Page 202 -

Chapter 4 • Business Reporting, Visual Analytics, and Business Performance Management 201

company was 80 percent? Obviously, that particular salesperson needs to pick up the
pace. As Simons’ definition suggests, in performance measurement, the key comparisons
revolve around strategies, goals, and objectives. Operational metrics that are used to
measure performance are usually called key performance indicators (KPIs).

Key performance indicator (Kpi)
There is a difference between a “run of the mill” metric and a “strategically aligned” met-
ric. The term key performance indicator (kpi) is often used to denote the latter. A KPI
represents a strategic objective and measures performance against a goal. According to
Eckerson (2009), KPIs are multidimensional. Loosely translated, this means that KPIs have
a variety of distinguishing features, including:

• Strategy. KPIs embody a strategic objective.
• Targets. KPIs measure performance against specific targets. Targets are defined
in strategy, planning, or budgeting sessions and can take different forms (e.g.,
achievement targets, reduction targets, absolute targets).
• Ranges. Targets have performance ranges (e.g., above, on, or below target).
• Encodings. Ranges are encoded in software, enabling the visual display of
performance (e.g., green, yellow, red). Encodings can be based on percentages or
more complex rules.
• Time frames. Targets are assigned time frames by which they must be
accomplished. A time frame is often divided into smaller intervals to provide
performance mileposts.
• Benchmarks. Targets are measured against a baseline or benchmark. The
previous year’s results often serve as a benchmark, but arbitrary numbers or external
benchmarks may also be used.
A distinction is sometimes made between KPIs that are “outcomes” and those that
are “drivers.” Outcome KPIs—sometimes known as lagging indicators—measure the
output of past activity (e.g., revenues). They are often financial in nature, but not always.
Driver KPIs—sometimes known as leading indicators or value drivers—measure activities
that have a significant impact on outcome KPIs (e.g., sales leads).
In some circles, driver KPIs are sometimes called operational KPIs, which is a bit of
an oxymoron (Hatch, 2008). Most organizations collect a wide range of operational metrics.
As the name implies, these metrics deal with the operational activities and performance
of a company. The following list of examples illustrates the variety of operational areas
covered by these metrics:
• Customer performance. Metrics for customer satisfaction, speed and accuracy
of issue resolution, and customer retention.
• Service performance. Metrics for service-call resolution rates, service renewal
rates, service-level agreements, delivery performance, and return rates.
• Sales operations. New pipeline accounts, sales meetings secured, conversion of
inquiries to leads, and average call closure time.
• Sales plan/forecast. Metrics for price-to-purchase accuracy, purchase order-to-
fulfillment ratio, quantity earned, forecast-to-plan ratio, and total closed contracts.
Whether an operational metric is strategic or not depends on the company and its
use of the measure. In many instances, these metrics represent critical drivers of strate-
gic outcomes. For instance, Hatch (2008) recalls the case of a mid-tier wine distributor
that was being squeezed upstream by the consolidation of suppliers and downstream by
the consolidation of retailers. In response, it decided to focus on four operational mea-
sures: on-hand/on-time inventory availability, outstanding “open” order value, net-new

M04_SHAR9209_10_PIE_C04.indd 201 1/25/14 7:34 AM