Characteristics of effective KPIs are as follows:-

• Aligned: KPIs are always aligned with corporate strategy and objectives.

  • Owned: Every KPI is “owned” by an individual or group on the business side who is accountable for its outcome.

  • Predictive: KPIs measure drivers of business value. Thus, they are “leading” indicators of performance desired by the organization.

  • Actionable: KPIs are populated with timely, actionable data so users can intervene to improve performance before it is too late.

  • Few in number: KPIs should focus users on a few high-value tasks, not scatter their attention and energy on too many things.

  • Easy to understand: KPIs should be straightforward and easy to understand, not based on complex indexes that users do not know how to influence directly.

  • Balanced and linked: KPIs should balance and reinforce each other, not undermine each other and suboptimize processes.

  • Trigger changes: The act of measuring a KPI should trigger a chain reaction of positive changes in the organization, especially when it is monitored by the CEO.

  • Standardized: KPIs are based on standard definitions, rules, and calculations so they can be integrated across dashboards throughout the organization.

  • Context driven: KPIs put performance in context by applying targets and thresholds to performance so users can gauge their progress over time.

  • Reinforced with incentives: Organizations can magnify the impact of KPIs by attaching compensation or incentives to them. However, they should do this cautiously, applying incentives only to well-understood and stable KPIs.

  • Relevant: KPIs gradually lose their impact over time, so they must be periodically reviewed and refreshed.