Setting Key Performance Indicators

Setting Key Performance Indicators

The Role of KPIs

Key performance indicators (KPIs) are a ubiquitous business term today. As alluded to by the name, they are considered the litmus test for the performance of an individual or a process. While there remains a diminishing number of managers who rely solely on their watchful eyes, setting and monitoring key performance indicators, when properly done, has a direct positive impact on the results of an activity.

Used by organizations to evaluate the success of a variety of activities, KPIs are an important tool in measuring the periodic achievement of operational goals and evaluating progress toward strategic goals. When setting KPIs for any business process, organizations should take the following into consideration:

Use up-to-date KPIs

Business missions and models rarely change, but processes and tactics employed to achieve strategies are more frequently altered. Ever-changing business landscapes, the emergence of new competition and the growing role of technology in the workplace all call for the constant review of approaches and tactics. Because factors such as these affect the roles that are assigned to employees and their performance requirements, it is important to regularly update, assess and adjust KPIs.

Align process and people measurement

KPIs can be assigned to almost any activity that employees carry out. While it is important to measure employee performance, it is equally as important to measure the performance of processes. The core processes of an organization that help it to achieve its strategy and the more detailed procedures that contribute to these processes, all need to be measured by assigning specific KPIs. These indicators enable the constant monitoring of process efficiency and need to complement the assessment of employee performance.

Assess all performance factors

It is not uncommon for KPIs to be too generalized, with management often failing to choose KPIs that accurately represent the performance of certain departments or employees.

A common mistake is to have KPIs that are based on deliverables not directly under the employees area of control. Employees often collaborate with other internal departments or external parties to produce deliverables. So KPIs need to be accurate enough to measure direct employee input without taking into account input from other sources that are not being examined. In addition, rather than using KPIs to reprimand employees, they should be viewed by organizations as tools to help improve performance of staff and ultimately the organization as a whole. Poor performance may not always be sign of unskilled or uncommitted employees, but can be a symptom of other underlying problems such as inefficient processes or training deficiencies. KPIs can help uncover these issues.

Talk to us to get insight into how to improve your organization's performance.