Key Figure System
A key figure system is an ordered set of several metrics linked either logically or mathematically that together depict a situation more completely and make it controllable than any single metric could.
A key figure system is an ordered collection of several metrics that stand in a logical or mathematical relationship to one another and together depict a business situation comprehensively. Instead of looking at a single figure in isolation, a key figure system connects several measures so that causes, effects and interrelationships become visible – for example, how revenue, costs and capital employed condense into profitability. The goal is to produce a balanced, consistent overall picture that a company or a division can be steered by.
The decisive added value over a loose collection of metrics lies in the structure: a key figure system defines which metrics are relevant, how they relate to one another and to which top-level metric they are subordinate. This makes it possible not only to identify deviations but to trace them back to their root cause. Key figure systems are therefore a core tool of controlling and business intelligence and form the basis for dashboards, reporting and management decisions.
At a glance
- Key figure system = structured collection of several linked metrics
- The link is mathematical (e.g. DuPont) or logical (e.g. Balanced Scorecard)
- Depicts a situation more completely and more evenly than a single metric
- Enables root-cause analysis via drill-down from the top-level metric downward
- In mid-sized companies the data basis is usually the ERP system or a connected data warehouse
How a key figure system is built
A key figure system arranges metrics into a deliberate relationship. There is almost always a top-level metric that represents the overriding goal – often a profitability or performance measure – and beneath it several metrics that explain this apex. A flat list of figures thus becomes a hierarchy or a network in which each metric has its place and its meaning for the overall result.
Computational and ordering systems
Two basic types are distinguished. In a computational system the metrics are mathematically linked: the top-level metric can be broken down seamlessly into its components, and every subordinate metric is part of a formula. In an ordering system, by contrast, the metrics stand in a logical, not necessarily mathematical, relationship – they belong together thematically and complement one another without a fixed calculation relationship. Many practical systems combine both principles.
Top-level metric and value drivers
The logic of a key figure system often follows the question "What does success depend on?". The top-level metric is split into its value drivers, and these in turn into finer measures, until you arrive at metrics that can be influenced operationally. This creates a continuous path from the strategic target measure down to the concrete lever in day-to-day business – the prerequisite for tracing a deviation at the apex back to its root cause.
Well-known key figure systems
The oldest and best-known computational system is the DuPont model from 1919. It mathematically decomposes return on investment (ROI) into net profit margin and capital turnover, and these further into revenue, costs and capital measures. This makes it possible to read off precisely whether a falling profitability stems from the margin or from too high a capital base. Related systems such as the ZVEI key figure system or the RL key figure system pursue a similar, more finely differentiated approach.
On the ordering-system side, the Balanced Scorecard is the most prominent example. It complements the purely financial view with the customer, internal process, and learning and growth perspectives and links these to strategy via cause-and-effect chains. Whereas the DuPont model explains past financial results, the Balanced Scorecard aims to steer the factors that drive future success. The two approaches are not mutually exclusive but are frequently combined in practice.
Benefit: why a key figure system does more than single metrics
A single metric can be misleading. Rising revenue looks positive but may conceal a shrinking margin or a dangerously growing inventory. A key figure system guards against such false conclusions because it considers metrics in combination and makes goal conflicts visible: growth is read together with profitability, delivery speed together with tied-up capital.
The second major benefit is root-cause analysis. Because the metrics are linked in a structured way, a deviation at the apex can be traced by drill-down down to the responsible measure. This turns reporting from mere documentation into a steering instrument: you see not only that a target is being missed, but also why. The prerequisite, however, is consistently high data quality – a key figure system is only ever as reliable as the data that feeds it.
Key figure system in the ERP system
For mid-sized companies, the ERP system is the natural data basis of a key figure system, because orders, invoices, stock, purchases and master data all come together there. From this operational data, the subordinate metrics of a system – inventory turnover, contribution margin, order lead time, open items – can be derived directly and without manual collection work and condensed into the top-level metric.
Many ERP systems come with dashboards and reporting functions that present linked metrics in near real time. However, as soon as a key figure system draws on several sources – for example ERP, shop, marketplace and financial accounting – or requires long histories and complex aggregations, the data is usually transferred via an interface into a data warehouse and prepared there with BI or OLAP tools. In both cases, a uniform metric definition is decisive: only if all areas calculate a measure identically does the system remain consistent and comparable.
Distinction: key figure system, metric and KPI
A metric is a single, condensed measure; a KPI is a particularly steering-relevant metric that is tied to a goal. A key figure system is the level above: the ordered set of several metrics together with their relationships. It can contain both KPIs and explanatory secondary and auxiliary metrics and makes their interplay explicit.
Key figure system vs. dashboard
A dashboard is the visual presentation of metrics; a key figure system is the underlying content logic. A good dashboard depicts a key figure system – it shows the top-level metric and lets you drill down into the explanatory measures. Without a well-thought-out key figure system, however, a dashboard remains a pretty but arbitrary collection of figures with no inner coherence.
Example
Key figure system at a trading company
A mid-sized wholesaler wants to improve its return on capital and builds a key figure system on the DuPont principle. At the apex is the ROI, which splits into net profit margin and capital turnover. The net profit margin is further decomposed into revenue, cost of goods and operating costs, and the capital turnover into revenue and tied-up capital, of which inventory is the main component. All the measures come from the ERP system.
When the ROI falls in the quarter, the drill-down shows that the problem is not the margin but the capital turnover: inventory has risen sharply for several slow-moving items. Because the key figure system reveals the interrelationships, the company counteracts specifically via the planning of these items – instead of cutting costs across the board and thus tackling the wrong lever.
Frequently asked questions
Related services
Questions about Key Figure System in your ERP project?
We advise vendor-neutrally – and implement it ourselves on request.