KEY PERFORMANCE INDICATORS
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1 KEY PERFORMANCE INDICATORS Measure your performance against key business objectives. KPI stands for key performance indicators. Every business or industry needs to evaluate its success at reaching targets and track whether it has accomplished its goals and objectives. A key performance is a measurable value that demonstrates just this. Each KPI has its own set of measurement criteria it must meet which will determine an accomplishment or a failure. Key performance indicators will also vary from industry to industry or business to business. It is also very easy to get drowned in too much information and this may result in you not being able to identify the correct path forward to follow, it is therefore vital that a business has a set strategy and has a full understanding of its goals and objectives to achieve and exceed targets and expectations. What makes a KPI effective? A KPI is only as valuable as the action it inspires a business or industry to take. In many cases organisation s will blindly adopt industry-recognized KPIs and then wonder why that KPI doesn't reflect their own business and therefore fails to bring a positive outcome. In reality one of the most important aspects of KPIs is that they are a form of communication. If they abide by the same rules and best practices of any other form of communication they should be clear and relevant and as such the message will be absorbed more positively and therefore acted upon.
2 In terms of developing a strategy for formulating KPIs, your team should start with the basics and understand what your business goals and objectives are, how you plan on achieving them, and who can act on this information. This should be a repetitive process to identify the correct formula and should involve feedback from analysts, department heads and managers. As this fact finding mission unfolds, you will gain a better understanding of which business processes need to be measured with KPIs and with whom that information should be shared. BE SMART ABOUT YOUR KPIS Let s look at the LETTERS as one way to evaluate the relevance of a KPI SMART meaning SPECIFIC, MEASUIRABLE, ATTAINABLE, RELEVANT, TIME-BOUND. In other words: Is your objective Specific? Can you Measure progress towards that goal? Is the goal realistically Attainable? How Relevant is the goal to your business? What is the Time-frame for achieving this goal? To be even SMARTER with your KPI s evaluate and re-evaluate. If you follow these two steps you can ensure you are continually assessing your KPIs and their relevance to your business. For example, if you've exceeded your sales target for the current year, you should determine if that's because you set your goal too low or if that's attributable to some other factor.
3 Some Examples of KPI s Sales KPI s : Your competitive edge is a data-driven culture. You can provide your sales team with the KPI s and metrics they require to be ahead of any competition, increase sales and close more business. Measure your sales growth over multiple time periods. This will enable you to see monthly or quarterly, highs and lows in your revenue and assist you with future forecasts and targets. Measure and analyze your average order values. This KPI can be mixed with other KPI s and metrics and give you more of an understanding of your customer purchase behaviour patterns. A business may have one of its Key Performance Indicators as the percentage of its income that is generated from returning customers. A school may focus its Key Performance Indicators on the academic grades achieved by its pupils. A Customer Service Department may have one of its Key Performance Indicators : in line with overall company KPIs, percentage of customer calls answered in the first minute. A Key Performance Indicator for a social service organization might be number of clients assisted during the year. You may be serious about measuring your performance and consider KPI s as a valuable tool to manage your business performance, but if you do not have a robust process in place to develop these measures then there is a possibility you could be experiencing the following: Measures are not being used because no-one really sees them as relevant to your Business Success and key objectives. There are no clear links between your KPI measures and your Business Strategy? You may not have a good idea on how to measure your goals, especially those which are intangible and your basic qualitative goals.
4 ARE YOU MEASURING SOMETHING MEANINGFUL? Some businesses may not appreciate the value of a KPI and if this is the case they may be falling foul to a common human error and that is Lack of Communication. The truth is that KPIs are only as valuable as you make them. A good KPI requires time, effort and you need the employees to buy into them to make them successful. While KPIs may have fallen out favour, their potential value remains in the hands of those that use them. If people don t share a single, sharply focused, easily imaginable vision of a result they want to create, any effort to measure that result will waste time. And if you do successfully get some measures established, it s likely they just won t stimulate the excitement and motivation needed to make the result happen. SUMMARY In essence there are many different interpretations a business, industry or public service can measure its performance, but most importantly each goal or objective has to be measured to ensure it is successful and performing to a satisfactory level. Understand, research, strategically plan, share and communicate effectively to achieve successful KPI s.
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