Key performance indicators: Are they worth it?

Abstract

Key performance indicators (KPIs) and the red-headed stepchild, dashboards, are the current bright shiny objects of the real estate industry. The unusual nature of real estate — all the variables, everything negotiable, lead times and lag times, and a vocabulary that does not relate to the balance of the business — contributes to a mystical quality of the profession that is understood only by those who are fully engaged. But the profession needs to be able to communicate with the rest of management in its companies and needs to engage with their business demands, understand their needs and be able to anticipate what will be required. The current tools of choice to help with this communication are KPIs and the purpose of this paper is to add a perspective to the content necessary for cred­ible tools that can inform the broader audience within companies and raise awareness of the challenges involved in creating useful results. It begins with the contrarian view that raises the question: ‘Is it really worth it?’, because KPIs are rife with challenges and opportunities to find fault. The paper then goes into a discussion of the role of data because data integrity is essential to the credibility of the indicators. Many have experienced the executive who looks at a sheet of numbers and sees one that he knows is not correct because: ‘I only have four open rec's not five’, or ‘26 people in Minneapolis, not 27’, and he then has prejudiced the entire presentation. This is followed by observations that indicate the metrics — ie the measurables — are changing. The fundamental rules of occupancy are being challenged by the way in which people are beginning to occupy space and, while there are no clear solutions, the issue needs to be addressed. The paper concludes with an approach to what the author believes are good KPIs. Some boundaries and some parameters are drawn, and the paper considers how to prepare KPIs in a way that will result in not only good communication but also consistency moving forward.