Raj,
The question you pose is a very valuable one. Sadly, it is often overlooked by overzealous folks who rush to introduce the latest fad KPI without considering the underlying effectiveness of their approach.
The acronym “KPI” is one of the most grossly-overused words in organizations today. Sometimes it seems that everything that can be measured is a KPI, whether or not it is indeed a KEY measure of performance.
It is impossible to consider performance measurement without imbibing the fundamental truth that measuring performance does not equate to managing performance!
A performance dashboard should reflect how well we are performing against the key goals we are targeting. So it is imperative that the starting point is the Procurement function’s objectives.
For effectiveness, those objectives must be aligned to the corporate priorities.
They should also imbibe a degree of balance, considering the multifarious nature of “performance” and the differing stakeholder groups Procurement seeks to serve, e.g., it may be appropriate and sensible to cover performance dimensions like “people” or employees, internal customers, financial, and operations.
Not all functional objectives will reflect what stakeholders want, or what was agreed with internal customers, or what the board demands—some may simply be “the right things to do” to maintain or build long-term functional capability, e.g., an objective to “Increase functional talent” (measurable via a KPI like “Percentage aggregate competency rating versus ideal profile”).
Irrespective of the defined objectives of the Procurement function, great functional performance is only ever achieved when you attain great performance from:
- Individuals in the function
- Suppliers, and
- Specific projects or initiatives run by Procurement.
These 3 core areas form the “engine rooms” of Procurement performance. And Procurement functional objectives must be further disaggregated down to these levels.
Hence, in considering a Procurement performance dashboard, it is crucial to start with the pre-defined functional goals. But if those objectives don’t incorporate an effective blend of critical performance dimensions, the dashboard will really be of limited value.
A robust, well-structured performance dashboard is a key element of driving Procurement effectiveness. But setting sensible functional objectives up-front is even more vital for success.
