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    Key Performance Indicators

    Uploaded by

    Kristine Goyala

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    Key Performance Indicators

    Uploaded by

    Kristine Goyala
    291 views2 pages

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    Key Performance Indicators.docx

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    291 views2 pages

    Key Performance Indicators

    Uploaded by

    Kristine Goyala

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Key Performance Indicators – Definition

    A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a
    company is achieving key business objectives. Organizations use key performance indicators 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 or
    employees in departments such as sales, marketing or a call center.

    What makes a KPI effective?


    Now that we know KPI stands for key performance indicator it is only as valuable as the
    action it inspires. Too often, organizations blindly adopt industry-recognized KPIs and then
    wonder why that KPI doesn't reflect their own business and fails to affect any positive change.
    One of the most important, but often overlooked, aspects of KPIs is that they are a form of
    communication. As such, they abide by the same rules and best-practices as any other form of
    communication. Succinct, clear and relevant information is much more likely to be absorbed and
    acted upon. KPIs are an effective tool to help build better performing teams.

    In terms of developing a strategy for formulating KPIs, your team should start with the basics
    and understand what your organizational objectives are, how you plan on achieving them, and
    who can act on this information. This should be an iterative process that involves 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 a KPI dashboard and
    with whom that information should be shared.

    What is a SMART KPI?

    One way to evaluate the relevance of a performance indicator is to use the SMART criteria. The
    letters are typically taken to stand for Specific, Measurable, 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 organization?
     What is the Time-frame for achieving this goal?

    How to define a KPI

    Defining key performance indicators can be tricky business. The operative word in KPI is “key”
    because every KPI should related to a specific business outcome with a performance measure.
    KPIs are often confused with business metrics. Although often used in the same spirit, KPIs need
    to be defined according to critical or core business objectives. Follow these steps when defining
    a KPI:

     What is your desired outcome?


     Why does this outcome matter?
     How are you going to measure progress?
     How can you influence the outcome?
     Who is responsible for the business outcome?
     How will you know you’ve achieved your outcome?
     How often will you review progress towards the outcome?

    As an example, let’s say your objective is to increase sales revenue this year. You’re going to
    call this your Sales Growth KPI. Here’s how you might define the KPI:

     To increase sales revenue by 20% this year


     Achieving this target will allow the business to become profitable
     Progress will be measured as an increase in revenue measured in dollars spent
     By hiring additional sales staff, by promoting existing customers to buy more product
     The Chief Sales Officer is responsible for this metric
     Revenue will have increased by 20% this year
     Will be reviewed on a monthly basis

    Being even SMARTER about your KPIs

    The SMART criteria can also be expanded to be SMARTER with the addition of evaluate and
    reevaluate. These two steps are extremely important, as they ensure you continually assess your
    KPIs and their relevance to your business. For example, if you've exceeded your revenue 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.

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