How to Develop and Evaluate Key Performance Indicators (KPIs) (PDF)

Effective Boards of Directors know and understand what are the Key Performance Indicators (KPIs) that management must capture, measure, track, and report. In this simple and easy to use guidebook, the consultants should be able to tease out and facilitate the development of a working set of KPIs for their clients.

The guidebook contains working guidelines on definition, types, purpose, target and standards, formula, assumptions, frequency of measurements, reporting, traceability and role of trackers, and accountability.

This guidebook delves into the critical aspects of defining KPIs, emphasizing the importance of a common understanding and acceptance of definitions across the organization. It highlights the necessity of clear, concise definitions that align with the organization's goals and are understood by all stakeholders. This ensures that KPIs are meaningful and actionable, minimizing misinterpretation and fostering a unified approach to performance measurement.

Setting targets and standards is another focal point of this document. It outlines the process of establishing realistic, achievable targets that align with stakeholder expectations and organizational objectives. The guidebook stresses the importance of continuous improvement and the need to adjust targets based on performance data. This approach ensures that KPIs remain relevant and drive the organization towards its strategic goals.

The frequency of measurement and reporting is also covered in detail. The guidebook provides best practices for determining how often KPIs should be measured and reported, balancing the need for timely data with the practicality of data collection. It underscores the importance of regular updates to keep management informed and enable prompt corrective actions. This ensures that KPIs are not just metrics, but tools for proactive management and continuous improvement.