A generic method for KPI design in organizations

Abstract: Introducing a dashboard or a scorecard system in an organization is a complex process that requires a number of design tasks to be carried out. The main task is to design the Key Performance Indicators (KPIs), which are the metrics used for measuring the performance of the organization. However, existing methods for designing KPIs are not easy to use for practitioners; their explanations of how to design KPIs are hard to apply and/or understand. Therefore, the research question of the thesis is: How a method for KPI design should be designed to be practically useful for an organization which aims to introduce a dashboard or scorecard system for measuring their organizational performance? The thesis presents a method for designing KPIs for practitioners. The method aims to fulfill the following requirements: it should be independence from business domain; precise and easy to understand; it should provide a step-by-step description of how to design KPIs; and independence from experts in performance management so that practitioner can use it without having much knowledge in this area. The utilized approach in this study is design science, which is characterized by the creation of artifacts (i.e. constructs, models, methods and IT systems) for addressing problems in a business setting. The method was designed based on earlier research (by combining and comparing the existing guidelines), and by obtaining experienced opinions through discussion with focus group (a group of people which are expert in this area). The method is demonstrated using a real-life case study, and evaluated by interviewing practitioners with experience of designing KPIs as well as using so called informed arguments.