Is there a single KPI for the entire organization? Possibly, two metrics qualify as good KPIs.
1. Net Profit = Total Income minus all Expenses. This is a Dollar number and ignores the scale. It can be measured with a target like an EPS target or a profit target. But this measures fails as a comparison metric. So the correct format will be Return on Investment. I believe this is highlighted in APICS CSCP courses. Remember Dupont Analysis.
1. OTIF – This is a noble measure as well. Most supply chains should strive to provide the required service level to keep customers happy. But service levels cost money – real money in fact plenty of dollars. So this has to be balanced against the cost of providing the service ==> inventory costs, expediting costs, reserve capacity costs. One can provide OTIF if they have an unlimited cost budget.
So this OTIF does not qualify as an organizational measure unless measured against cost. So we have the problem of “no denominator” here. No corporate management will like an OTIF level at a very high execution cost. You can lose your shirt and go out of business. Even Charitable organizations should have an OTIF measured against execution cost.
I generally believe there should be two metrics for every function. See my other entries on this blog and the www.demandplanning.net web pages.
Going back to single KPI for the entire organization, that may still be possible if we look at Corporate Finance literature………
Even ROI does not qualify as that single measure. Finance literature says that ROI is not adjusted for firm risk. For example, you can borrow a lot of money and invest. This will increase your firm risk.
At least according to the Noble laureates in Finance, the single best measure for a company is its stock price. The goal of a CEO is to maximize stockholder value.
Perhaps that sounds too capitalistic, but that is one reason most middle management to upper management gets rewarded with stock options. Perhaps everyone in the organization should be rewarded with some stock options.
