XU Magazine - Issue 07

S.M.A.R.T & D.U.M.B Key Performance Indicators

Written by Dave Cahill

In the latest in an occasional series addressing the ways in which Advisors can influence their clients’ understanding of their own businesses, Dave Cahill co-founder of the My Own CFO app outlines how structuring the Xero business Dashboard appropriately will help to improve business performance…

Question: Which management guru was it that said: ‘What gets measured gets done’?

Peter Drucker? Tom Peters?

Well, neither, actually. It’s 1539 and the Austrian mathematician and astronomer, Georg Rheticus (who first devised trigonometry tables), is credited to have said: “If you can measure it, you can manage it.” Which later became the cliché we’re more familiar with today?

Research hasn’t revealed when the term ‘Key performance Indicator’ was first used but roll forward almost 500 years and the concept of the ‘KPI’ is very well established across many walks of life.

The crowdsourced repository of KPI’s, kpilibrary.com, lists 6,535 individual measures with the latest to arrive on the scene being the ‘Klout Score’ which measures the ‘influence’ of an individual person.

It may not surprise readers to hear that President Obama has a Klout Score of 99 but, depressingly, for the writer at least, Justin Bieber is close behind at 92!

The accepted wisdom in deciding which KPI’s to use for a business regardless of which walk of life you reside in, is to use the S.M.A.R.T. method (and to stay well clear of D.U.M.B. indicators!).

Each measure should be:

• Specific
• Measurable
• Attainable
• Relevant
• Timebound

KPI’s to be avoided at all costs would meet the following criteria and would be:

• Disappointingly vague
• Unbelievably biased
• Meaningless
• Beyond implementation

Xero presents the Advisor with a wealth of riches when it comes to business KPI’s automatically calculated and delivered in tabular or graphical form.

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About the author

Dave Cahill

Pictured: Wes Vermaas and Dave Cahill, co-founders of My Own CFO.