Date Published October 26, 2016 - Last Updated April 19, 2019
I’m often asked this question, and it’s a great question. The answer is that a Key Performance Indicator (KPI) is a KPI…when it is.
When I discuss KPIs, I use an analogy of driving a car. Why are you about to drive the car? At the risk of stating the obvious, it’s because you want to get to some destination. What about the car do you need to know before starting to drive?
- Is there enough fuel in the gas tank?
- Do I have any flat or low tires?
- Did the car start without having any issues?
- Is the oil pressure within normal limits?
As you are driving, your focus moves to other goals: getting to your destination on time and getting to your destination without any mechanical issues. What are the kinds of things that give you confidence that you will meet these goals?
- What is my rate of speed?
- What is the direction that I’m traveling?
- Is the water temperature within normal limits?
- Is the oil pressure within normal limits?
- Is the ”check engine” light on?
There are a lot of other things that your car measures. Cabin air temperature. Radio sound volume. The amount of unburned oxygen found in the engine exhaust. The number of engine flywheel revolutions per minute. The number of miles driven overall. The number of miles driven on the current trip. The average number of miles driven per gallon of fuel.
Then there is a whole group of measures that can be made about your car, but your car doesn’t measure directly. Tread depth of the tires. Air pressure in the spare tire. The size of the various suspension angles that determine if the car is in alignment (toe, thrust, camber, and caster). Elasticity and wear of the belts and hoses on the engine.
If our objective is to get to your destination, is it important to know the amount of air pressure in the spare tire? Do we really need to care about the sound volume? Not really. But the amount of fuel in the fuel tank? Yes, we need to know and monitor that. How about the direction in which we’re driving? We need to know and monitor that, too.
That’s the difference between a measure and a KPI.
The trick is that not every measure is a key performance indicator.
KPIs give us the ability to quantify what is most important to monitor as we work to achieve goals and objectives. The trick is that not every measure is a key performance indicator. After all, we can (and do) measure all kinds of things. So, what makes a measure a KPI? The answer depends on a few factors.
- Goals and objectives
- Audience
- Measurability, or the ability to actually measure something
- Context
The audience and context in my example above is the driver travelling to a destination. Change the audience and context to a mechanic troubleshooting an issue with a car and a whole different set of measures will be considered. So how can we determine what measures should be KPIs?
Balanced Scorecard to the Rescue
Here’s where the balanced scorecard helps. A good balanced scorecard is rooted in an organization’s mission and vision. The mission and vision statements identify what is most important to an organization. Goals and objectives identify what the organization plans to do to meet or fulfill the mission and vision. Critical Success Factors (CSFs) provide further context to goals and objectives by describing the conditions that must be present to ensure success. But here’s the gotcha: CSFs by themselves cannot be measured. What measures would demonstrate and tell the compelling story of how you are helping the company meet its goals and objectives by realizing those CSFs? Those measures are great candidates to be KPIs.
A Real-World Example
Let’s consider a real-world scenario: incident management and the service desk.
A critical success factor for incident management is having a good service desk. But what is good? Good is a qualitative attribute that cannot be measured; what’s good to me may not even be acceptable to someone else. But we want the CIO to know that she has a good service desk, and that the service desk is fulfilling its role within incident management. Here’s where KPIs come in.
Think about all of the things that can be measured at the service desk: number of contacts, number of tickets, average speed to answer the phone, average handle time, and more. Now think about all of the things that could be measured from an incident management perspective: number of incidents, number of escalations, mean time to restore, number of incidents by priority. The list goes on and on.
So which of these measures demonstrate that a service desk is good? We might define the following measures as KPIs that would indicate a “good” service desk:
| Key Performance Indicator | What makes this a KPI? |
|---|
| Percentage of incidents properly escalated to level 2 personnel |
A high percentage indicates that the service desk is correctly following procedures and escalating incidents as appropriate |
| Percentage of incident records filled in accurately and completely |
A high percentage indicates that the service desk is properly capturing the details of incidents |
| Percentage of incident records correctly categorized |
A high percentage indicates that the service desk is doing a good job triaging incidents and assigning the proper category to incidents |
| Cost per incident resolution |
A lower cost per incident resolution indicates that the service desk is resolving a higher percentage of incidents |
| First call resolution (FCR) |
Higher FCR indicates that the service desk is properly enabled to resolve a high percentage of incidents in a single contact |
Given these KPIs, not only can we tell how the service desk is performing, but we will also be able to tell the compelling story about our “good” service desk!
Ensure Your KPIs Are KPIs
How can you ensure your KPIs are KPIs? Here are a few tips:
- Does the measure help you tell a compelling story? Using the service desk example above, you’ll notice that I did not mention the number of calls taken by the service desk. Why? Well, frankly “taking calls” is what a service desk—any service desk—is supposed to do. What is being done with those calls? How are those calls being managed? That is the compelling story you want to tell.
- Less is more. There are a number of things we can measure in IT. But the key indicators are those measures that directly support achievement of the CSFs defined for goals and objectives.
- Just as goals and objectives change over time, KPIs will often change as well. I recommend reviewing your defined KPIs on an annual basis—ideally, just after yearly goals and objectives have been identified—to ensure that you have the right KPIs.
Doug Tedder is a strategic, innovative, and solutions-driven IT service management professional with more than 20 years of progressive experience across a variety of industries. He’s a resourceful and hands-on leader with track record of success implementing ITSM and IT governance processes. Doug is a certified ITIL Expert and ISO/IEC 20000 Consultant Manager and holds many other industry certifications. In addition, Doug is an accredited ITIL Foundation trainer and HDI Support Center Analyst and Support Center Manager instructor. Follow @dougtedder on Twitter and connect with him on LinkedIn.