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Friday

CSF’s, KPI’s and Metrics

Read an article by Larry Cooper which talked abut CSF’s, KPI’s and Metrics. He makes some good points - but the key thing I want to share here are the distinctions he makes in some of definitions of these terms. The full article can be found here.

Critical Success Factors

Critical success factors were first introduced by D. Ronald Daniel in a 1961 Harvard Business Review (HBR) article. Daniel highlighted the types of information needed to support top management activities. He said that an organization’s information system should be selective and center on providing detail around three to six success factors that help the organization achieve success.

Metrics

When we use the term metric we are referring to a direct numerical measure that represents a piece of business data in the relationship of one or more dimensions. A simple metrics statement is the “number of CI’s in error each month”. In this case, the measure would be the number CI’s found to be in error and the dimension would be time (month).

Metrics are not the KPI’s themselves; rather they are needed in order to determine if our KPI’s have been satisfied. The KPI that might use the above metric could be “% reduction in CI’s in error each month” – you need the number actually in error in order to determine the % of reduction over the previous month’s # of CI’s in error.

Key Performance Indicators

Key performance indicators represent a particular value or characteristic that is measured to assess whether an organization’s goals are being achieved. They reflect the critical success factors, stakeholder needs, and the expectations of the organization. For KPIs and their measures to be effective, the organization’s goals need to be specific, measurable, agreed, realistic and time-based. KPI’s can use both financial and non-financial metrics. "KPI’s…need to specific…measurable, realistic, and time based." KPIs must be constructed by people with different viewpoints on the service or process being measured.

KPI’s are used in conjunction with CSF’s and must have a target that is to be achieved. The target for a KPI can be expressed as a percentage, a simple ratio, an index, a composite average or in a statistical context. Whatever is chosen as a KPI and a target must be actually measurable though. At the outset, keeping the number of KPI’s for a single CSF in the range of 3-5 is recommended.

A KPI is a key part of a measurable objective, which is made up of a direction, KPI, benchmark or target and a timeframe. For example: “5% reduction of CI’s in error each month" where “reduction of CI’s in error each month” is the KPI.

Metrics are used in conjunction with KPI’s to measure CSF’s. A KPI then, is simply a metric that is tied to a target to determine if we have met our CSF. Most often a KPI represents how far a metric is above or below a pre-determined target. In the examples above, you are able to determine whether the target for CI’s in error is being met by comparing the metric to the target for the KPI.

6 comments:

Thomas E. Murphy said...

The key here is to teach benefits/HRM metrics in business schools. See: Schwarz and Murphy, Teaching Hum. Capital Metrics, J. Mgt. Ed (Sage) (April 2008) and also Chapter 10, Benefit Metrics, "Benefits and Beyond . . " (Sage Pub. 2009): www.managementandbeyond.com/ You will find the tools to measure as well as a new - value proposition - for benefits and other HRM practices. Prof. Thomas E. Murphy

keyperformanceindicators said...

I would like to introduce you some KPIs, I think, may be useful for community.

All Sample KPI

Best rgs
Ngo

Alan said...

Hi.

I read a same topic 2 month ago. The topic helps me to improve my competency.

Apart from that, below article also is the same meaning

key performance indicators examples

Tks again and nice keep posting
Rgs

Carlos said...

Hi

I read this post two times.

I like it so much, please try to keep posting.

Let me introduce other material that may be good for our community.

Source: KPI metrics

Best regards
Henry

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