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Taking decisions in a complex environment like a modern enterprise is not as easy as it seems from the outside. Many factors need to be considered and some have more importance than others. Unfortunately, these factors and their influence on the decision may change with each case.
Many different KPI systems have been introduced to support making such a decision on a settled basis, taking into consideration a certain set of factors and preconditions. But which KPI system should be used and when? Is there a perfect fitting KPI system for you and your company? To answer this question, we can look at an easy example from the real world.
How to design an enterprise performance measurement system? A performance measurement system is something that is tailored to the needs of the group or person who needs to make a decision. Compared to a benchmarking system, the number of recipients is rather small, and the view is not as neutral and abstract as most benchmarks are meant to be. This is why it may not be the best idea to lead your business based on benchmarking KPIs. These were designed to make companies comparable, not to steer them.
In order to design a good measurement system, we need to find out what to measure. In the belief that every employee is working to his or her best extent to support the enterprise in realizing its strategic goals, all decisions and actions taken should be aligned with the overall corporate strategy and the subsequent targets and objectives derived from it.
What you will take out of this.
The easiest example of KPI-driven management is driving a car. If a decision must be taken to either accelerate before a curve or to slow down, different factors have to be considered. The first will be consulting the speedometer for one of the most important KPIs – the speed. Unfortunately, with this isolated information, a proper decision cannot be taken. Even without noticing, we start to consider other factors:
- What does the curve look like?
- How far away is it?
- What is the angle of the curve?
- Are we alone in the car?
- Is the car loaded?
- How close are we to the speed limit?
- Are there other cars we need to consider?
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