KPI Dictionary- Business and Technical specifications for KPI

A KPI is not linked or 'owned' by a specific scorecard. It is a stand-alone component, which can be linked to various KPIs, processes, functions and scorecards. A KPI is a building block for creating your performance management systems. This page talks about the details one needs to capture to be able to implement a KPI in your performance management infrastructure. Here are the heads under which you capture business and technical requirements around a KPI

• KPI title: This is KPI long title. For example Sales Productivity by Volume
• KPI Short title: This is the short title (optional), to be used as a heading in the scorecard. This is used in case the KPI title is too long.
• KPI owner: As mentioned in each KPI should have a single owner, one needs to define the business owner for the KPI.
• KPI definition: For example- This KPI class measures the performance around sales value achieved per sales channel instance (sales executive, sales manager, sales outlet….) period of time.
• KPI description and calculation formula: This gives a more precise definition and detail on how to calculate For example- Sales value productivity KPI class, is calculated as sales value achieved for all the sales invoice raised to the customer (reflecting as the accounts receivable in the financial books) divided by the number of sales persons. As sales revenue as a measure has different connotations, there can be multiple KPI’s within the KPI class.

• Type of KPI: Here are different types of KPIs
• Lagging: These KPIs provide the indication on current or past state of the performance. They are more of post-facto, and help to do the investigation and root cause analysis on the performance till date. They don't indicate on the future performance. In other words they talk about "what has happened?"           For example sales revenue per sales employee is a lagging indicator
• Leading: These KPIs provide the indication of future performance. They are measuring the performance on those parameters which will build the future performance on end business outcomes. In other words, they tell us on "what is expected to happen?" for example "sales pipeline" is a leading indicator as it points to the expected sales in the future months.
• Balance Sheet KPI: Status as at a point of time: A balance sheet talks about the balances in your assets and liabilities at a given time. Similarly there are KPIs which talk about the current state. For example product inventories per store as % of the last quarter sales will be a balance sheet item.
• P&L KPI: The activity for a period of time. Most of the KPIs belong to this category. Like profit and loss account talks about the sales revenue and expense over a period (say annual or quarter), KPIs like sales productivity over a quarter talks on the performance over a period.
• Quantitative: These KPIs are in the form of mathematical numbers. Most of the KPIs belong to this category.
• Categorical: These KPIs are more qualitative. For example realization of training objectives as ‘High, Medium or Low’. While one should try to quantify the KPIs as much as possible, one can use categorical KPIs, if one hits a wall.

• Detailed scenarios and exceptions: This part is essentially 'functional specification' for the KPI. It provides complete details on how to calculate and what will be the values in different scenarios. For example, if KPI is related to sales compensation per dollar of product sold. In the functional specification, you would define on:
• How you will calculate the sales compensation?
• How will you handle the products sold in one month and returned in the next month (therefore reversal of the sales compensation)
• How will you handle the Tax deduction at source?
• How will you handle the service tax (if applicable in your country) for the sales services provided by your indirect channel? etc...

• Possible cuts for KPI: This essentially talks about the various dimensions on which you would like to analyze this KPI. For examples sales velocity KPI may be analyzed on location, products, sales-team, customer-category etc...
• Linked KPIs: This provides the details on the other KPIs, which have a correlation (both positive and negative correlation). For example sales velocity correlated to sales productivity**.
• Linked Business Functions: This states on who are the functions whose performance results in the KPI value or the ones which are impacted by it. For example, the TAT (turnaround time) taken to deliver the order, is linked to operations functions. However, the sales function is surely impacted by it as it determines on how fast they can close a sale.
• Linked Processes: This states the processes which are responsible or contributing to the performance. For examples sales productivity is impacted by the sales process management** and sales channel training.
• Linked Scorecards: This is an optional area. A KPI is a stand-alone component and it can be used in million different scorecards, as per the need. However, you can mention the top 4-5 scorecards, where is included. One has to be careful in constantly updating this field, as scorecards, keep on changing faster than the KPIs
• Standards for the KPIs: This is an important but an optional field. This is because the standards against a KPI vary on the dimension it is attached to. For example, you may have different expectations around the sales productivity depending upon the tenure of a sales office, the product being sold etc. Therefore, we always encourage the standards to be mentioned at the enterprise level (say expected sales productivity for the entire organization for all the products...). For sales productivity standards at production, location, sales team level etc.., they can be defined at the level of scorecards and dashboards. However, there is no hard and fast rule. One can have an annexure of many pages to provide all the details about the standards.
• Exception Ranges for the KPI- This is same as above, this talks about what will define ‘green, amber and red range’ for a performance around a given KPI. 
• Additional Information: Any thing which cannot be included in the above mentioned fields.
• Source system(s): This field takes us to the solutioning mode, in terms of from where the data will be captured. As you refer to the source system mapping, there can be many different sources for data linked to KPI. One needs to figure out the source, which is stable, reliable and complete.
• Process of generation: This talks about how the data will be processed to generate the final KPI.

NOTE- The concept of KPI generation need not be linked to the entire BI concept. An organization can have a comprehensive KPI frame-work without a BI environment (though it will be little shaky and painful to maintain).