| Key Performance Indicators (KPIs)
is one of the popular terms of management jargon of recent years.
The idea is that a few key measures can indicate how an organisation
is performing, relative to its targets. If these key indicators
are on track, then the organisation as a whole will be well-placed
to achieve all its main objectives.
This is based on the fact that people, whether this refers to
the management team or the workforce as a whole, cannot focus
effectively on more than half a dozen things at a time.
Start with a plan
The whole point of measuring is to compare with a target. Defining
your business objectives and preparing a plan to achieve them
will give you the basic information you need to set your key performance
indicators.
Key: KPIs are the things that really matter
Use your knowledge of the business to identify the main things
you need to measure. You could also use sensitivity analysis on
your business plan to see what elements most affect your ability
to achieve your objectives. Think deeply about what really drives
your business. It’s obviously important to know how profitable
your business is, but profitability is (partly) driven by sales,
which is an outcome of orders received, which is directly linked
to the number of leads followed up. So which is the key indicator?
Only you can decide.
Indicators: KPIs must be measurable
It might seem obvious, but if you can only measure something that
is capable of being measured. You might like to know how many
people think about your product but do not place an order for
it. But could you measure it?
Ideally, your KPIs should be capable of being automatically produced
by your existing systems. Fast, accurate measures are more meaningful
and are likely to be acted on.
Performance: KPIs must be used to drive performance improvement
If you have chosen the appropriate key performance indicators
and measure them effectively, it follows that you need to do something
with the results. If you are not on course for hitting your targets,
you must put action plans in place to get back on track.
Everyone in the business should understand the relevance of the
selected KPIs and should be able to see that they contribute to
at least one of the measures.
Use KPIs to focus and motivate your team and you will see the
benefit in the performance of your business.
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