KPIs (or Key Performance Indicators) are used to measure strategic objectives, that is, monitoring where an organisation is now in relation to where it wants to be in the future. KPIs can also be used to measure operational objectives, that is, monitoring the internal operational delivery on a daily basis. These two activities are not the same – they require different types of KPIs.
What are operational KPIs?
Operational KPIs seek to get closer and closer to ‘real time’ measurement, so you can assess what’s actually happening in the business on an hourly, daily, weekly and monthly basis. These insights help you to do things better. They offer up important information about where systems, processes or people are falling behind or veering off course so that you can take corrective action quickly, solving the issue before it escalates into a full-blown problem. This real-time performance monitoring is not required for strategic measurement.
What are strategic KPIs?
You don’t need to monitor strategic measures day-by-day, and certainly not hour-by-hour. Strategic KPIs are more about monitoring progress or trends toward a stated destination, and as your strategy shouldn’t change that much, nor should the set of KPIs you use to measure progress toward that stated destination. It’s important to monitor the KPIs over time so you can get an accurate picture of progress.
Aligning strategic and operational KPIs
Strategic and operational KPIs are equally important – they just provide different information for different purposes. However, a disconnect often exists between the metrics a company uses at a strategic board-room level and those indicators people use on the shop floor to measure performance. For KPIs to yield all their promise strategic and operational KPIs must be aligned so that everyone in the business can see the connection between what they do and what the business achieves.
To be successful you must develop and link your strategic objectives to the operational objectives and then use appropriate KPIs to measure how your business is doing against those.
Where to go from here
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Bernard Marr is a bestselling author, keynote speaker, and advisor to companies and governments. He has worked with and advised many of the world's best-known organisations. LinkedIn has recently ranked Bernard as one of the top 10 Business Influencers in the world (in fact, No 5 - just behind Bill Gates and Richard Branson). He writes on the topics of intelligent business performance for various publications including Forbes, HuffPost, and LinkedIn Pulse. His blogs and SlideShare presentation have millions of readers.