Speaker 1: In this video, I want to answer the question, what are KPIs, Key Performance Indicators? Key Performance Indicators are your most important, quantifiable measures of progress towards your intended outcome. We link KPIs to the achievement of your business, portfolio, program or project objectives. As a result, KPIs help us to focus our work on delivering the operational or strategic requirements that we have for our business. Peter Drucker's famous quote reminds us that what gets measured, gets managed. That is, if we put in place ways that we can measure our performance in a particular domain, then we are likely to manage our performance in that domain and therefore more likely to get the results that we want. So performance indicators provide us with targets to work towards. As a result, they can also be powerful ways to help us to engage and energize our project teams. They can be statements of what we ultimately want, or they can stand in for the things that we want. They can measure things that we believe are closely related to things that we want to achieve, but that are harder to measure. This type of indicator is a proxy indicator. KPIs can also be either leading indicators or lagging indicators. Leading indicators give us a measure of the progress towards achieving what we want to achieve, whereas lagging indicators give us information about how successful we have been after we have completed the work. So what are the characteristics that make for good KPIs, good key performance indicators? Well, I think there are six main ones. Firstly, they provide objective evidence of progress towards achieving our desired outcome. Objective in the sense that when we measure the performance against the KPI, we get a reliable number that is not subject to opinion or preference or prejudice of one or more individuals. Secondly, good KPIs measure the right things to inform better decision making. Thirdly, good KPIs have to link directly to the organisation's strategic imperatives. We have to craft a set of KPIs that closely mirrors our organisational priorities. Fourth, KPIs need to allow us to track how performance changes over time so that we can understand the trends in our performance. Is our performance improving? Is it decreasing or are we staying at a level? The fifth requirement for good KPIs is they have to track things that matter to us. These include things like timeliness and efficiency. Effectiveness and quality, governance and compliance. Team behaviours and performance, resource utilisation, economics and financial performance, and for us as project managers, overall project performance. The final criterion for good KPIs is that they need to be smart. No, smarter. No, smartest. In this context, I'm using smartest to stand for significant, measurable. And if you're wondering why the S isn't specific, well, if something's measurable, it's got to be specific. So, significant, measurable, achievable, relevant, trackable, ethical, supported, and time-bound.

Speaker 2: So the question I expect you're asking yourself is how do you create good KPIs?

Speaker 1: And to do this, you need to ask the right questions. What are your KPIs? And why do you want each of these outcomes? How can you influence each outcome?

Speaker 2: And who will be responsible for each of them? How can you measure progress against each outcome? And when will you review that progress? How will you know when you have achieved your outcome?

Speaker 1: Who will be responsible for each of these outcomes? And when will you know when you have achieved your outcome? Who needs to know about and understand your KPIs? And what is the process and cycle for reviewing which KPIs you work to? Some companies, notably Tesla, for example, take the KPI process to extreme. They articulate the one metric that matters to them. However, in a large, complex organization, the use of KPIs to measure progress, to track progress, and to highlight issues is really important. And as project managers, we can adopt the KPI process, not only as part of the wraparound to drive projects, but also as a mechanism to drive and improve performance on our projects. Please do hit the thumbs up if you like this video. I'll be creating loads more great project management videos for you, so please do subscribe to the channel and hit the notification bell so you don't miss any. And I'll look forward to seeing you in the next one.