Chosing the correct Key Performance Indicators (KPIs) in Business


  • KPIs are vital tools used by organizations to measure how effectively they are achieving their business objectives.
  • They quantify the performance of a business system or its components, like equipment, individuals, or teams.
  • However, their effectiveness can be hindered by misinterpretation, leading to poor decision-making.

Challenges with Traditional KPIs:

  • Traditional KPIs often provide a myopic view, focusing on individual efficiency rather than overall value generation for the customer.
  • This narrow focus can lead to improvements in specific work phases that inadvertently harm overall process indicators and customer service levels.
  • Classic key indicators are often adopted without considering the primary goal: customer satisfaction.

Rethinking KPIs:

  • It’s crucial to shift perspectives, starting from customer needs.
  • KPIs should be redefined to reflect whether the organization is adding value to the customer.
  • This shift leads to a process-oriented rather than phase-oriented work organization.
  • Central to this approach is aligning all KPIs with customer satisfaction.
  • This requires an organizational rethink, starting from the top management down to the end of the process.

Practical Implications:

  • For instance, focusing solely on the efficiency of a machine that meets its production targets can be misleading if the market demand does not align with this output.
  • Such misaligned KPIs can lead to unnecessary inventory and financial immobilization.

The Pitfall of KPIs:

  • KPIs can become a constraint rather than an aid to improvement if not aligned with the right goals.
  • They should not only support decision-making but also guide towards correct decisions, with customer value as a primary goal.
  • For example, measuring individual efficiency in a team, like a soccer team’s players’ performance stats, does not necessarily explain the lack of overall success.

Changing Mindsets:

  • Adopting the right KPIs is challenging and involves questioning long-standing habits.
  • It's especially tough if the organization is already profitable.
  • The right KPIs can significantly enhance business performance.

Key Takeaways:

  • Reevaluate and realign KPIs with customer value as the central focus.
  • Shift from a narrow, phase-specific view to a broader, process-oriented perspective.
  • Understand that KPIs should guide towards making the right decisions for overall business health, not just individual components.
  • Rethinking KPIs is a fundamental step towards more effective and customer-centric business strategies.