Task: Identify Business Goals and KPIs
This task describes a combined approach (top-down and bottom-up) for identifying business goals and associated Key Performance Indicators.
Disciplines: Business Modeling
  • To identify goals with which the business can be planned and managed using KPIs
  • To ensure alignment between long-term strategic goals and short-term operational goals.
  • To translate the business strategy into action.
  • To provide a basis for measuring and improving the activities of the business.
Main Description

Neither an exclusively top-down approach nor an exclusively bottom-up approach is sufficient for identifying business goals. It is necessary to investigate and synchronize business goals from both perspectives. A combined approach such as the one described here facilitates understanding and helps align the strategic, tactical, and operational levels of the organization.

Analyze Competitive Positioning

The purpose of this step is to determine the current and desired competitive positioning.  The business goals to be defined in the next step will lead the organization to the desired situation. A number of techniques are applicable here-for example, a Strengths, Weakness, Opportunities, and Threats (SWOT) analysis or Porter's competitive analysis [POR98].

Without a clear and well-communicated business strategy, realistic business goals cannot be set, and alignment between business goals, processes, and strategy cannot be guaranteed.

Define Business Goals

The purpose of this step is to define what needs to be achieved in order for the organization to reach the desired competitive position identified in the previous step. Be sure to focus on what will give the organization a competitive advantage, because only this is strategic, as described in Guideline: Business Goal

Describe KPIs and Metrics

Once an enterprise has analyzed its mission and defined its goals, it needs a way to measure progress toward those goals. Many things contribute to organization's success. Those that are key contributors such as Key Performance Indicators (KPIs), also known as Key Success Indicators (KSIs) or Key Business Indicators (KBIs), are used by businesses to define and measure progress toward their goals. In SOMA, KPIs represent quantifiable measurable objectives, agreed to beforehand, that reflect the critical success factors of an organization.

KPIs differ depending on an industry and an organization. A sales organization may have as one of their KPIs the percentage of its sales that comes from return customers. A Customer Service Organization may have a KPI that measures a number of customer calls answered in under a minute. To determine if the objectives associated with a KPI are being met, the KPI may need to be broken down into one or more metrics, which identify specific measurements to collect for analysis (e.g. time to close an average sale deal).

The purpose of this step is to define how the Business Goal will be measured by identifying at least one KPI and hopefully the corresponding metrics for each goal and sub-goal. If you can find a quantitative measure to assess whether or not the business goal has been achieved, the business goal probably can be related to business activities. KPIs will provide the business with a measure of success of meeting its goals and sub-goals.  For example, for a goal of "increase revenue", a KPI could be "increase revenue by 5% during the next fiscal year" - this provides a specific way to determine if the goal has been met. Metrics identify the type of measurements that need to be collected to assess the state of the KPIs.  For a example KPI above, a metric could be "record the revenue from all revenue generating transactions".

Try to quantify the expected outcome and record this in the change value and change kind properties of the business goal. Because people often set more ambitious goals for themselves than others would, it is useful to discuss the upper and lower boundaries with those responsible for achieving the business goal. Employees need to feel that there is enough challenge in their work, but they also like to be able to give themselves an occasional pat on the back.

As described in the Guideline: Business Goal the relationship between Business Goals, KPIs and Metrics can be seen in the following diagram.

If the measure is qualitative or subjective, the business goal may need to be translated to more measurable, sub-goals. In this case, the sub-goals are identified by considering how the higher-level goal will be measured. It is important that all leaf-level goals have identified KPIs. Achievement of some or all of the sub-goals should result in achievement of the higher-level goal. If a business goal has been assigned a date by which it should be achieved, it is sufficiently concrete to be called an objective. When determining the timeframe within which the goal is to be achieved, be ambitious yet realistic.

Structure Business Goals

The purpose of this step is to identify the relationships between higher level and lower level goals. This is the step that will actually produce a hierarchy of business goals. Some business goals are not concrete and measurable enough to allow you to find supporting business use cases. These are typically strategic goals that need to be defined at more concrete levels.

Business goals must be traced from higher level to lower level to produce a business-goal hierarchy.

In the daily operations of any enterprise, there are minor localized conflicts between scoring in the short-term and building up long-term company value. A business-goal hierarchy derived from the Business Vision ensures that the right tradeoffs are made between short-term financial goals and less immediate, yet more important, strategic goals.

Evaluate Your Results

The purpose of this step is to verify that the business strategy has been successfully translated into a set of management objectives for the organization. Review the business-goals hierarchy as well as the individual business goals to ensure that they form a complete and consistent whole. Make sure that the business goals have been translated to the business use cases so that the activities of the business are aligned with the desired competitive position of the organization.

Conduct a review session with management and stakeholders at different levels to ensure that the business goals support the strategy and that business goals at different levels are unambiguous, measurable, and realistic. For help with reviewing, see Checklist: Business Goal.

More Information