KPI: Key Performance Indicator

Key Performance Indicator (KPI) is a metric of performance measurement that helps an organization to measure how its employees/processes or brand at large are performing. Thus KPI is a business metric that basically indicates how effectively an organization is achieving key business objectives, i.e., whether the desired outcome is attained or not. KPI benchmarks vary from company to company, and even it varies from one department to another of the same organization.

 KPI works as a compass for a business just like how navigation tools help a ship crew and caption to understand that whether they are in the planned sailing route or not. This is how KPIs enable employees of an organization to get a clear picture of the current magnitude of performance and whether there is any area of improvement required. A well-designed Key Performance Indicator (KPI) ultimately can be used as a decision-making kit as it summarizes the complex nature of business performance to a manageable number of key indicators. Some of the major criteria a company should keep in mind while designing effective KPIs are:

  • It should be well -defined and should be presentable in quantifiable data
  • KPIs should be cascaded throughout each department of the organization
  • Should be applicable through each Line of Business(LOB) or department

What makes KPI effective?

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. Concise, clear, and relevant information is much more likely to be absorbed and acted upon.

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.

 A company should conduct extensive research before determining the criteria of its KPIs based on its own output capacity and industry standards. Once the appropriate KPIs are fixed according to business requirement and fulfilled successfully, it will help a business to gain the edge over its market competitors.

Evolve process KPI to meet the ever-expanding business needs

KPIs that never get updated can quickly become obsolete. You may think, based on your results, that you are continuing to perform at a high level. In reality, though, you may be tracking KPIs that fail to capture the impact your efforts are having on underlying strategic goals. Reviewing your KPIs on a monthly or, ideally, a weekly basis will give you a chance to fine-tune – or change course entirely. You might even find new and possibly more efficient ways of getting to the same destination.

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