Many companies are working with the wrong measures, many of which are incorrectly termed key performance indicators (KPIs). I believe it a myth to consider all performance measures to be KPIs. From my research over the last twenty five years I have come to the conclusion that there are four types of performance measures:
1. Key result indicators (KRIs) give the Board an overall summary of how the organization is performing.
2. Result indicators (RIs) tell management how teams are combining to produce results.
3. Performance indicators (PIs) tell management what teams are delivering.
4. KPIs tell management how the organization is performing in their critical success factors, and by monitoring them, management are able to increase performance dramatically.
The four measures are in two groups. Result indicators and performance indicators. I use the term result indicators to reflect the fact that many measures are a summation of more than one team’s input. These measures are useful in looking at the combined teamwork but, unfortunately, do not help management fix a problem as it is difficult to pin point which teams were responsible for the performance or non performance. Performance indicators, on the other hand, are measures that can be tied to a team or a cluster of teams working closely together for a common purpose. Good or bad performance is now the responsibility of one team. These measures thus give clarity and ownership.
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