Skip to Content

 

Benchmarking has become more and more important in today's business world. Every company wants to compare its performance to the one of market leaders. However, when talking about benchmarking of business KPIs it is very often the same story. You want to compare your company’s performance to your peers, but you just don't know whether your pears are using the same KPIs and the same defitnitions.

Very often the definitions of the KPIs vary, sometimes the KPIs are even named different but the definitions are the same. Finally you simply don’t know whether you are comparing apples to apples or apples to oranges.

 

As a consequence, there have been several approaches to KPI standardization in the past, e.g. the Supply Chain Reference (SCOR) Model in the SCM area. However, there is no standard covering all aspects of the business.

 

Therefore we launched a project to create a unique and consistent set of KPIs that are commonly understood, used and accepted by the market. Of course, SAP or any other party could try to define such a set alone. However, we believe that it is the best way to involve all stakeholders (i.e. SAP customers, partners, SAP experts) in the process of defining the common KPI language. Everyone can participate and contribute.

The KPIs will eventually be delivered as pre-configured content of our software in the future, hence, everyone can influence the development.

Business KPI are always tightly related with business processes, therefore SDN / BPX is the ideal platform for our project.

 

I would like to invite you to share your opinion about the definition of business KPIs on our wiki:

<http://www.sdn.sap.com/irj/sdn/wiki?path=/display/bpx/business+kpis&>

 

Please feel free to review the KPI definitions and provide us your valuable input.

 

To report this post you need to login first.

9 Comments

You must be Logged on to comment or reply to a post.

  1. Zlatko Radisic
    Hi Nadim,

    I believe it is impossible to come up with a standard, consistent set of KPI defintions that are applicable to the whole world.

    A KPI is a “key performance indicator”, a measure that a particular organization, after much research and investigation, has deemed important or “key” to monitor its performance against and take subsequent actions.

    Yes some KPIs can have general similarities in their defintions, across many companies. But to be truly effective, a KPI must be very specific and individualized for each company.

    I am not a big fan of benchmarking because I believe that every company is unique and to be successful has to find ways of differentiating themselves from the competition. Hence, benchmarking can only be done in a very general sense. 

    (0) 
    1. Nadim Razvi Post author
      Hi Zlatko,

      thanks for your reply. I agree that there are always KPIs that are company specific and therefore cannot be compared with other companies (-> apples to oranges…).
      On the other hand I can clearly see a growing demand for benchmarking in the market over the past years, especially for KPIs (but also for best practices of business processes for example). As a consequence, companies demanding for benchmarking have to agree on certain generic KPIs. Possibly, these KPIs might only reach a limited level of detail.
      Therefore it is part of our project to find the most detailed level on which KPIs can be defined in a generic way.

      Regards,
      Nadim

      (0) 
  2. Christian Geyer
    Hi Nadim,

    that is a very interesting activity you are starting here. I think it is correct that you mentioned the SCOR model here: To avoid the apple <-> orange scenario, it is essential to check if the underlying business processes are compatible to a certain level and only then compare KPIs. For that reason SCOR defines processes only to a specific level – the individual implementation of a process is not predefined in SCOR. The KPIs in the SCOR model are valid only for that “common” level. So if everything went fine, then it consists only of apples 🙂

    You stated correctly that there is no model covering all aspects of businesses. So here’s my question (finally…): Would you like to use the approach that e.g. the SCOR model uses (from process to KPI) or would you like take an entirely different approach? If for instance you “only” collect KPI definitions in your wiki without describing the underlying processes, I’m not sure how far that would really get you…

    (0) 
  3. Christian Geyer
    Hi Nadim,

    that is a very interesting activity you are starting here. I think it is correct that you mentioned the SCOR model here: To avoid the apple <-> orange scenario, it is essential to check if the underlying business processes are compatible to a certain level and only then compare KPIs. For that reason SCOR defines processes only to a specific level – the individual implementation of a process is not defined in SCOR. The KPIs in the SCOR model are valid only for that “common” level. So if everything went fine, it consists only of apples 🙂

    You stated correctly that there is no model covering all aspects of businesses. So here’s my question (finally…): Would you like to use the approach that e.g. the SCOR model uses (from process to KPI) or would you like take an entirely different approach? If for instance you “only” collect KPI definitions in your wiki without describing the underlying processes, I’m not sure how far that would really get you…

    (0) 
    1. Nadim Razvi Post author
      Hi Christian,

      thanks for your interest and feed-back. I agree with you that the underlying processes / data are very often the decisive point when talking about KPI definitions. Therefore I encourage everyone to describe the KPIs (especially the calculation) as precisely as possible, that is, including the related source data.
      I think we should mention the underlying processes exactly to the extent that is relevant to the KPI calculation. However, for this particular project we would probably overshoot the mark if we tried to define all potentially related processes first.

      Please take a look at the following KPI “Employee Turnover Rate”.
      https://wiki.sdn.sap.com/wiki/display/BPX/Employee+Turnover+Rate

      The KPI definition does not fully include the description of the underlying process but from my point of view the description of its calculation is precise enough. What do you think?

      Are you able to contribute some KPI definitions as well?

      Regards,
      Nadim

      (0) 
      1. Christian Geyer
        Hi Nadim,

        I’ll see if I can add something. First of course I’ll try to get an overview of what’s there already – as I saw, you have quite a few KPIs already.

        I can think of a few KPIs to add but those are really quite specific. Their definition depends on the details of the processes, e.g. the sales process. So they are probably not generic enough. For the same reason, I would not expect to find them in a model like SCOR.

        I’ll take a look through the existing wiki.

        Regards,
        Christian!

        (0) 
      2. Davide Cavallari
        Hi Nadim,

        yes I agree the descriprion of the “Employee Turnover Rate” is accurate, and consequently that KPI is pretty well defined.

        A broad business process is monitored through that measure. No process description is needed, as the KPI definition explains the process itself.

        On the other hand, the introduction of the process perspective states that:

        These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants.

        which seems to contradict a bit our aim to gather a standard set of common KPIs – at least for the process perspective.

        Cheers, Davide

        (0) 
        1. Nadim Razvi Post author
          Davide,

          you are making an interesting and important point here. Talking about KPIs I can actually see two different trends:
          1. You need very detailed KPI descriptions, e.g. in the process area (as you mentioned). These KPIs might have to be tailored to the individual needs of a particular company.
          2. There is a raising demand in benchmarking. As a conseuqence, the KPIs have to be more ore less identical.

          This seems to be a contradiction. Nevertheless, the KPIs will have to address both needs. I think it is a question of granularity. I think it should be part of this KPI wiki project to find the right level of granularity. The KPI definitions have to be as precise as possible while enabling benchmarking.

          Regards,
          Nadim

          (0) 

Leave a Reply