I was reminded of Neal Williams' Balanced Nine Step Process the other day:
1. Define your strategic objectives
- eg: 5% profitable revenue growth
2. Create questions aligned with objectives
- eg: what % of sales are from new products/services?
- eg: what % of sales include cross-selling initiatives?
3. Write English descriptions of KPIs
- eg: Sales Productivity by Product
4. Assign targets, goals, and benchmarks
- benchmarks can be internal (ie: vs. last year) and external (vs. industry)
5. Diagram the navigation paths
6. Determine if KPIs are drivers or outcome metrics
7. Check the availability and condition of data
8. Check for compliance and balance
- compliance with company standards and definitions
- balance of leading/lagging and financial/operational/non-financial
9. Assign owners and users
For more, see Wayne Eckerson's article, "How to Create and Deploy Effective Metrics"