Setting Targets

23 04 2009

Setting targets for Performance Indicators should be well thought through. This should not be an exercise in looking at the historical average (unless that is specifically relevant) and then apply 10% as the desired increase. You will want to review history, but you need to understand the goal. It is also important to define the KPI clearly.

For example, let’s use the retail market’s target of sales to sales last year. Retail has traditionally looked at this on a daily basis, as well as rolled up to the week, month, quarter, and year. I have two primary concerns with this:
  • If the weather was bad, we ran a promotion, or some other contributing factor, we may not know it and are really not comparing apples to apples. Additionally, what if last year was really bad? Beating that number doesn’t do much for us. 
  • If we are reviewing this on a daily basis, we loose institutional knowledge due to the repetition. What if we miss a day? Is there any repercussion? What if we miss three days in a row? What if we miss 10 days out of 14? Were there enough days in there of good performance to hide the fact that a trend is occurring?

What would make more sense to me would be to look at this number as a rolling average, or take the total sales for the last 365 days / 365 on a daily basis. Here we can very quickly identify a positive or negative trend, as we don’t have to look at numbers that swing wildly by the day of the week. Instead of talking about  a couple of bad days, we understand that even though we had a couple of bad days, the overall trend is above the goal. We can also integrate our sales goal and show it relative to the trend line.  

About these ads

Actions

Information

One response

3 05 2009
Speedlinking, May 2009 « Manage By Walking Around

[…] about many of the same topics that I’m interested in, including key risk indicators, setting targets, and the problems caused by complexity.   I’ll be reading them […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




Follow

Get every new post delivered to your Inbox.

%d bloggers like this: