Organisations, whether commercial or non-profit, are constantly managing and measuring performances. Key performance indicators are the most widely used tool for managing performances, with some preferring dashboards, benchmarking or balanced scorecards. The primary value of KPIs is to enable rich data-driven performance conversations and better decisions.
KPIs are the vital navigation tools that managers use to understand whether the business is on a successful trajectory. The right set of KPIs will shine light on the key aspects of performance and highlight areas that may need attention. Without the right set of KPIS, managers will not have focus. Choosing just a few operational data point to include in a review reduces complexity of the organisation. Successful managers identify their informational needs and determine what data to use as a business performance indicators. By examining performance levels, managers can see where the problems lie and develop improvement strategies. Additionally, company executives review KPI reports to monitor the overall business and make strategic management decisions.
Used appropriately, KPIs feature quantifiable numbers used to analyze and direct business functions. A performance indicator shows a level of performance within a specific part of the business. Executive dashboards or reports typically feature a set of KPs to show company progress toward achieving strategic goals. Customer transactions in a day, sales closed, support service calls and customer satisfaction tend to be easily measured. Choosing the right KPis involves analyzing the business’s needs and selecting the most relevant sources. KPIs also help to reduce uncertainty about how the business is functioning.
Once executive leaders define a corporate strategy, they can design KPs to track progress and improve company performance. KPIs provide information required to make good business decisions. Key performance questions help managers figure out what is really important. Monitoring KPIs using business intelligence tools and techniques allow a manager to assess the business's current state and define a course of action to achieve a desired future business condition. Without knowing which part of the business performs poorly. business professionals may just guess at the solution. Instead, by examining KPI’s, managers can determine if a business is improving or declining, and decide from there. For example, if there is a web page dropoff, business can implement programs to understand why there was the drop-off and take corrective action.
A KPI usually consists of a directive, indicator, time frame, benchmark and target. For example, a directive could “increase customer satisfaction” for a customer support department. “from 40% to 50%” could be the indicator. “By the end of the fiscal year” typically represents a reasonable target. “alignment with industry standards” represents a general benchmark. Another element typically describes how frequently the organization reports the data; for example, monthly, quarterly or annually.