KPI’s are not just financial measures.
To be effective KPI’s can not just be composed of financial metrics. Metrics derived from the financial statements have a place but they need to be complemented with other measures that are derived from a true understanding of what is important to the customer.
The financial statements are records of history. Thus financial metrics also reflect what has happened. They are not in any way predictive of what is to come. Financial measures have important uses including cashflow management, efficiency, productive use of resources. But financial measure must not dominate the KPI’s as the focus will be distracted from delivering value to the customers.
We need to focus on what is success in the eye of the customer not just past profitability.
The first step in this process is to have a complete understanding of the customer and what they value. A business must invest the time and effort to be armed with the facts and data on the customer. From this the business needs to ask the customer and to observe their behaviour to get the understanding of what is important to the customer. Once this information is to hand then indicators that measure this value delivery can be designed and implemented.
The key measure of this post is not just have financial metrics as KPI’s.
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