Best Practices for Performance Measurement

Below is a continuation of the transcript of a Webinar hosted by InetSoft on the topic of Best Practices for Key Performance Indicators. The presenter is Mark Flaherty, CMO at InetSoft.

Question: Is there a best practice for the timeliness or frequency of performance measurement and when to make a decision that performance is off track and actions need to be developed?

Mark Flaherty (MF): Most companies should use monthly time frames when it comes to the high-level business metrics. But with the operational performance metrics, weekly frequencies are necessary. Such as with marketing or sales metrics, so that you can take more nimble corrective actions if necessary so that the high-level metrics aren’t in trouble by month’s end.

Some industries do have a need to look at real-time performance indicators. Hospitals, for instance, do this. But the problem with real-time metrics, you’ve got to be careful not to overreact to a blip in performance. It takes some experience to know the normal range of aberration.

This case is an example of where domain expertise is needed when designing a dashboard.

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What Are the KPIs in IT?

This is a relatively new area for the use of KPIs. IT has had some traditional ones such as the five nines for uptime, server availability, for instance, or are processes running fast or slow. But now that IT is doing things that are customer-facing like powering a company’s online presence and the performance of the Web site is a point of competitive differentiation, that’s where there new performance indicators that need to be tracked.

For technology service providers, performance metrics and meeting service level agreements are critical for the success of their business. One example is a company providing airline reservation systems to travel agencies. Every day they’re adjusting prices of airline travel between particular cities to try to get competitive advantage, get a little more volume, and make a little more profit.

They used to analyze their data at the end of the day, and then make price adjustments the next morning. But then their IT group said they can measure what consumers are seeing and doing in real-time. Now they change their prices up to twenty times a day. And the result is they are getting better maximization of ratio of sale price to volume. So this is an example of IT measuring itself in a totally different way. So it isn’t just about availability and hardware performance, but it is related to real business metrics.

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