Nilukas Blog on Key Performance Indicators
Key Performance Indicators
A Key Performance
Indicator (KPI) is what?
Key
performance indicators (KPIs) are a collection of measurable metrics used for
evaluating the overall long-term performance of an organization. KPIs
specifically encourage the evaluation of a company's strategic, financial, and
operational achievements, especially as compared to those of competitors in the
same industry
Key
performance indicators, or KPIs, are measurable and quantifiable measurements
that are used to track advancement toward a specific goal or objective.
KPIs encourage data-driven decision-making, optimization of performance, and
the identification of shortcomings and opportunities for improvement.
And
it gives teams goals to strive for, benchmarks to evaluate progress, and
insights to aid in guiding decision-making across an organization.
Organizations can spot areas of strength and weakness, make better decisions
based on data, and take action to boost performance by tracking KPIs
Figure 1: Key Performance Indicator
Characteristics of
Effective KPIs:
In
an organization data-driven teams use KPIs to monitor business objectives and
take part in a cycle of continuous improvement, allowing them to become more
efficient over time.
Effective
KPIs should possess 7 characteristics to measure key drivers of business value.
1. Simple - A KPI must be simple to
understand and measurable, prompting decisions and allowing employees to take
initiative to affect the result. It should increase the operation's visibility of
performance.
2. Aligned - KPIs should flow from an
organization's strategic goals and Objectives to regular operations that have
an impact on them and should be aligned with all overall strategies.
3. Relevant - KPIs should be assigned
to the right decision-makers to ensure accuracy and realization.
4. Measurable - A KPI must be quantifiable
to measure both positive and negative deviations from a goal and should be
based on a specific objective.
5. Achievable - Setting realistic and achievable
KPIs is key to achieving overall progression.
6. Timely - KPIs must be generated
with objectives that workers consider they can achieve. Employees are more
inclined to achieve a KPI's goal if it is more realistic.
7. Visibility - Visibility of KPIs is
essential for successful KPIs, as it increases employee engagement and determines
a standard for accountability.
Figure 2 : KPI Characteristics
What is a KPI Report
A
KPI report is an accurate document that contains details about the key
performance indicators (KPI) that a business, division, team, or individual is
monitoring. KPI reports can be massive and detailed, depending on the amount of
data and gathered information that traces who the intended audience is. They
can be physical or digital reports, and some software programs can produce
interactive documents that let the reader learn more about each piece of data.
To learn more about performance data, leadership may give these reports to
divisions, or they may talk about it in staff meetings
Figure 3: KPI Report
How to Improve Performance Using KPI’s:
KPIs
are an important tool for collecting the information needed to control the
cycle of continuous improvement. So, it helps to provide insights into issues
or possibilities, plan steps to address, and take action to reflect improvements,
measure, and improve performance
Types of KPIs
Key
performance indicators can be used to measure the effectiveness of an
organization. Others are used to track long-term progress rather than monthly
progress toward a goal. The fact that each KPI is connected to a strategic goal
is the only thing that connects them all. Here is an overview of some of the
most common KPI types.
· Strategic
Strategic
KPIs measure organizational objectives, for example, the share of the market,
revenue, and return on investment, to measure progress.
·
Operational
KPIs
are on average more time-sensitive and focused on the effectiveness and
efficiency of organizational processes, for example, sales by region, and transportation
costs measure organizational processes.
·
Functional
Units
Numerous
KPIs have links to specific roles, like finance or IT. Finance KPIs track gross
profit margin or return on assets, whereas IT may track time to recovery or
average availability. These operational KPIs are also classified as strategic or
operational KPIs.
·
Leading
vs Lagging
Organizations
use both leading and lagging indicators to track key performance indicators, as
slow KPIs track what has already taken place, and leading KPIs facilitate
outcome prediction
Figure 5: Types of KPI’s & Structure
How do KPIs apply to the Human
Resource function?
Key
performance indicators (KPIs) are accurate measurements of an organization's
performance in essential areas of the organization that can be quantitatively
or qualitatively quantified. KPIs can differ by project, department, or
business; they can also be financial, nonfinancial, or both, and can be weighed
variously by each project, department, or business. KPIs are HR-related systems
of measurement that have been looked at to show a link to the organization's
long-term Organizational objectives or essential success factors. For instance,
a shorter time to fill a sales position not only helps with scheduling issues
but also increases the organization's revenue due to the proper staffing
levels. Another example of an HR KPI is the capacity of an organization to reduce
turnover rates
Figure 6: Human Resource KPI
Dashboard illustration
Conclusion
A key performance indicator, or KPI, is a measurable indicator of how well achieved over time for an individual goal. KPIs provide teams with goals to work toward, benchmarks to measure progress, and insights to help everyone in the organization make better decisions. KPIs can be used to measure an organization's effectiveness. Operational performance across the organization is intended to be calculated and observed by process KPIs.
References
Figure
1: Key Performance Indicator
Figure
2: KPI Characteristics
Figure 3:
KPI Report
Figure
4: Importance of KPIs
Figure
5: Types of KPI’s & Structure
Figure 6:
Human Resource KPI Dashboard illustration
Basically, I have conducted many KPI meatings in my previous company, but now its good to know 7 Charactoristics of KPI. I did not know earlier. Thank you so much for sharing. Conclusion was good Adding to that This Results of KPI leads to the Tallent management styles by getting the work done from less performanced staff. Nicelyt presented. Thank you for sharing such knowledge.
ReplyDeleteHi, thank you for sharing a good topic. KPIs are more important for a company to monitor its performance and to make the right decisions at the right time. Further, this could be used as a monitoring/motivational tool for the staff.
ReplyDeleteIn my previous experience, while going for ISO certification, I had to implement KPIs as well. Some of the challenges faced during the implementation are as follows:
01. Selecting the KPI to fulfill the needs.
02. No of KPI to be set. This can not be few or too much
03. Staff acceptance to follow the KPI
SMART is a requirement for a key performance indicator. In other terms, we can say SMART for the seven characteristics.
ReplyDeleteS-Simple
M-Measurable
A-Attainable
R-Realistic
T-Time bound.
Many companies provide KPIs for each department.
KPI is important to measure the performance for individual employees. Its also designed to measure the impact the company's training and development program has on employees.
ReplyDeleteKPI is giving us where we are at present and guide us to improve lagging areas .Therefore it is vital to get update in KPI,s content well explained.
ReplyDelete