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Today KPIs, Tomorrow Benchmarks?

A new software offering has the potential to automate finance benchmarking.

David McCann, CFO.com | US
January 20, 2010

KPIs for centuries, benchmarking for decades, organic systems for the future

Interesting topic - KPIs, benchmaking and technology. KPIs and technology go hand in hand as they complement each other well. Documenting measures, gathering data and analysing results are simplified a great deal by the use of technology. At http://www.smartKPIs.com we have documented thousands of performance measures in a format easily done online, but difficult to implement with the traditional tools used for KPI documentation - Word and Excel. Software as a Service is an excellent catalyst of technology integration for business value. However, benchmarking is a different story. When talking about benchmarking, I would add to the equation the human element. Here is where things get complicated: In sports and tennis in particular, performance metrics are monitored by players and coaches to track progress and how the game plan was executed. In terms of benchmarking KPIs between players, this needs to be explored with care. The playing style is different from one player to another. One player might have a very powerful serve, but generally inaccurate. Another might have a high percentage of net approaches, but ineffective. On top of this, in tennis the concentration power and determination is in many instances more important than game statistics. Similarly, in business, many companies zoom to a different tune. While benchmarking sounds good in theory, there are many practical issues relating to data accuracy and relevance of results. There are many questions organisations need to clarify before embarking on such a road: a. Who may the beneficiaries of such an exercise be? b. What is the added value? c. Who has done this well? In terms of KPIs, they are not new. Venetian sailors used to measure the performance of their journeys by tracking profit. Accounting as a discipline emerged from this. Benchmarking is newer. Benchmarking is reputed to have started when the Xerox Corporation wanted to improve its order fulfilment process in 1982. It had its heydays in the 80s and now as new technology is available, benchmarking is coming back. However benchmarking should be approached with care. We should be mindful of situations where benchmarking is done "just because we can" and / or with unreliable data, like in many instances I have witnessed. Overall KPIs have been around for centuries and benchmarking for decades. There is plenty to be improved in terms of how they should be used properly. New approaches are always welcomed to be explored and tested by businesses. I would encourage initiating a research project in partnership with a university to investigate the benefits to users using the proposed approach and share with others an optimized approach to combining benchmarking with technology. In terms of the future, we might find that more value can be unlocked by shifting the paradigm from a mechanistic view of organisations an organic systems based one. Much more difficult, though, as it involves more than configuring software applications. It makes for a good PhD. research topic, though. In the meantime, let's continue to learn together and analyse critically what and how generates value. Good luck and good vibes! Aurel Brudan . Performance Architect http://www.smartKPIs.com

Posted by Aurel Brudan | February 02, 2010 10:48 pm

What about a KPI dashboard you can see and act on every day?

The article presents a great idea: much the same way Google stays ahead of its search competitors by having a far larger wealth of statistical data to draw on. However, one element that's lacking here is the emphasis on the "K" in KPI: 300 metrics just aren't "Key". How about the 3,4 or 5 that really matter to your daily performance? This introduces another point: the human element. KPIs only matter if you actually see and act on them regularly. If improving data visibility with a simple dashboard is a concern of yours, I encourage you to check out this article from Beye Network on Klipfolio: http://www.b-eye-network.com/view/11909.

Posted by Brian Ogrady | January 26, 2010 02:08 pm

Automated Benchmarking

Very interesting article. For those interested, there is also http://www.kpilibrary.com and its premium products KPI Benchmark and KPI Dashboard that have already implemented a similar model. KPI Library is a community with over 145.000 members that have provided benchmarking information for more then 700 KPIs. These benchmarking results can be accessed with KPI Benchmark and you can build Dashboards for thesee KPIs with KPI Dashboard allowing you to compare yourself to the benchmark.

Posted by Karel Der Poel | January 22, 2010 04:42 am

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