In our previous post, we discussed how to find and set KPIs in your business, today we look at setting KPIs in place, introducing them to your business and establishing the baselines.
Creating effective business KPIs is an exceptional task, it requires multiple steps and involves all of your senior leadership team. Despite that, it provides an immense insight into your business, its performance and it can become a good revenue driver.
So, what is a key performance indicator baseline? Baseline data are past results of whatever the measurement is, this is then used to measure future performance. These baselines are then used to set targets.
Any KPI baseline should represent normal operating parameters despite what you are measuring, it can be your team’s productivity or KPIs of the device that you use.
The baseline is traditionally calculated by collecting the values for the attributes of a monitor type over a specified time period and establishing a low baseline value and a high baseline value, then taking a weighted average of these values over time.
Another crucial step is to synthesise the historical data into a single baseline. Rather than a simple average of annual data across the board, it is better to create a set of business rules that account for varying performance conditions, such as seasonality and other trends. We covered this briefly in our previous blog post about demand forecasting.
It is important to set the baseline accurately as it is going to be the main measurement for the future performance and service value.
Since the targets and performance will be calculated relative to the baseline everybody in the business will take a keen interest in this. Therefore, accurate measurements will reflect the current level of service.
Assigning goals and assessment
Once you have gathered your data and set the key measurements for whatever performance you are measuring the next step is to set how can you monitor this KPI baseline and what measurement would be a positive or negative result. There are a couple of ways this can be done:
Some key performance indicators can be assessed in a binary way – that is ‘yes’ or ‘no’. These measurements can either be adequate or inadequate, with nothing to be gained by improving them beyond the level of suitability. For example, a binary KPI would be introducing new IT applications or complying with standards.
Majority of KPIs are measured numerically, where they can be counted and measured mathematically. This is one of the most common types of KPIs, such as capacity, output, transactions and volumes.
Many industries will avoid subjective assessment; however, it is necessary to measure all possible KPI’s. These can vary from usability and flexibility to creative tasks in different industries.
It can be complicated to set subjective assessment as it cannot use mathematical techniques for measurement. Therefore, the question here is what form of gathering information and analysing it is acceptable.
However, subjective assessment can be something that can be measured on a significantly less substantial angle. Such measure as an intermediary measure, since it goes about as a substitute for a measure that can’t without much of a stretch made. For instance, a sign of “staff confidence” might be given by a measure of staff turnover rate.
Additionally, don’t forget that there are plenty of tools out there to help you report on your KPI baseline and help you track your business performance progress. You can find out more about what we do to help your corporate performance management on our home page.