iB4e - Key Performance Indicators
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What are Examples of Key Performance Indicators?

For CEO’s and Presidents, these may include Revenue by Period, Cash on-hand, New Customers by Period, Total Debt, and Total Costs by Department. For Directors and Managers, these may include Days Sales Outstanding, Response by Mailing, Total Defects by Products, or Call Volume.

Misalignment Example

  • Mail Order - National Company
  • Annual sales - $30MM
  • Perspective – They are profitable and are able to pay bonuses each quarter.
Management Level Key Performance Indicator Misalignment or Conflict
C-Level
  • Stock Price – Growth of 10% per year
  • Avg. quarterly profit margin of 40% or higher· Avg. yearly growth of 10% or higher
  • Effective communication of the corporate goals measured by immediate level staff meetings and an average rating of 4.9 out of 5 on the internal survey section measuring communication company goals.
Assumption: if all level of managers and directors are working profit and revenue, stock price will rise. The C-level folks should have responsibility for the less tangible ways to effect stock price.
VP of Sales
  • Revenue of 35MM
  • Avg. yearly revenue growth of 10% or higher
  • Effective communication of the corporate goals measured by immediate level staff meetings and an average rating of 4.9 out of 5 on the internal survey section measuring communication company goals.
Since the VP of sales is not concerned about profitability, then he/she may be temped to make sales with low profitability.

Alignment Example

  • All goals would be specifically stated in terms of the overall company goals.
  • These goals only reflect profit and revenue since they are easily aligned, the same could be done with company values. I used communication as one example of this. Notice everyone has the same measurement for this goal.
Management Level Key Performance Indicator Misalignment or Conflict
C-Level
  • Avg. quarterly profit margin of 40% or higher
  • Avg. yearly growth of 10% or higher
 
VP of Sales
  • Revenue of 35MM
  • Avg. yearly revenue growth of 10% or higher
  • Avg. quarterly profit margin of 40% or higher
VP of sales must find "good sales." No longer conflicting with operations or customer service

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