A best practice set of KPI need to be holistically integrated into the organization model. This involves looking at three crucial characteristics—formalization, integration, and utilization . Formalization deals with the questions:
• What will be measured?
• How will it be measured?
As performance measurement is not an isolated system, best practice KPI must be developed from the integration between various areas of the business and deploying the business objectives throughout the organization (tied inherently into the organization model). The best practice KPI must integrate with the accounting system, the operation (planning and control) system and the strategic planning. Best practice KPI is therefore unique in the context of a particular organization. You cannot copy the best practice KPI but you can learn about the process of developing the KPI.
The third characteristics deal with the purpose of doing the KPI—utilization. There are basically two reasons: to compare with the competitors and to check the accomplishment of the organization’s objectives. The idea is to comply, to check, and to challenge in the market.