In this column and in subsequent months, we will discuss the important role of KPIs in the performance management process, provide guidelines for choosing the most appropriate and meaningful KPIs, and leverage Six Sigma techniques to facilitate KPI development and prioritization. A key performance indicator (KPI) is a business metric used to evaluate factors that are crucial to the success of an organization. KPIs differ per organization; business KPIs may be net revenue or a customer metric, while government might consider unemployment rates.
HPIs Definitions KPIs are applied in business intelligence (BI) to gauge business trends and advise tactical courses of action. Before KPIs can be identified, the following requirements must be met: A predefined organizational process. Clear business objectives for the process. Quantitative and qualitative measurements. An active approach to finding and remedying enterprise variances. KPIs are above all else, a set of indicators to measure data against, a sort-of enterprise success gauge.
Ultimately, they help an organization assess progress toward declared goals. Indicators include quantitative metrics such as process tracking and progress measurement. What is a KPI? Wikipedia states that “KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged. Sometimes success is defined in terms of making progress toward strategic goals, but often, success is simply the repeated achievement of some level of operational goal.”
The key word in the above statement is evaluate, if you do not evaluate your staff’s performance then how on earth do you know if they are doing a great job or a terrible one …… that’s right, your don’t! One of the biggest threats to any business is it’s staff performance, the only way you can keep them focused on what they should be doing is to keep them accountable. As a business owner or manager, you can know exactly what level any of your staff are working at, by putting KPI’s in place.
Give them goals to work towards, with these in place it will be easier for your staff to stay focused, when they have reached their goals, they will know they have done a good job, if they fail to meet their goals then the business owner / manager can use this performance level to identify areas that require training & development. Keeping them focused on their jobs, helps to clarify their job roles and their responsibilities, this in turn minimises stress and confusion throughout the team helping them to maintain a happier working environment and be more efficient.
When it comes to their staff appraisals, the discussion can be help between the business owner and the staff member using factual information based around the KPI’s, making it easier for both parties to agree on the way forward especially around subjects like training & development, promotion prospects and wage increases. Practical Example of KPI Usage A large company has several departments each with their own team leader, these team leaders have to report to their departmental managers who in turn report to the general manager.
Each week the team leaders have meetings with their staff and they in turn report to their managers. Every two weeks their managers report to the general manager so that they in turn can report to the board. No KPI’s in Place Teams have their meetings, with no set agenda, the team leaders have know idea what they should be reporting to their team managers so their meeting is not structured, their is the usual complaining about the same issues week in week out and there is a general attitude of “why are we bothering this is a waste of time!”
The team leaders, having had a non productive meeting have a meeting with their managers with little to report except for the usual complaints from their team. The team managers then report their usual list of complaints to the general manager (believing they will fall on deaf ears because nothing has been done in the past). The general manager then has an awkward meeting with the board with nothing other than complaints to report. KPI’s in Place Team leaders organise their meetings with set agendas, according to their own KPI’s, asking their teams to report back about a range of specific areas within their job roles.
Each member of the team gets a set amount of time within the meeting to report their specifics, any issues then get discussed and action plans decided on how to overcome the issues and thus improve performance and the KPI measure. Team managers organise their meetings with set agendas, according to their own KPI’s, they allow each of their team leaders to report on specifics areas relating to their KPi’s, any issues raised as a result of this reporting is then discussed and action plans put in place to address them.
The general manager organises their meeting with a set agenda, according to their own KPI’s, they then allow each of the team managers to report on specific areas relating to their KPI’s ensuring that issues and action plans are also reported. The general manager now has all the information the board need to understand what is going on with the business, keeping up to speed of performances in each department as well as getting an understanding of the issues facing any part of the business at any time including potential action plans to address these.
Which company do you think will last the longest and perform the strongest? Summary Having measures creates natural boundaries for each job role. Creating boundaries, creates clarification. Having clarification about your job role gives you confidence. Confidence leads to better output and efficiency and less stress. Less stress and better efficiency makes for a healthier business.