Are we measuring right?

In the following thread, I will try to list some of the challenges that we face in the process of KPI (key Performance Indicators) definition.

Customer interest

few questions to ask your management team:

1. If you stop or delay measurement, is your customer going to complain and raise a red flag?
2. Does your customer question and discuss your measurement accuracy?
3. Is your customer using your KPI in process control, quality control, website info or advertising material?
4. Is your customer using your KPI in key-strategic decisions?

If most of the answers come negative then you are probably picking the wrong KPIs. In my opinion, measurement should be driven by customer interest and focus. It is not that difficult to predict what a customer wants, we are playing a customer role in our daily/weekly/monthly shopping. Customer cares about quality, cost and time to deliver the needs. So when you are addressing your customers, make sure you pick the right KPIs that trigger their interest in quality, cost and time. For instance, sharing employee performance measurement with your customer is not really the focus they want. However, sharing KPIs that reflect the quality and stability of a product is straight to the point. In addition, a KPI should reflect the past, the present and help to manage the future. The following are some of the interesting KPIs that you might want to share with customers:

1. Quality measurement: (The present) that includes current known issues in the product, (The past) a trend that shows the decrease/increase of issues over time with key technical/management decisions annotations, etc...
2. Cost measurement: A cumulative report that shows the trend of project cost over time relatively to project full budget as well as project phase sub-budget. If you are in a service model, then a trend of an average cost per resource would be very helpful along with annotations that represent key technical/management decisions over time.

The 5 perspectives

Assuming that you have a family of 4 members and you are the main income driver. You have been offered shares in 2 types of companies for the same price (equivalent to all your savings!)

• A company with 60% chances to double its price by end of year #1 and it belongs to a very competitive domain.
• A company that guarantees to you a minimum of 20% yearly interest on your initial investment for 5 years.
  

Which one do you pick? In fact it depends on your risk tolerance. However, your family is an important factor here because it represents your responsibilities and duties that you cannot avoid. I did the exercise and asked 8 married persons. 6 out of them picked option #2 and only 2 persons picked option #1.

Now you are a company owner, what would be your smartest target?

• Increase your revenues by selling more!
• Increase your end of year net profit
• Ensure your business continuity and almost same yearly profit
  

As you may notice, target 3 goes along with option #2 of the previous question. As a company owner, it's in your interest to increase the share price of your company and that's only possible by increasing the demand thus satisfying option #2. That leads us to the target of every business: Business continuity.
Business continuity consists of 3 factors: The customer, The company and The employee. You can easily evaluate your strength of business continuity through answering the following questions that represent the 5 perspectives of every business:

1. How do customers see us!? - Customer satisfaction: that consists of quality and excellence of work
2. What measures did we take to optimize our processes? - Optimization: That consists of optimizing processes and reducing the overhead.
3. What measures did we take to reduce our operating cost?
   
4. What are our latest innovations?
5. How do employees see us!? - Employee satisfaction: that consists of rewarding distinguished employees, fairly evaluating their performance based on objective measurements and comparative to their previous accomplishments and provide a satisfying working environment.