and making sure it’s accurate, so I recommend that each team model six things,” says Corda’s Neal Williams.

Many survey respondents underscored the importance of going slow and doing things right.

Many survey respondents underscored the importance of going slow and doing things right. “Start small and take time to define the most important KPIs for your business,” wrote one respondent. These KPIs are powerful agents of organizational change and you need to make sure you’re getting the change you want. The fewer the KPIs, the more you can evaluate the impact of each KPI and make refinements to ensure it drives the right behavior. This is especially true if the KPIs are used for compensation purposes.

During the Project

The KPI project consists of gathering and refining requirements and then translating them into software. The key steps are:

  • Define requirements
  • Prioritize and normalize
  • Collect the data
  • Develop the dashboard

Define Requirements. There are many approaches to gathering requirements and most of them do a reasonable job. The two keys are: 1) let business requirements drive the project not the tool and 2) iterate quickly.

Corda’s Neal Williams developed a 10-step workshop three years ago to help teams accelerate the deployment of dashboards by defining business requirements up front. Before then, groups would purchase Corda’s dashboard product and start implementing the tool before they knew what they wanted to measure. “Many teams got a mandate from above to implement a dashboard and then we struggled through many product iterations to figure out what to measure and how to display the KPIs.”

Today, the two- to three-day workshop enables a KPI team comprised of three business people and an IT professional to create a detailed blueprint that comprises a complete set of specifications that the technical team uses to build the dashboard. Williams says the blueprint reduces the number of product development iterations by 80% to 90% and significantly accelerates dashboard delivery times.

The workshop has 10 steps. The output of each step is written in English sentences or depicted in diagrams. There is no coding or prototyping during these steps:

  1. Frame: Write a framing statement that defines your strategic objectives.
  2. Elaborate: Write questions aligned with the strategic objectives.
  3. Define metrics. Describe measures that answer each framing question.
  4. Define targets. Describe targets, goals and benchmarks.
  5. Diagram drill paths. Diagram the drill paths needed to answer the questions.
  6. Define behaviors. Describe behaviors that drive each type of indicator.
  7. Check data. Check data availability and condition for each KPI.
  8. Check for compliance. Ensure KPI definitions align across the organization.
  9. Check for balance. Ensure KPIs drive desired outcomes.
  10. Assign owners and users. Assign a business and a data owner for each KPI.

Consultants offer a range of techniques to gather requirements. For example, Ranga Bodla of SAP recommends a brainstorming session where every idea is mapped out on a flip chart. Jim Gallo of Information Control Corporation recommends an iterative approach using a requirements gathering and model-generation tool called Consensus from Balanced Insight. Cisco's Ryan Uda recommends having business people map out “a day in the life” to elicit areas where metrics could make a process more efficient. Others recommend issuing surveys to business users or mapping out business processes.

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