Developing new Key Performance Indicators : A six-step approach

Abstract: Purpose: The purpose of this study is to create a brief, but comprehensive process for developing KPIs independent of context. Bridging the current gap in the literature for a process that can be applied in any industry or situation and include instructions for each of the steps in the process. To fulfill the purpose, the following research question is answered: Independent of industry and application, how could a process for organizations that are interested in developing new KPIs be structured? Method: This is an abductive qualitative study that combine extant literature with empirical data from both in-depth analysis of a single case company as well as interviews with companies from different industries. The literature was analyzed through a content analysis. Thematical analysis was utilized for analyzing the interviews. A tentative process for new KPI development synthesized from the theory and empirical findings was applied in the case company to identify a process that is applicable in a practical setting. Findings: The findings consist of a process for developing new KPIs with (1) six activities that companies should undertake, (2) six critical success factors, one for each activity, they need to consider, and (3) actions and tools to utilize in each activity. Implications: This study contributes to the literature by combining the currently wide array of research into a brief but comprehensible and applicable process that can be used independent of context. For practitioners, this study contributes by creating an understanding of how to efficiently develop new KPIs that enables the whole organization to achieve the strategy and goals. Limitations and future research: There are two main limitations in this study; the process is only applied at one company and the timeframe inhibited the ability to study the effects of the developed KPIs. Hence, future research should investigate if the process is valid in other contexts as well as study the effects of the KPIs being developed through the process.