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Do you think a company is inefficient if they have more than 20 KPIs?

  • Anne Marie Smith, Sid Adelman, Chuck Kelley
  • DM Review Online, December 7, 2006

Q: Many companies are working with the wrong measures, many of which are termed "key performance indicators" (KPIs). Companies with 20 or more KPIs are likely to lack both focus and alignment and may result in underachieving. Give your arguments for or against this statement.

Sid's Adelman's Answer:

If the KPIs do not align with the business than they are the wrong KPIs. If the KPIs don't match the way the organization should be measured, I would expect management to quickly change the metrics.

Chuck Kelley's Answer:

I do not think that they lack focus at all. You could have KPIs for human resources, management, manufacturing, IT, sales, marketing, logistics, etc. By looking at each group within your organization, you could have a lot more than 20. It is not only the executive management that has KPIs, but (almost) everyone in your organization could have KPIs.

Anne Marie Smith's Answer:

Effective KPIs are segregated within key process areas (KPAs). An organization should identify their KPAs, perhaps using the Capability Maturity Model (CMM) as a source. Within each KPA, the organization would develop the appropriate indicators (KPIs) that show whether the organization is performing that KPA effectively. The number of KPAs and KPIs within each KPA will vary by organization, but the CMM has 16 KP's and between six to ten KPIs within a KPA.

quot;Too many" is a relative term, just as is "too few" - too many KPIs within a KPA may result in the organization's focus being dispersed; too few and the organization won't be able to tell if they are performing the KPA effectively. The real challenges are choosing the right KPAs (regardless of the number) and crafting the right KPIs that measure the performance of the KPA (once again, regardless of the number).


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