Can you get away with one KPI?

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This is a challenge for most businesses. Can you 'get away' with only having one KPI?

The short answer is 'yes', if you respect the letter K. As I am sure you know, KPI stands for Key Performance Indicator.  Key, as in critical or super important.

This means that the one 'killer metric' has to be meaningful. Really meaningful.

A good KPI will cascade into other areas. Supporting data / metrics can be dug into when required. If the primary KPI is off track, you'll need the other data for context and to help with decision making.

But, if the KPIs is not off track, what else do you need to know.

Thinking like this is an antidote to too much data. I see businesses with reams of information. Each measure is defined as a KPI, but how can it truly be?

The reality of this situation is that this approach could lead to one KPI per business team / function.

Most metrics can be translated back to into a financial measure, ultimately profit. This is a hard nosed meta metric. Better customer experience, potentially more profit. Improved products, potentially more profit.

So, what about cause and effect. Profit comes at the end, if everything goes well. What about the bit upstream? Well this will depend on your mission as an organisation.

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For example, I went to a sweet factory many years ago and their one key number was tons of sugar processed per hour. They gave me a bin bag full of sweets when I left, but I digress...

Let's bring this back to you. What do you do with your KPIs? How many do you have? Do they already have supporting data? Do you record them for the sake of recording them?

Designing KPIs can make a massive difference to your focus and ultimately your results.

If you have read my book On Time Delivery, you'll be aware that I focused on one key metric:
  • Is my capacity plan loaded correctly?
I measured on time delivery and lead time, to present back to the workforce, but they meant nothing if I hadn't loaded the businesses resources correctly.

I hope this article has given you some food for thought. If you need some more ideas, then check out my book Designing KPIs to Drive Process Improvement.

Giles

About the author:

Giles Johnston is a Chartered Engineer who specialises in helping businesses to grow and improve through better business processes and embracing Kaizen.

Giles is also the author of Effective Root Cause Analysis and 'What Does Good Look Like?'.