Key Performance Indicator
A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes in departments such as sales, marketing, HR, support and others.
It measures employee performance against key business objectives.
So what makes business performance indicators “key” and how should a business owner, executive or manager select them? There are six factors that separate effective, value creating key performance indicators from detrimental, value diminishing ones. Follow these six best practices:
Aligned - Make sure thy align with the strategic goals and objectives of your organization
Attainable - The indicators you choose to measure should have data that can be easily obtained
Acute - They should keep everyone on the same page and moving in the same direction
Accurate - The data flowing into the performance indicators should be reliable and accurate
Actionable - Does each one give you insight into the business that is actionable?
Alive - Your business is always growing and changing. Your KPIs should evolve as well!
Business Metrics vs KPIs
A Business Metric is a quantifiable measure that is used to track and assess the status of a specific business process. Every area of business has specific metrics that should be monitored – marketing metrics can include tracking campaign and program statistics, while sales metrics may look at the number of new opportunities and leads in your database, and executive metrics will focus more on big picture financial metrics. Learn more: Business Metrics.
Process for setting actionable KPI targets
- Review business objectives
- Analyze current performance
- Set short and long term KPI targets
- Make sure they are actionable
- Review targets with your team
- Evolve them to fit the changing needs of the business
- Check to see that they are attainable (but add a stretch goal)
- Review progress and readjust
- Update KPI objectives as needed
Implementing the key performance indicators
- The company translates its corporate vision into measurable operational goals that are communicated to employees.
- These goals are linked to individual performance goals which are assessed on an established periodic basis.
- Internal processes are established to meet and / or exceed the strategic goals and customer expectations.
- Key Performance Indicators are analyzed to evaluate and make recommendations to improve future company performance.