Should KPIs Be Selected Bottom-Up or Top-Down?

Below is the 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.

Mark Flaherty (MF): This is one of the most challenging issues in business intelligence. It’s unlike any other software segment, where you can define your requirements, and you can define your metrics, take CRM or ERP, for instance, and you will probably be OK with what you set up for a couple of years with just minor changes.

But business intelligence and performance management are completely different. Because by design, you go through the regular cycle of defining your metrics and defining how you will source and calculate them. You actually develop them and roll them out, and you test them. You put them in front of the business users, and after a few months have passed since the beginning of the BI project, guess what happens.

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The people who asked for those metrics are gone. Or the work has changed. Or you have just acquired another company. Or you have just gone global. Or you have a new competitor. The world where you create your KPIs is very complex and challenging, and often changing.

Sometimes if you use the top-down method of planning KPIs, by the time you finish defining your goals and objectives, and the metrics you need to monitor on a daily basis to understand where you are against those goals and objectives, you may end up creating metrics that you don’t have the data to support.

On the other hand, if you use the bottom-up approach, where you first inventory all the data that you do have from all the operational systems, perhaps collected in a data warehouse, and then you try to guess what to measure, you can end up with a confusing mess.

InetSoft Viewpoint

"Some people say nowadays IT is getting a loud wake-up call. Itís either shape up or ship out. Up until a few years ago, business depended 100% on IT for the delivery of these KPI dashboards and metrics and reporting systems. Today in a lot of cases businesses can use technology and tools out there such as software-as-a-service on their own.

So if you still have a misalignment of business and IT, business people are becoming much more empowered. IT is certainly not becoming obsolete for infrastructure, security and operational risk. But specifically in the area of performance management and BI, IT has a challenge. They almost have to prove themselves in this market all over again because today people can often go around them."

- Mark Flaherty, Chief Marketing Officer, InetSoft Technology

Previous: Getting Started With Key Performance Indicators

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