Question: Do you think a company is inefficient if they have more than 20 key performance indicators (KPIs)? Is there an optimal number?
Joe Oatess Answer: A well-designed set of KPIs is hierarchical. By this I mean that the top level KPIs are derived from lower level KPIs. To put it another way, in order to have a set of KPIs that are truly meaningful and helpful to C-Level management, meaningful and helpful KPIs for the management of each business process area should be developed. It is seldom possible to develop top-level KPIs without taking into account how to measure the major business processes of an organization.
So, in my opinion, 20 or more KPIs are not inefficient as such. As a matter of fact, in a well-designed KPI hierarchy, there are usually more than 20 KPIs. The key is in organizing the KPIs in such a way that lower-level KPIs can be combined into high-level KPIs and that the KPIs at any level in the hierarchy are appropriate for the intended management level.
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