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Winning CFOs: Implementing and Applying Better Practices, with Website by David Parmenter

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CHAPTER 19

Reporting Your Winning Key Performance Indicators

Many companies are working with the wrong measures, many of which are incorrectly termed key performance indicators (KPIs). Very few organizations really monitor their true KPIs. The reason is that very few organi­zations, business leaders, writers, accountants, or consultants have explored what a KPI actually is. There are four types of performance measures:

1. Key result indicators (KRIs). Give an overview on past performance and are ideal for the board as they communicate how management has done from a critical success factor (CSF) or balanced scorecard perspective.

2. Performance indicators (PIs). Tell staff and management what to do.

3. Result indicators (RIs). Tell staff members what they have done.

4. Key performance indicators (KPIs). Tell staff and management what to do to increase performance dramatically.

Many performance measures used by organizations are an inappropriate mix of these four types.

An onion analogy can be used to describe the relationship of these four measures, as shown in Exhibit 19.1. The outside skin describes the overall condition of the onion: how much sun, water, and nutrients it has received; and how it has been handled from harvest to supermarket shelf. However, as we peel the layers off the onion at home, we find out more information. The layers represent the various performance indicators and the core—the key performance indicators.

EXHIBIT 19.1 Four Types of Performance Measures ...

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