How many key performance indicators should be taken into account to manage business?

How many key performance indicators should be taken into account to manage business?

Managing large business is a hard task as CEO should take into account a lot of factors that affect or may affect business. It's important to see what business was in the past, what business is now and what it is going to be.

On of the a

pproaches to managing business is developing key performance indicators which will tell how the business is working, where the problems are and what can be done about this. Business performance indicators base on metrics as a way to measure performance in numbers, for instance, if CEO should evaluate and manage it security within a company, then "Security Controls" metric should be developed to determine the efficiency of closing significant system weaknesses.

It is important not just to name the metric itself, but provide it with sufficient meaning and measure ways. How to measure the values within metric, how to determine if business is performing good or bad from the viewpoint of this metric? Company experts should already know about how to do this, the task is to formalized their knowledge using target values, measurement methods and measurement recommendations.

Once the metric was developed, what should CEO do next? The next step must be combining develo

ped metrics into the set of metrics which will represent all various sides of the business. It's a good idea to consider financial aspect of the business, also, business is running for customers, so relations with customers should also be a key focused element. What else? Company employees are it's the most valuable resource, so consider evaluating the performance of education within company. It's important to know a lot of internal business processes.

How to combine all metrics into the one total performance values? The key idea is that most metrics and group of metrics have different importance for the business. For instance, now the financial pespective is what should be strongly looked over, then the importance or the weight of the financial perspective should be ranged higher.

How many metrics should the average have? It's a good question, but it's very hard to answer. It depends on the size of your company, e.g. the number of employees, your business model, your financial flows. Typically, you should consider carefully every important aspect of the business from four main view points, each view point should contain 2-3 metrics, so the total number of metrics for a certain business unit or business task may be about 8-12 metrics.

If you have designed a scorecard with metrics that show the performance of the company and the number of metrics is less then 5 - what then? Consider re-grouping you metrics, 5 metrics are good enough to describe some part of the business only, so you should add these 5 metrics to some group of metrics in order to keep your performance data connected.

What is you have too many metrics? It's sometime possible, if you are running a very specific business with very specific key performance indicators, but for most cases it worth to merge some metrics into the one, which will represent the total performance for this aspect of the business.

The general idea is - key business performance metrics are not for the description of business in details, you will not have a full picture of the business, just key ideas about if your business is performing well, so keep the number of metrics at a reasonable level. The golden number here is about 3-5 metrics for each metric group and about 4 metric groups.
Article Directory: http://www.articledashboard.com

If you are interested in Balanced Scorecard check hr scorecard at Sam Miller web-site.

Permalink: http://expert-talk.com/tips/636/how-many-key-performance-indicators-should-be-taken-into-account-to-manage-business-10636.htm

Comments

SEND A COMMENT

PLEASE READ: All comments must be approved before appearing in the thread; time and space constraints prevent all comments from appearing. We will only approve comments that are directly related to the article, use appropriate language and are not attacking the comments of others.

Related Tips and Advices

Related Tags