Measurement frequencies and periods

One of the most commonly asked questions that we get at KPI Library is about Measurement Frequencies and Measurement Periods. Let me start by explaining the difference:

Measurement Frequency: How often can we measure?
Measurement Periods: Over what period should we measure?

Measurement Frequency
For some people the performance management dream is to measure on a daily basis. However in most cases daily measurements are simply not viable. For example: the finance department crunches the numbers once a month, and the sales department produces new forecast at the end of the week.

In general: The more frequent you measure, the faster you can respond to measurement outcomes, but you should only measure if your data quality is stable enough to identify representative trends.

Measurement Periods
Daily measurements are very helpful in trying to improve the performance culture of your organization.
But problem with daily updates of performance reports however is that daily trends tend to be very volatile and improvement projects take weeks or months before they become visible in daily measurements. So the risks is exist that with daily measurements, your employees can become short-term focussed, reactive “day-traders”.

There are some good practices to overcome this problem.

The solution lies in picking the right period to report over.
Below are some of our experiences setting the right measurement periods for your key performance indicator.

We define three types of periods:
1. Closed periods
2. Open periods
3. Moving periods

Closed periods
Closed periods are always after the fact. Results of last year, last quarter, last month or last week. The period has ended and you are reporting over this period in comparison to earlier periods. (This quarter vs last quarter or vs 4 quarters ago.)

Closed periods are often used for financial reporting and reporting to shareholders.

Open periods
The most known “Open period” is the Year To Date (YTD). Often used for end of year targets: revenue to date, cost to date and for instance IT outsourcing contracts often have there SLAs with annual targets such as: “Accepted minutes of downtime”.

Open periods are easy to understand for the end-users but not the best structure for analysis with earlier periods.

Moving periods
The most known moving periods are “Last 30 days, Last 90 days”. Moving periods are very handy since they allow for high measurement frequencies (daily), without focussing on “small measurement periods”. As a result they provide a good trend, are less volatile, prevent ’day-trading" but do provide the advantage of daily measurements that allow you to build a performance culture.

Moving periods are also more future oriented then closed and open periods. If your moving period trend is positive, then this could be a strong indication for future results.

At Mirror42 we use a lot of “moving periods”. Every day we measure: “Number of new KPI Library members in the last 30 days”, “Number of new KPI Dashboard customers in the last 30 days”, “Number of cancellations in the last 30 days”. With these numbers we calculate our Acquisition, Conversion, Retention and Customer Growth ratio’s. If the trend of these ratios is upwards, our financial results will move upwards in the months to come.

Summary
Some indicators can be measured more frequent then others. Setting the right measurement frequency for your indicators highly depends on how often accurate measurement results are available. If you have indicators with daily accurate measurements then moving periods are a good way to monitor those indicators. Moving periods contribute in building a performance culture, prevent “day-trading” and are future oriented.