KPI - Key Performance Indicators
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The document defines Key Performance Indicators (KPIs) and discusses their importance and use. KPIs are quantifiable measures that help companies gauge performance against strategic goals. They should be linked to objectives and track specific metrics over time. The document outlines different types of KPIs and provides examples. It also discusses best practices for identifying, designing, evaluating and using KPIs to improve performance.
KPI - Key Performance Indicators
- 2. 1.What is KPI • Definition of Key Performance Indicators (KPI) A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. That means measurement of performance against key business objectives. KPIs vary between companies and industries, depending on their priorities or performance criteria. Also referred to as "key success indicators (KSI)”.
- 3. 2. Objectives of KPI • Improve personnel’s understanding of Key Performance Indicators (KPIs). • Improve personnel’s awareness of maintenance performance.
- 4. • KPIs are directly linked to the overall goals of the company. • KPIs are measurements that define and track specific business goals and objectives. Figure: Business objectives determine Key Success Factors (KSFs) and tracked by KPIs. Business Objectives Key Success Factors (KSFs) Key Performance Indicators (KPIs)
- 5. • The larger or smaller organizational strategies require monitoring, improvement, and evaluation. • Once an organization has analyzed its mission, identified all its stakeholders, and defined its goals, it needs a way to measure progress toward those goals. • KPIs are utilized to track or measure actual performance against key success factors.
- 6. • Key Success Factors (KSFs) only change if there is a fundamental shift in business objectives. • Key Performance Indicators (KPIs) change as objectives are met, or management focus shifts.
- 7. 3. Why Use KPIs • Performance effectiveness. • For the accuracy, actual reflection of the process, efficacy in delivering the outcome. • The effects of a change can be monitored reliably, repeatedly and accurately by KPI.
- 8. • A KPI can be used to closely monitor the results of actions. • Detect potential problems and it can drive improvement. • It is reasonable to use the KPI as a tool to improve ongoing process performance.
- 9. 4. Uses of KPI • A key performance indicator (KPI) or performance indicator is used to measure the performance. • To make the decision making process easier. • Key Performance Indicators (KPIs) help organizations to understand how well they are performing in relation to their strategic goals and objectives.
- 10. • They are used by an organization to evaluate its success or the success of a particular activity in the organization. • To analyze the operational details of the organization. • It helps to focus on the facts clearly. • Key performance indicators are used periodically assess the performances of organizations, business units, and their division, departments and employees.
- 11. 5. How to design KPIs KPIs should be clearly linked to the strategy, i.e. the things that matter the most. KPIs have to provide the answers to our most important questions. KPIs should be primarily designed to empower employees and provide them with the relevant information to learn.
- 12. Figure: KPIs designing process Overall Business Strategy What is this business trying to accomplish? Goals, Objectives What are the short-term and long-term objectives to achieve the strategy? Key Business Drivers What are the important execution steps to meet the goals and objectives? Key Performance Indicators What measures of success are tied to the drivers? Supporting Metrics What bare the detailed measures that feed and augment the KPIs?
- 13. 6. Identifying the KPIs • Related to strategic aims. • Identify what makes the organization success or failures. • Controllable and accountable. • Qualitative and quantitative. • Long term and short term.
- 14. • Consider Stakeholder needs. • Identify important aspects. • Establish Company Goals and KPIs. • Select Performance Indicators and Metrics. • Set Targets and Track Performance.
- 15. 7. How Are KPIs Evaluated • A KPIs status and score are determined by comparing its actual value against the thresholds that you define. • The performance status of a KPI is represented by the status icon that you assign to each range.
- 16. 8. Advantages • Identifies everything that is easy to measure and count. • Visibility on performance and strategic goal • Agility in decision making • Efficient management • A team work on the basis of shared and measurable objectives. • KPI’s do not give answers, rather they raise questions and direct once attention.
- 17. • It helps to measure both the financial and operational goals of a company. • Improve operations. • Increase project flexibility. • Better job costing processes. • KPIs focus employees attention on the tasks and processes.
- 18. 9. Disadvantages • The KPI’s is intended to simply improve future results without reference to external parties and benchmarks. • In that case one must develop KPI’s which use existing data available to the organization. • Frequency of Data Collection. • Should be measured frequently.
- 19. • No connection with the external database. • Short-termist. • Backward looking. • Used to punish rather than to motivate and equip. • Too many measurements. • Limits are to be set by the company itself.
- 20. 10. Types of KPI 1. Process KPIs: Measure the efficiency or productivity of a business process. Examples - Days to deliver an order. 2. Input KPIs: Measure assets and resources invested in or used to generate business results. Examples - Dollars spent on research and development, Funding for employee training, Quality of raw materials.
- 21. 3. Output KPIs: Measure the financial and nonfinancial results of business activities. Examples - Revenues, Number of new customers acquired. 4. Leading KPI: Measure activities that have a significant effect on future performance. Drive the performance of the outcome measure, being predictor of success or failure.
- 22. 5. Lagging KPI: It is a type of indicator that reflect the success or failure after an event has been consumed. Such as most financial KPIs, measure the output of past activity. 6. Outcome KPI: Reflects overall results or impact of the business activity in terms of generated benefits, as a quantification of performance. Examples are - customer retention, brand awareness.
- 23. 7. Qualitative KPI: A descriptive characteristic, an opinion, a property or a trait. Example - Employee satisfaction through surveys which gives a qualitative report. 8. Quantitative KPI: A measurable characteristic, resulted by counting, adding, or averaging numbers. Quantitative data is most common in measurement and therefore forms the backbone of most KPIs. Example - Units per man-hour.
- 24. 11. Characteristics of a good KPI • KPI is always connected with the corporate goals. • A KPI are decided by the management. • They are the leading indicators of performance desired by the organization. • Easy to understand
- 25. 12. What is a SMART KPI? • Specific • Measurable • Achievable • Result-oriented or Relevant • Time-bound SMART Specific Measurable Achievable Result- oriented Time- bound
- 26. 13. KPIs for Human Resources (HR) Departments • Actual versus budgeted cost of hiring • Average number of training hours per employee • Average salary • Average length of service of all current employees • Employee satisfaction with training
- 27. 14. KPI for Marketing and Customer Service • Sales forecasts. • Transportation. • Return on Marketing Investment (ROMI) • Brand strength • Number of customer satisfaction
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