Dealing With the KPI Terminology Problemby Stacey Barr |
To arrive at a universally accepted terminology for performance measurement, like ‘KPI’, we first must understand the core concepts we are trying to name.
Here’s just a sample of the KPI and measurement words that seem impossible to find a universal terminology definition for:
- performance measure
- performance indicator
- key performance indicator (KPI)
- key result indicator (KRI)
- lead indicator (or leading indicator)
- lag indicator (or lagging indicator)
- strategic initiative or change initiative
- goal (strategic goal, operational goal)
- critical success factor (CSF)
- key result area (KRA)
- strategic theme
There are no doubt many more. However, the problem isn’t the sheer volume of words we use in the performance measurement field. The problem is that we use the same words differently, with varying, overlapping, and sometimes contradictory meanings. And we fail to explain our meanings to each other.
To illustrate the point: what is the definition of ‘KPI’?
Here are but a few examples of how the term ‘KPI’ is defined:
David Parmenter, author of Key Performance Indicators: Developing, Implementing and Using Winning KPIs, defines a KPI as “a performance measure that tells us ‘what to do to increase performance dramatically’, as opposed to other types of performance measures.”
Bernard Marr instead suggests KPIs are the type of performance measure that directly monitors strategic direction: “KPIs provide a way to measure how well companies, business units, projects or individuals are performing in relation to their strategic goals and objectives.”
By contrast, the KPI Library (www.kpilibrary.com) uses the term ‘KPI’ to refer to any kind of measure at all that a business or organisation might use to monitor its performance. Now, the term KPI is used generically to mean any kind of performance measure.
And based on the regular questions that my readers send me, there are still many businesses that define a KPI as a performance standard in employee position descriptions, against which the employee’s performance is appraised.
What definition of ‘KPI’ has your organisation been using?
‘KPI’ is just one of the many performance measurement terms that does not have a standardised, universally accepted definition. You might like to take just a sample of the terms I’ve listed above, and research and compare definitions for them, just to convince yourself of how widespread the problem is.
Forget KPI terminology, and first go back to core concepts.
I have no idea how this problem of varying KPI-related terminology is going to be resolved, and that’s not the intent of this discussion. The intent of this discussion is to give you a contextual framework to make sense of where ‘KPIs’ – or performance measures, or metrics, or whatever you call those quantitative pieces of evidence of our performance results – should fit.
So, let me share with you my definition of the core performance measurement concepts I use, and then you can map your own terms to those definitions. Trying to find universally accepted KPI terminology definitions will just cause you distraction and confusion when you try to make sense of your own strategy.
Take, as our starting point, the following strategic plan that describes part of the strategic direction for Chokolaide, a Swiss not-for-profit organisation that supports people with a lifestyle-diminishing addiction to chocolate (see note 1 below). For now, I’ve labelled each core concept in this plan as Object A, Object, B, etc.:
Most of these ‘objects’ also feature in operational plans, as strategic direction is cascaded throughout the organisation.
You probably have your own names for these ‘objects’ in your own planning framework. Here is the terminology and definition I use for each of these ‘objects’, along with some examples of related terms you might be familiar with:
|Object A||vision||the future state the organisation aspires to create||[do you know of any?]|
|Object B||mission||the core purpose of the organisation||purpose [do you know any others?]|
|Object C||values||the principles or standards of behaviour most important to the organisation||[do you know of any?]|
|Object D||performance result||an ideal or intended state [more]||goal, objective, strategic goal, operational goal, outcome|
|Object E||performance measure||a quantification that provides objective evidence of the degree to which a performance result is occurring over time [more]||KPI, metric, performance indicator, measure|
|Object F||target||a level of performance that a performance measure is to reach in the future [more]||benchmark, standard, goalpost|
|Object G||strategic theme||one of a small of set broad areas of performance that provide the overarching structure of a strategic direction [more]||critical success factor, strategic perspective, key result area|
|Object H||improvement initiative||an action or project that focuses on removing one or more of the root causes that currently prevents a performance measure from reaching its target [more]||strategic initiative, change initiative, improvement project, action|
Feel free to substitute your own words, but make sure you use them consistently, and always be prepared to explain the meaning of the words you choose. And if you can, avoid making KPI and performance measurement terminology more complex than it needs to be, to get the job done of measuring what matters.
(1) It is probably obvious to you that I made this up in its entirety. What is probably not as obvious to you is that I am a chocoholic, but with no intention to reach out for help.
Forget about KPI terminology and understand the core concepts before you worry about which terms to use.
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