Indicators Defined

KPIs are typically presented in a graphical fashion, using visual indicators. An indicator can be any type of visual display that represents the degree to which the target measurement has been achieved or exceeded. Examples of indicators include fuel gauges, thermometers, stop lights, and many others.

Each indicator is divided into multiple levels, each of which displays differently. A stop-light indicator, for example, might have three indicators: red, yellow, and green. A green-level would visually demonstrate that the target measurement has been achieved or exceeded. A yellow indicator would show that the actual result is slightly off-target. And a red indicator would mean that the actual result is farther off-target.

They say a picture is worth a thousand words, and KPIs make this adage a reality. When viewing multiple KPIs on a single scorecard, a manager can quickly scan through the KPIs to quickly identify and root out those that are off-target and focus on those that warrant additional investigation.

When creating a new indicator, a number of different visual indicators are available, as shown in Figure 30.7.

Figure 30.7. Different indicator template styles available for KPIs.

Different indicators serve different purposes and visually convey different messages. For example:

• The various “trending” indicators display arrows in various colors—red, yellow, and green—and pointing in various directions. These indicators would be useful for KPIs that compare the results of a previous period to the current one.

• Some indicators, such as Stoplights and Smiley Faces, are helpful in demonstrating targets versus actual at the end of a measurable period of time. Use these indicators to show how sales figures at the end of a year or quarter compare to their corresponding target measurements.

• The sets of Bar, Cylinder, Gradient, and Gauge indicators might be appropriate for showing progress during the middle of a measurable period of time. They might be appropriate in scenarios where you want to present things such as the amount of budget exhausted or month-to-date or year-to-date figures versus the corresponding targets for the month or year. Because the measure would continue to change over the course of the measurable period, this set of indicators would convey the amount of progress toward a specific goal. Halfway through the month or quarter, you would expect to see progress of halfway (or better) toward the goal.

Besides the display style for indicators, you can apply a couple of other settings to make the indicator set unique. KPIs can have both positive and negative measurements. With targets such as sales volumes, the more the better. Thus, with a positive KPI, exceeding the target result is good. On the other hand, for a measurement such as number of safety incidents, the fewer the better. Thus staying at or below the target level is preferable. When defining indicators, designers can specify whether more is better or less is better.

In addition, for each level within a set of indicators, you can specify the percentage toward the actual goal that applies to each level. For some goals, 75% of the total may be considered “slightly off target,” whereas for other measurements, 75% would be considered “way off target.”