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KPIs: useful info, but how do you get the most out of it?

In every organization, there are a number of routines and processes that assist in collecting information and converting this information into knowledge. However, this knowledge must then actually be used in the company. Only then will this knowledge ensure that a company is able to implement innovations and change strategically.

Most companies get most of the necessary information from their performance measurement system (PMS). The PMS is part of the management control system and focuses, among other things, on result control. A PMS consists of a number of measures (key performance indicators - KPIs) that help to monitor the actions and performance of the company both quantitatively and qualitatively. When performance is monitored in several ways, more information is also generated. This shows the diversity of the PMS. For example, the company’s profitability can be monitored, but also the number of customer complaints.

Research shows that this diversity of the PMS is essential. The more KPIs that are monitored, the more information is available within the organization. This information can lead to more signals about strategic problems. However, it is not enough to solely monitor different KPIs. The information must actually be used to trigger innovation and strategic change.

There are two different ways to use the information coming from KPIs. In the first place, the information can be used as a monitoring mechanism and to provide feedback. This is called diagnostic use. Managers use information to follow up the differences between the stated goals and the actual results and to keep track on whether the goals are being met. This allows for corrective actions to be taken. Research has shown that diagnostic use contributes to the power to collect and interpret the useful information, which is necessary to identify the right opportunities for improvement and change.

Secondly, the information can be used to create interaction between managers (interactive use). For example, the information serves as a basis for debates: it is a starting point for communication between managers and it ensures that changes can be discussed. The information is also the base for setting goals for the future. Therefore, managers actually get to work with the information. They discuss the KPIs and base their decisions on them. Here, research has shown that by effectively working with the information, this information is converted into knowledge. It is important that this knowledge is then actually applied in the organization in order to implement changes. Moreover, this knowledge will in the future also result in a quicker conversion of new information into knowledge. Prior knowledge is necessary to be able to evaluate new information and to select the relevant information.

Therefore, it is important that managers are aware that they must first create a diverse PMS if they want to trigger innovation and strategic change. Secondly, they have to ensure that the information generated by the KPIs is actually used in the organization. They must therefore not only collect as much information as possible, but also actually get to work with this information. Both a diagnostic use as well as an interactive use of the performance data is beneficial. This is the only way to convert the information captured by KPI into the knowledge that is necessary to implement the necessary innovations and changes.


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