University Of Liberal Arts Bangladesh (ULAB)

Assignment On
KEY PERPOMANCE INDECATOR (KPI)

Submitted By
Name ID
Mushfika Afrin 163051053
Mahadi Mushrur Ahmed 163051058
Afroza Happy 163051059
Nurun Nahar Shirat 162051015

Submitted To
Parveen S.Huda

Submission Date
8th December 2017
  Definition of KPI
A Key Performance Indicator is a measurable value that demonstrates how effectively a
company is achieving key business objectives. Organizations use KPIs at multiple levels to
evaluate their success at reaching targets. High-level KPIs may focus on the overall performance
of the enterprise, while low-level KPIs may focus on processes in departments such as sales,
marketing or a call center.

Key performance indicators measure the quality of an organization’s performance and assist in
developing performance goals and strategies. In many cases, key performance indicators are
posed as questions that need to be answered, and the answers provide the indications of
organizational performance and strategic development. While developing key performance
indicators might seem like a challenging task, it is an essential one for a company that plans to
succeed. What is more, developing key performance indicators takes time but is not necessarily
difficult; it requires largely the ability to bridge the gap between goals and results.

 Objectives Of KPI:

 Improve personnel’s awareness of maintenance performance

 Measurements that define and track specific business goals and objectives
 Analyze the operational details of the organization
 Helps to focus on the facts clearly
 For the accuracy, actual reflection of the process, efficacy in delivering the
outcome
 Detect potential problems and it can drive improvement

 Type Of KPI:
Understanding the different types of KPIs can help teams to design a well-rounded
evaluation system that boosts profits and improves business processes.
 1. Quantitative Indicators
Quantitative indicators are the most straight-forward of KPIs. In short, they are measured solely
by a number. Examples of quantitative measurements include measurements of time, dollars and
cents, and weight.
There are two types of quantitative indicators –
i. Continuous and
ii. Discrete.

i)Continuous quantitative indicators can take any value (including decimals) over a range.
ii)Discrete quantitative measures include things like complaints, accidents, and rating scales.

2. Qualitative Indicators
Qualitative indicators are not measured by numbers. Typically, a qualitative KPI is a
characteristic of a process or business decision. Examples of qualitative KPIs include opinions,
properties, and traits. A common qualitative indicator that organizations regularly use would be
an employee satisfaction survey. While some of the survey data would be considered
quantitative, the measures themselves are based on the opinion of a person. Qualitative focuses
more on the “why” as opposed to the “how.”

3. Leading Indicators
Leading indicator is a type of indicator that reflect the success or failure after an even has been
consumed. Such as most financial KPIs, measure the output of past activity.

4. Lagging Indicators
Lagging indicators are used to measure results at the end of a time period to reflect upon the
success or failure of an initiative. Often, they are used to gauge historical performance. Some
examples of lagging indicators include total customer contacts or total incidents. Lagging
indicators give businesses the ability to evaluate the effectiveness of their business decisions and
determine whether their business decisions facilitated the desired outcome.
5. Input Indicators
Input indicators are used to measure resources used during a business process. Some examples of
input indicators include staff time, cash on hand, or equipment. Input indicators are necessary for
tracking resource efficiency in large projects with a lot of moving parts, but are also useful in
projects of all sizes.
 6. Process Indicators
Process indicators are used specifically to gauge the efficiency of a process and facilitate helpful
changes. A very common process indicator for support teams are KPIs focused around customer
support tickets. Tickets resolved, tickets opened, and average resolution times are all process
indicators that shed light on the customer support process. In this example, that data can be used
to influence changes in the support process to improve performance.
7. Output Indicators
Output indicators measure the success or failure of a process or business activity. Output
indicators are one of the most used KPI-types. Examples of output KPIs include revenues,
profits, or new customers acquired.
8. Outcome Indicators
It reflects overall results or impact of the business activity in terms of generated benefits, as a
quantification of performance. Example are customer retention, brand awareness.

 Characteristics of a Good KPI

KPI characteristics include the following.

 KPIs are non-financial measures

KPIs are not expressed in monetary figures. When you put a pound sign to a measure you have
not dug deep enough. Sales made yesterday will be a result of sales calls made previously to
existing and prospective customers, advertising, amount of contact with the key customers,
product reliability, etc.

Any sales indicators expressed in monetary terms are result indicators.

In many organizations, a KPI may rest with certain activities undertaken with your key
customers, who often generate most, if not all, of your profit.

 KPIs are measured frequently

KPIs should be monitored and reported 24/7, daily, and a few, perhaps, weekly. A KPI can't be
measured monthly as this is shutting the stable door well after the horse has bolted.

KPIs are current or future measures, as opposed to past measures. Most organisational measures
are past indicators, measuring events of the last month or quarter. These indicators cannot be and
never were KPIs. That is why a satisfaction percentage (e.g. 65%) from a customer satisfaction
survey performed every six months can never be a KPI.

 KPIs are acted upon by the CEO and senior management

All good KPIs that make a difference should have the CEO's constant attention, with daily calls
to the relevant staff. Having a potentially career-limiting discussion with the CEO is not
something staff want to repeat.

 KPIs are understood by staff

A KPI should make clear what action is needed. In the case of an airline that was having a
problem with late planes, a KPI communicated immediately to all staff that there needed to be a
focus on recovering the lost time. Cleaners, caterers, ground crew, flight attendants and liaison
officers with traffic controllers would all work some magic to save "a minute here and a minute
there" while maintaining or improving service standards.

 KPIs are the responsibility of individuals

A KPI is deep enough within an organization to be tied down to an individual. In other words,
the CEO can ring someone and ask "why?" Return on capital employed has never been a KPI as
it cannot be tied down to a manager; it is a result of many activities under different managers.

Can you imagine the reaction if a general manager was told one morning by the CEO: "John, I
want you to increase the return on capital employed today"?

 KPIs have a significant effect on the organization

A KPI will affect most of the critical success factors (CSFs) and more than one balanced
scorecard perspective. In other words, when the CEO focuses on the KPI and the staff follows,
the organization scores goals in all directions.

 KPIs have a positive effect on other measures

A KPI has a flow-on effect on other performance measures. Reducing late planes would improve
performance measures around improved service by ground staff as there is less "firefighting" to
distract them from a quality and caring customer contact.

 KPI Selection Process

Key performance objectives for employees should be measurable. For example, the employee
must achieve a sales goal in terms of dollar amounts or new customers. Objectives should be
based on a timeline. The employee might be required to achieve the objectives in three months,
six months, or before the next performance review. Objectives should be attainable and
realistic. Expecting an employee to achieve a billion dollars in sales within 60 days is
unrealistic. Finally, key performance objectives should be clearly worded using action words.
For example, the employee will achieve customer satisfaction with a complaint rate of less than
five percent.
  Problem Of KPIs
 Sometimes KPI is not related or relevant to the work being performed.
 Sometimes rate of change in the KPI is too slow to produce a result that is actionable.
 Turnaround time for actions needed to correct low performing KPIs takes too long.
 Loosely monitored by front line managers as opposed to being shared with the team as a
whole .
 Too many KPIs lead to confusion and ‘noise’ .

 Example Of KPI
KPI Table for HR Manager
No. Key Result Key Performance Indicators Weight Target Actual Score Total
Areas of KPIs Score

1. Recruitment Average lead time to recruit employees 15 60 calendar 70days 86 13

days
Performance score of new employees 15 80 82 103 15
within 6months
2. Training and Training hours per employee/Year 10 40hours/year 37hours 93 9
development
% difference in the rate of productive 10 50% 67% 134 13
before and after training(for selected
training programs)
3. Performance % of employees that fully execute their 10 90% 80% 89 9
and career individual development plan
Management
% of employees that participate in 15 90% 74% 82 12
career coaching program
4. Employee % of employees that leave the 15 2% 2,30% 87 13
Retention and organization in a given time period
productivity
Profit Per employee 10 USD 2 Mio USD 95 10
1,9 Mio
  Conclusion
KPIs are communications vehicles. They enable top executives to communicate the mission and focus of t
he organization and grab the attention of employees. When KPIs cascade throughout an
organization, they ensure everyone at every level is marching together in the right direction to deliver the
most value to the organization as a whole.

Reference

https://www.klipfolio.com/resources/kpi-examples

https://www.klipfolio.com/resources/articles/what-is-a-key-performance-indicator

https://www.thebalance.com/key-performance-indicators-2275156

http://slideplayer.com/slide/6530622/

http://www.gerke.com/documents/ten_characteristics_of_a_good_kpi_pd_dw.pdf

http://smallbusiness.chron.com/advantages-key-performance-indicators-construction-76432.html

http://www.dashboardinsight.com/articles/digital-dashboards/fundamentals/the-benefits-of-key-
performance-indicators-to-businesses.aspx