Key Performance Indicators (KPIs) help an organization define and measure progress toward organizational goals.
Do you have good KPIs defined? Are they ones that reflect your organization’s goals, ones that you can measure and that you can use as a performance management tool? If so, you can use them as a stick to improve performance but much more positively you can use them as a carrot.
KPIs give everyone in the organization a clear picture of what is important and what they need to make happen. You can use them to make sure that everything the people in your organization do is focused on meeting or exceeding your KPIs. Publicize them and post them everywhere: in the lift lobbies, on the walls of every conference room, on the company intranet and certainly on the company web site! Show what the target for each KPI is and the progress toward that target for each of them. Use them to get real engagement within the organization and across your supply chain.
But what are KPIs? Once an organization has analyzed its mission, identified all its stakeholders, defined its goals and agreed a set of ‘critical success factors, it needs a way to measure progress toward those goals. KPIs are those measurements. They should be quantifiable measurements, agreed to beforehand, that reflect the ‘critical success factors’ of the organization. They will differ depending on the organization. Some may be financial e.g. the percentage of turnover coming from a particular region, some may be transactional e. g. number of helpdesk calls answered in a fixed time. What matters is that they reflect the organization’s goals, they must be key to its success, and they must be SMART (Specific, Measurable, Achievable, Relevant and Time Bound) .
If a KPI is going to be of any value, there must be a way to accurately define and measure it. For example to be the lead organization in a particular sector sounds good but how do you really know when you get there. Not only must they be measurable but you must have systems in place to do the measuring – for example, if you are not prepared to invest in software to measure how quickly the phones are answered, don’t set that as a KPI!
Real value comes from staying with the same definition from year to year so that you can compare results over time and look at trends. You can use KPIs to set challenging targets e.g. year on year improvements. For example a 5% increase in sales is something employees can understand and take specific action to accomplish.
In selecting KPIs it is important to limit them to those factors that are essential to the organization reaching its goals. It is also important to keep the number of KPI’s small just to keep everyone’s attention focused on achieving the same KPIs. That is not to say, for instance, that a company will have only three or four KPIs in total. Rather there will be three or four Key Performance Indicators for the organization at corporate level and the business units within it may have three, four, or five KPIs that support the overall company goals and can be “rolled up” into them.
Selecting the right KPIs can be a key to ensuring your organization achieves real performance success. If you would like advice on selecting KPIs for your organization or if you would like assurance that your performance measures are working effectively, G&W Consulting can provide you with support
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