Key Performance Indicator (KPI)
What is a Key Performance Indicator (KPI) in performance management?
Organization Strategic, Financial, and operational
achievements can be determined through KPIs.
Metrics vs. KPI’s
The Metrics and KPIs are both
quantifiable measures of a particular strategic or tactical activity.
Metrics are more focused on
tactical activities and are set at specific points of business activity with
different views to evaluate how well the activities are performed.
KPI’s mainly focus on Strategic ‘key’ activities
and are set to track the achievements of business objectives.
A simple five-step process for implementing KPI’s as,
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Review business targets/objectives.
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Analyze existing performance.
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Set Targets (long term & short term).
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Target review.
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Progress review and readjust.
Reason for failure of KPI’s
1. No proper link: Not aligned with the company strategy. When not linked with the strategy, the time and money spent on collecting information go waste and may be more costly to the business.
2. Easy
Measuring: Some businesses set KPI’s based on the easiness of measuring performance
and gathering data, regardless of the importance to the business.
3. Walks
and moves: Measuring everything that walks, and moves may lead to too much information
and maybe useless to the business. Money, time, and attention could be used somewhere.
4. Following
others: KPIs might be set by looking at competitors / some other business for
the same information. However, KPIs will not then be depending on the company’s
strategy, but just doing what everyone is doing.
5. Linking
incentives to KPI’s: Incentives or bonuses linked to the KPI’s are more
dangerous since this will target individual benefits & not for the whole
organization and means of manipulation of KPI achievement could occur.
6. Noninvolvement of executives: Most senior executives are not involved in setting up the KPIs, but they are expected to achieve and follow up on the same. They should feel the ownership of the KPIs set, by having all the answers for the questions they may have.
(Marr, 2020)
Conclusion
·
Accurate and timely information should be
provided to the setting up a business strategy.
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Should be reviewed and edit if required.
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Should be simple but targeting the business
strategy.
References
Marr, B., 2020. The
10 Biggest Mistakes Companies Make With KPIs, London: Bernard Marr &
Co..
Twin, A., 2020. Key
Performance Indicators (KPIs). [Online]
Available at: https://www.investopedia.com/terms/k/kpi.asp
[Accessed 29 April 2021].
Walczak, M., 2014. What are Key Performance Indicators (KPIs) and Why You Should Use Them, Chicago: Domain experts on Sales, Marketing and Finance.
KPIs are often used to measure the performance of businesses. it can be used to track performance and improvement.
ReplyDeleteEx: of KPI in Human Resources Performance
Revenue per employee – An indicator of the productivity of the company’s workforce. ( Measures the amount of sales per employee, efficiency of utilization of HR)
Employee satisfaction index – Helps understand how satisfied employees of a department.
Salary competitiveness ratio – helps to gather data on competitor pay/ industry average pay and allows to compare with company’s own salary levels.
Human Capital ROI – Measure of return on capital invested as pay and benefits. (Source: https://einsights.com/key-performance-indicators-kpi/)
very good topic and interesting article since most of the employees within the organization are not aware about the KPI's of the organization.so I think Top management & Managers to need to make awareness programs on them based on their job description. KPI's also can be assign to compete with industry competitors too .I think KPI is really goods thing and it ultimately creates improvements in the business based on the performance.
ReplyDeleteGood article. When developing strategies to formulate KPI an organization need to know what are the organizational objectives, how to plan to achieve them, and who is going to act on this information. T evaluate KPI, the SMART criteria can be used. It includes specific objective, measuring the progress towards the goal, realty of the goal, relevancy of the goal and the time frame to achieve the goal.
ReplyDeleteGood article. When developing strategies to formulate KPI an organization need to know what are the organizational objectives, how to plan to achieve them, and who is going to act on this information. T evaluate KPI, the SMART criteria can be used. It includes specific objective, measuring the progress towards the goal, realty of the goal, relevancy of the goal and the time frame to achieve the goal.
ReplyDeleteKPI is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs to evaluate their success at reaching targets.
ReplyDeletetoo 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.
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.
Good topic. There are advantages as well as disadvantages of KPI. An organization can easily measure the progress of its goals and understand which part of the task needs more focus. And KPI helps everyone stay aligned to the goals. Further KPI assists employees to track their performance and improve themselves.
ReplyDeleteDue to getting results for short-term goals, employees may lose focus on the quality of work. As the goals are more result-oriented, it discourages employees to implement innovative approaches. And KPIs get difficult to track the quality of work and in return might affect the loyalty between the organization and the client.
KPIs) refer to a set of quantifiable measurements used to gauge a company’s overall long-term performance. KPIs specifically help determine a company's strategic, financial, and operational achievements, especially compared to those of other businesses within the same sector.
ReplyDeleteKey Performance Indicators are the critical indicators of progress toward an intended result. KPIs provides a focus for strategic and operational improvement, create an analytical basis for decision making and help focus attention on what matters most.
ReplyDeleteKPIs are simply metrics you choose to measure whether or not your business is attaining its core objectives. Since attaining core business objectives is not ‘obsolete’ neither are KPIs. Core business objectives need to be chosen well. These are the precursors to the KPI. To be effective measures, KPIs need to be chosen well. A poorly chosen KPI is like a GPS that doesn’t function properly. It’s possible to choose poor objectives and poor KPIs.
ReplyDelete