Designing Performance Measurement Systems: Theory and Practice of Key Performance Indicators

In recent years, the use of indicators as a vehicle to transmit information, behavioural codes and rules of governance has dramatically increased. Indicators often accompany the daily life of public and private organizations in many fields: from the stock exchange to the meteorology and from the manufacturing processes to the sport specialties. Indicators regulate and influence organizations and their behaviour. In the broadest sense, they often give the impression to be the real driving force of social systems, economy and organizations. The need to establish long-term objectives, rules and behaviours in order to achieve the planned results puts indicators in the spotlight of stakeholders of organizations. Indicators take on the role of real “conceptual technologies”, capable of driving organizational management in intangible terms, conditioning the “what” to focus and the “how”; in other words, they become the beating heart of the management, operational and technological processes. Designing a performance measurement system is not an easy task. It requires a multidisciplinary approach that integrates knowledge from different process areas, people and information technologies and suitable scientific methods to ensure appropriate academic rigour. This monograph describes in detail the main characteristics of indicators and performance measurement systems and summarizes methods and approaches for identifying, constructing and analysing indicators, combining theoretical and practical aspects. The book is intended for academics, professionals and consultants involved in data analysis and indicator management. The description is relatively simple and does not necessarily require familiarity with advanced mathematics. The book can also be used in programmes for professionals, including senior executives, quality engineers, production engineers and procurement specialists. Professionals can also use the book for individual study. This book is organized into five chapters. The first chapter deals with the basic concepts of indicators and process performance. The second chapter deals with the critical aspects, problems and curiosities that can arise when representing a generic system by means of indicators. The third chapter develops an original theory of indicators, showing that measurements can be seen as “special” indicators. The concept of “non-uniqueness of representation” by means of indicators will also be explained. Then the fourth chapter analyses in detail the properties of indicators. Description of the third and fourth chapter is supported by a number of practical examples and applications. Finally, the fifth chapter describes how performance measurement systems can be designed, implemented and maintained over time. The content of this book is largely based on the monograph Management by Measurement: Designing Key Indicators and Performance Measurement Systems, produced by the same authors and published in 2007 by Springer-Verlag, Berlin Heidelberg.