Using Key Performance Indicators
From measurement to management
| Date: | May 2005 |
| Author: | Peter Ellis |
Asset managers are coming under pressure on three fronts to formalise their approach to business management: Sarbanes-Oxley, Basel II, and the need of clients and consultants for an independent assessment of operational competence. The most effective way for a manager to prove its operational division works well, is through key performance indicators (KPIs), which measure the level of achievement of different departments and processes.
Asset managers rarely use KPIs properly - a systematic approach isn't applied. It is thought that there are too many KPIs and it's too hard to get consensus agreement on a smaller set.
Therefore, this paper identifies 48 key performance measures (KPMs) that could be used as an industry-standard, allowing managers to overcome the problems associated with KPIs. These KPMs are divided into five categories:
- Investment Accounting
- Client Servicing
- Fund Services
- Market Operations
- Performance Services
By creating a standard set of measures across the asset management industry, this report allows managers to assess internal business processes and assess third party administrators (TPAs) in outsourcing selections. The report is an ideal tool for senior business managers to assess those business functions that are performing well, and which are performing poorly.
Table of contents
| Management Summary | 3 | |||
| 1.0 | Introduction | 5 | ||
| 1.1 | Methodology | 6 | ||
| 1.2 | Terms and acronyms | 7 | ||
| 2.0 | An Introduction to KPIs | 9 | ||
| 2.1 | KPIs - the basics | 10 | ||
| 2.2 | The problem with KPIs | 12 | ||
| 2.3 | KPIs in business management | 13 | ||
| 3.0 | KPIs in Investment Management | 15 | ||
| 3.1 | An overview of investment management KPIs | 16 | ||
| 3.2 | Drivers for an industry-standard set of KPIs | 21 | ||
| 3.3 | An industry-standard approach to KPIs | 24 | ||
| 3.4 | Operational benchmarking using KPMs | 27 | ||
| 4.0 | KPIs in Outsourcing | 29 | ||
| 4.1 | The two levels of outsourcing | 30 | ||
| 4.2 | SLAs for outsourcing | 32 | ||
| 4.3 | Using KPIs in SLAs for outsourcing | 34 | ||
| 5.0 | A Structured Framework for KPIs | 37 | ||
| 5.1 | The need to formalise business management | 38 | ||
| 5.2 | A framework for investment management | 40 | ||
| 5.3 | Defining KPIs | 43 | ||
| 5.4 | KPMs | 44 | ||
| 5.5 | LAIs | 46 | ||
| 5.6 | Going beyond the structured framework | 48 | ||
| 5.7 | KPI management | 49 | ||
| 6.0 | Conclusions | 53 | ||
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