One place you can see a lot of indicators is on the flight deck of an aircraft. To anyone who has flown these indicators are pretty important, in fact “life and death” important.

To effectively manage a business you must measure. It is a cliché, “What gets measured, gets improved”. Nevertheless it is true. Measures when accountable do dictate behaviour. Therefore this is an important consideration when building an improvement strategy.

There are thousands of events that must be managed for your business to run smoothly. To measure everything is complex - much like an aircraft. An aircraft flight deck looks complicated but this is only the tip of the iceberg, a modern aircraft has MPDs (multi-functional displays) that provide many more measures than it appears. Clearly a pilot cannot continually monitor every measure particularly during period of high workloads (e.g. take-off and landing). Nor can a pilot just focus on one or two measures. I would soon disembark if a pilot announced, “Today I will mainly focus on heading and the temperature of engine 4. I find it too complicated looking at all the other measures up here.”

There needs to be a balance. A pilot does focus on a small number of indicators during normal flight. In different circumstances the pilot may adjust the balance of indicators to best suit the task in hand.

But what about the temperature of engine number 4? Well the pilot does not give this any attention at all unless it becomes a problem. In which case an alarm will highlight this issue and the pilot will then follow a prescribed action plan to overcome the problem.

This is precisely how it should work in business when KPIs are installed correctly. The Chief Executive does not need to know what the average time to resolution of a call centre was last month unless it is way out of control. But he or she may want to know the operating profit on a regular basis.

There are some structured methods for KPIs. In 1992 Kaplan and Norton of Harvard proposed the “Balanced Scorecard”. These principles are fine but like anything it pays not be a slave to the terminology and rigidity of the structure. You – no doubt – have a unique business with a unique set of needs and problems.

Here are 8 points to keep you on track:

1. Measurable

Fundamentally a KPI must be measurable. “To only use approved suppliers”, “To be the best provider of…” and “Be ethical in the way we treat staff.” All are positively intentioned but would serve as mission or policy statements rather than KPIs. You must be able to apply a number to a KPI.

2. Alignment

If you are going to influence behaviour then ensure the KPIs are fully aligned with the needs of the business and do not conflict with other areas of the business.

3. Be Positive

Where possible, measure in positive terms. For example, instead of measuring absence why not measure attendance? By measuring positively you focus on what you want to achieve rather than what you would like to avoid. There is an important psychological point here. By focusing on the barriers you are not focused on the target. Golfers will be very familiar with this. Lining up for a tee shot you see a large wood to your left. You tell yourself “avoid the trees” and where does the ball end up?

4. Keep Key

At each level of the organisation you should have between four and eight KPIs. Remember a KPI is a KEY performance indicator. 30 measures across a department are not KPIs. With some thought you can probably consolidate many of these measures into one KPI. This is not to say you need to disregard the measure at all because…

5. Interaction

The status of most KPIs will be influenced by several departments or sites. But for KPIs to work they must be accountable. The KPI owners must recognise that they are not necessarily the sole influencer but probably the main influencer. For some this may not be a comfortable position. Effective managers are good at building strategic relationships and alliances to deliver objectives. Therefore these KPIs are an excellent driver for building strategic networks.

6. Dashboards

KPIs must be reported in a visible and coherent format. At a glance you should be able to see the status of a business, site or department. This is the dashboard principle.

7. Cycle times

You will improve by reviewing KPIs, understanding the gap assigning actions and reviewing again. The higher the frequency of this cycle the faster you will improve. You will potentially increase the reporting burden if you have a badly constructed reporting mechanism. So…

8. Engineer the Reporting

Reporting the KPIs is non-value added. Yes that is right NON value added. The value comes from the actions triggered from understanding the gap. Therefore the reporting mechanism must be as maintenance free as possible. You need your resources focused on the action side of the improvement cycle.

9. Leading and Lagging

Many KPIs are likely to be lagging. i.e. they indicate performance that has already happened. It is therefore useful to have some secondary measures that lead the KPIs. These measures are not reported externally but are used to drive the improvement.