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Creating Effective KPIs.
Eckerson Wayne W
One of the-mon questions people ask about performance dashboards is How do we define effective key performance' indicators (KPIs)? The Answer is important becarus KPIs govern how employees do their jobs
Agents anizational Change
The adage ‘What gets measured, gets done’ is true. KPIs focus employees’ attention on the tasks the processes that executives deem most critical to the ess of the business. KPIs are like levers that executives can pull to move anization in new and different directions. In fact, among all the tools available to executives to change anization and move it in a new direction, KPIs are perhaps the most powerful
Subsequently, executives need to treat KPIs with respect. As powerful agents of change, KPIs can drive unparalleled improvements or plunge anization into chaos and confusion. If the KPIs do not accurately translate pany’s strategy and goals into concrete actions on a daily basis, anization will flounder, impeding each other’s progress and leaving everyone tired and frustrated with little to show for their efforts.
Suboptimized Processes.
A pany, for example, that measures performance by the percentage of on-time shipments may drive hauling costs skyward because the KPI does nothing to discourage dispatchers from sending out half-empty trucks to meet their schedules. To keep cists in line, pany needs to add a second KPI that measures the percentage of unused cargo capacity in outgoing trucks, and it needs to revise the first KPI so it emphasizes meeting customer expectations for fast, reliable shipments rather than just on-time deliveries.
bination of KPIs gives dispatchers leeway to contact customers and renegotiate shipping schedules if they know the customer may be flexible
The Zen of Development
Crafting sound KPIs is more of an art than a science. Although there are guidelines for creating effective KPIs (see sidebar), they do not guarantee ess. A KPI team may spend months colle