Few organisations really monitor their true key performance indicators (KPIs) and few have explored what a KPI actually is. The objective of this White Paper is to identify what a KPI is and where to look for them in your organisation.
An example from the airline sector
BA appointed some consultants to investigate and report on the key measures they should concentrate on to turn around the airline. They came back and told the CEO that he needed to focus on one critical success factor (CSF): the timely arrival and departure of aeroplanes.
Finding the CSFs and narrowing them down to no more than five to eight is a vital step in any KPI exercise, and one seldom performed. The CEO was not impressed, though, as everybody in the industry knows the importance of timely planes. However, the consultants then pointed out that this was where the KPIs lay, and they proposed that the CEO focus on late plane measures.
The CEO was notified, wherever he was in the world, if a BA plane was delayed more than a certain length of time. BA airport managers at the relevant airports knew that if a plane was delayed beyond a certain threshold, they would receive a personal call from the CEO. It was not long before BA planes had a reputation for leaving on time.
The late planes KPI was linked to most of the CSFs for the airline. It linked to the “delivery-in-full-and-on-time” CSF, namely the timely arrival and departure of aeroplanes; it linked to the “increase-repeat-business” CSF, etc.
Impact on the balanced scorecard
The importance of the CSF for the timely arrival and departure of aeroplanes can be seen by its impact on all six perspectives of a modified balanced scorecard. (Employee satisfaction and environment and community are added to the traditional four perspectives.)