Module 3

Part 2
KPI Typology & Taxonomy

KPI Professional Course

By
Dr. Nashwa Elsayed
Clinical Pathologist, Quality & Excellence Consultant
MBBS, MSc, MD, TQM, MQM, CPHQ, CPPS, CSSBB, ISO QMS Lead Auditor, Certified Excellence Assessor
 Module 3 KPI Related Terminology
KPI Typology & SMART Objectives Decomposed
Taxonomy
KPI Lifecycle
Leading vs Lagging KPIs
Qualitative vs Quantitative KPIs
Efficiency vs Effectiveness KPIs
KPI Use Case Scenarios
KPI DNA Map
 Types of KPIs

• Strategic & Operational

• Short-term & Long-Term
• Lagging & Leading
• Quantitative & Qualitative
• Effectiveness & Efficiency
• Financial & Non-Financial
• Business & Project- Based
• Output & Outcome
 Leading Indicators
Predict Future Condition Lagging Indicators
Assess Final State

Leading Indicators Lagging Indicators

Leading vs Lagging KPIs

 Leading & Lagging Indicators

Leading indicators are measured objectives actions necessary to be

achieved with benchmarks that, if met, will be indicative of meeting
overall Goals measurable outcomes measured by Lagging indicators.

Leading and lagging indicators help enterprise leaders understand

business conditions and trends.
They are metrics that inform managers that they are on track to meet
their enterprise goals and objectives.
 Leading Indicators Lagging Indicators
Informs business leaders of how to Measures final production and
produce desired results performance
Dynamic but difficult to measure Easy to measure but hard to change
Encourages business stakeholders to Encourages business stakeholders to
ask: ask:
• What processes can I employ to • How much product was produced?
produce more products? • How many customers bought the
• What skills can the team improve for product?
better production? • What response did it receive?
• What steps can be taken to speed up
product development?
Inputs / Objectives Output / Goals
 KPIs Objectives Goals

1st Objective Goal

4th Objective
4th KPI

3rd Objective
3rd KPI

2nd Objective 1st Objective

2nd KPI 1st KPI
 Cascading

KPIs Objectives Goals

Leading Lagging

Leading
 Leading Indicators

Leading indicators for an Enterprise Business Company with an

annual subscription fee might be:
ü Percent of customers that sign up for two-year agreements
ü Number of customers that renew the product at or before mid-
term alerts
ü Number of customers that purchase product add-ons
 Lagging Indicators

Lagging indicators measure output that’s already occurred to gain

insight on future success for an Enterprise Business Company. They do
this by measuring things like:
Ø Profit
Ø Expenses
Ø Customer participation
Ø Renewal rates
Ø Revenue
 Leading & Lagging Indicators

The bottom line is if you’re using lagging indicators without

leading indicators, you’re only getting half of the KPI picture.
Lagging indicators are an important resource for creating leading
indicators that can launch your business into growth mode, but they
aren’t the entire package. These sets of metrics work best to produce
the most accurate and achievable KPIs.
Leading indicators may be harder to measure but the offer valuable
insight about the future. They work with lagging indicators to create a
number of metrics that are key performance indicators of future
growth.
Qualitative vs Quantitative KPIs
 Qualitative Indicators Quantitative Indicators
Measure non-numerical data with Measure characteristics that are
"descriptive" characteristics expressed in numerical terms
Based on qualitative data, such as Based on quantitative data, such as
feedback or surveys sales revenue or website traffic
Provide a subjective view or Provides an objective, data-based view
interpretations of a person's opinions. of a business or organization's
performance
When measuring performance against When easily measuring measurable data
specific goals or benchmarks compared over time.
Less Precise. More Precise.
 Qualitative Indicators

• When measuring the efficiency or productivity of specific processes or

departments.
• When measuring subjective or descriptive characteristics, such as
customer or employee satisfaction.
• When looking for insights into customer or employee experiences and
perceptions.
• When measuring the effectiveness of communication or engagement
strategies.
• When measuring perceptions of brand reputation or company culture.
 Quantitative Indicators

• Sales Revenue: the total amount of money generated from sales of

products or services over a specific period of time.
• Inventory Turnover Rate: measures how quickly a company is able
to sell its inventory and restock.
• Cost Per Acquisition measures the total cost required to acquire a
new customer divided by the number of new customers acquired.
• Average Order Value measures the average value of each customer
order
Efficiency vs Effectiveness KPIs
 Efficiency Indicators Effectiveness Indicators
Efficiency measures how well resources are Effectiveness measures how well a business
used to achieve desired outcomes. It involves achieves its objectives and delivers value to its
streamlining operations and maximizing customers.
productivity.
Consider various factors that can impact It goes beyond simply completing tasks; it
resource utilization. As by eliminating involves understanding customer needs,
unnecessary steps, businesses can improve addressing pain points, and providing solutions
efficiency and reduce resource waste. that meet or exceed expectations.
Related to Organization Related to Customer
Focus on the Process Focus on the Result
• Inventory Turnover Times • Number of pieces planned and produced
• Cost of Poor Quality • Number of pieces rejected vs target
• Sales per person • Number of training conducted vs its plan
 Goals vs. Processes
in relation to
Efficiency & Effectiveness Indicators

Effectiveness is primarily concerned with achieving goals, emphasizing

the impact and result of actions, and producing desired outcomes.
Organizations strive to align their efforts with their objectives so that
they are making progress toward their intended goals.

Efficiency, on the other hand, is focused on streamlining operations. This

includes eliminating unnecessary activities and using the most of
available resources. Organizations prioritizing efficiency constantly seek
ways to improve productivity and reduce waste.
 Quality vs. Quantity
in relation to
Efficiency & Effectiveness Indicators

Effectiveness emphasizes Achieving Objectives with a High Level of

Quality. Organizations prioritizing effectiveness understand the
importance of delivering products or services that meet and exceed
customer requirements.

Efficiency focuses on Maximizing Output with Minimal Waste and

Reducing Costs. Organizations prioritizing efficiency strive to produce
more with less, optimizing their resources to achieve higher
productivity.
KPI Use Case Scenarios
 The Corporate Retreat
Leading Indicators
Predict Future Condition Lagging Indicators
Assess Final State

Imagine you’ve just organized a corporate retreat and you’re trying to determine if
it was successful. One way you can do that is by using Lagging Indicators like:
• How many people attended the retreat? This can give you an idea of general
interest.
• How much money did the retreat cost? This is helpful to calculate the ROI
• How many of the attendees signed up for workshops? This metric tells if your
programming was engaging.
• Which workshops had the most attendees? This indicator implies which parts
of the program were most interesting.
 The Corporate Retreat
Leading Indicators
Predict Future Condition Lagging Indicators
Assess Final State

Here are some more other Leading Metrics that might be associated with a retreat of
this nature:
• Where can we expect the most sales growth? Based on attendance and other
factors, this indicates what new regional or industry markets you can corner after
the retreat.
• What individuals' sales goals can we predict in new markets? Given that you expect
to grow in certain areas, this percent of growth indicates how much to expect
• What attendance can we expect at next year’s conference? Using lagging indicators
like total attendance, managers can come up with leading indicators like percent of
future attendance.
 The Corporate Retreat
Leading Indicators
Predict Future Condition Lagging Indicators
Assess Final State

One of Lagging Indicators from a fictional Corporate Retreat, “How Much

Did The Retreat Cost?” Imagine the retreat was a sales training seminar
and business leaders want to use this lagging metric to determine the
potential for ROI in three months, six months and one year.
Calculate Leading Indicators that determine Sales Revenue Growth in
three months, six months, and one year. Once we have those figures, we
can measure them against the cost of the retreat to project future ROI over
the course of a one-year sales cycle.
 Can I Use Both Lagging and Leading KPIs?
Leading Indicators
Predict Future Condition Lagging Indicators
Assess Final State

Lagging indicators are always triggered by an event that has just occurred, and,
in that sense, are a little more self-explanatory than Leading Indicators.
If you’re measuring the outcome of an event, product release, sales training
program or what have you, you’re using lagging indicators to determine, who
attended, what was produced, or how it was received by attendees.
Lagging indicators are best used in conjunction with Leading Indicators to
determine trends and if outcomes were met. This can be made simple with the
right technology infrastructure that compares leading and lagging indicators,
offering insight.
 Healthcare Industry

Qualitative KPI: Patient Experience - Measure of how

satisfied patients are with their care and experience in the
facility.

Quantitative KPI: Hospital Readmission Rates - Measure

of the number of patients who are readmitted to the
hospital within a certain time period after discharge.
 Automotive Industry

Qualitative KPI: Customer Loyalty - Measure of how likely

customers are to purchase from a specific brand again.

Quantitative KPI: Sales Growth - Measure of the percentage

increase or decrease in sales revenue over a specific time
period.
 Hospitality Industry

Qualitative KPI: Guest Experience - Measure of how

satisfied guests are with their stay at a hotel or resort.

Quantitative KPI: Occupancy Rate - Measure of the

percentage of available rooms that are occupied during a
specific time period.
 Technology Industry

Qualitative KPI: User Satisfaction - Measure of how

satisfied users are with a specific product or service.

Quantitative KPI: Monthly Recurring Revenue (MRR) -

Measure of the predictable monthly revenue generated by
a business.
 Manufacturing Industry

Qualitative KPI: Employee Morale - Measure of how

satisfied employees are with their job and the company.

Quantitative KPI: Production Efficiency - Measure of how

efficiently a company is producing goods, often measured
by the number of units produced per hour or day.
 Real Estate Industry

Qualitative KPI: Tenant Retention - Measure of how likely

tenants are to renew their lease.

Quantitative KPI: Net Operating Income (NOI) - Measure of a

property's profitability, calculated by subtracting operating
expenses from revenue.
 Travel Industry

Qualitative KPI: Customer Feedback - Measure of how

satisfied customers are with a specific travel experience.

Quantitative KPI: Average Daily Rate (ADR) - Measure of

the average rental income earned per occupied room per
day.
 Food Industry

Qualitative KPI: Menu Item Popularity - Measure of how

popular specific menu items are among customers.

Quantitative KPI: Food Cost Percentage - Measure of the

cost of food sold as a percentage of total food sales.
 Financial Industry

Qualitative KPI: Employee Engagement - Measure of how

invested and enthusiastic employees are about their job
and the company.

Quantitative KPI: Return on Equity (ROE) - Measure of

how much profit a company generates in relation to the
amount of equity invested in the business.
 Nonprofit Industry

Qualitative KPI: Donor Satisfaction - Measure of how

satisfied donors are with the organization's mission,
programs, and communications.

Quantitative KPI: Fundraising Revenue - Measure of the

amount of money raised through donations and
fundraising efforts.
 Can I Use Both Quantitative and Qualitative KPIs?

Using a combination of Quantitative and Qualitative KPIs is

recommended for a more complete understanding of
performance and to identify areas for improvement.

Choosing relevant KPIs and regularly evaluating and

adjusting them is important for effective measurement of
progress.
KPI DNA Map
 Metrics or
Activities to do my Measures
actions
Initiatives (Strategies)
to achieve my
objectives & Strategy

Strategic
Plan

Objectives to achieve my
Strategic Goals
Goals
 Vision

Mission

Strategic
Plan

Strategic Strategic
Goal Goal

Strategic Strategic Strategic Strategic

Objective Objective Objective Objective

KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI KPI