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Key Performance Indicators

BI often uses Key performance indicators (KPI's) to assess the present state of business and to prescribe a course of action. More and more organizations have started to make more data available more promptly. In the past, data only became available after a month or two, which did not help managers to adjust activities in time to hit London Stock Exchange targets. Recently, banks have tried to make data available at shorter intervals and have reduced delays.

The KPI methodology was further expanded with the Chief Performance Officer methodology which incorporated KPI's and root cause analysis into a single methodology.

KPI example

For example, for businesses which have higher operational/credit risk loading (for example, credit cards and "wealth management"), a large multi-national bank makes KPI-related data available weekly, and sometimes offers a daily analysis of numbers. This means data usually becomes available within 24 hours, necessitating automation and the use of IT systems.

Designing and implementing a Business Intelligence Programme

When implementing a BI programme one might like to pose a number of questions and take a number of resultant decisions, such as:

Goal Alignment queries: The first step determines the short and medium-term purposes of the programme. What strategic goal(s) of the organisation will the programme address? What organisational mission/vision does it relate to? A crafted hypothesis needs to detail how this initiative will eventually improve results / performance (i.e. a strategy map).

Baseline queries: Current information-gathering competency needs assessing. Does the organisation have the capability of monitoring important sources of information? What data does the organisation collect and how does it store that data? What are the statistical parameters of this data, e.g. how much random variation does it contain? Does the organization measure this?

Cost and risk queries: The financial consequences of a new BI initiative should be estimated. It is necessary to assess the cost of the present operations and the increase in costs associated with the BI initiative? What is the risk that the initiative will fail? This risk assessment should be converted into a financial metric and included in the planning.

Customer and Stakeholder queries: Determine who will benefit from the initiative and who will pay. Who has a stake in the current procedure? What kinds of customers/stakeholders will benefit directly from this initiative? Who will benefit indirectly? What are the quantitative / qualitative benefits? Is the specified initiative the best way to increase satisfaction for all kinds of customers, or is there a better way? How will customers' benefits be monitored? What about employees,... shareholders,... distribution channel members?

Metrics-related queries: These information requirements must be operationalised into clearly defined metrics. One must decide what metrics to use for each piece of information being gathered. Are these the best metrics? How do we know that? How many metrics need to be tracked? If this is a large number (it usually is), what kind of system can be used to track them? Are the metrics standardised, so they can be benchmarked against performance in other organisations? What are the industry standard metrics available?

Measurement Methodology-related queries: One should establish a methodology or a procedure to determine the best (or acceptable) way of measuring the required metrics. What methods will be used, and how frequently will the organization collect data? Do industry standards exist for this? Is this the best way to do the measurements? How do we know that?

Results-related queries: Someone should monitor the BI programme to ensure that objectives are being met. Adjustments in the programme may be necessary. The programme should be tested for accuracy, reliability, and validity. How can one demonstrate that the BI initiative (rather than other factors) contributed to a change in results? How much of the change was probably random?

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