A key performance indicator (KPI) is a type of performance measurement.used to evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it engages.
Activities may be one-off events (Such as a design project), repeated events, making progress toward strategic goals or some form of repeatable operational performance such as 10/10 customer satisfaction, zero shipment defects etc.
What is important also often depends on the department measuring the performance – e.g. the KPIs useful to finance will differ from the KPIs assigned to sales.
The intent is that if a company achieves all of it’s KPIs then the organisation should be better tomorrow than it is today.
In summary, identify important factors that critically affect your organisation, tie them to the part of the organisation to which they are relevant and ensure that everyone in the organisation knows how they contribute to those KPIs and your business will be better tomorrow than it is today.
Sounds really easy, doesn’t it?
So why then are there companies who adopt this approach not successful in their endeavours?
The most common reasons why I have seen poor results are as follows:
The organisation has not really bought into the process. They are just paying lip-service to it
The organisation became a slave to the metric. It became the issue and not the result it was hoping to help the organisation achieve.
The KPIs remained the same even when circumstances became different.
The metric was not pursued in the spirit in which it was intended but in such a way that means that the KPI owner will achieve the best result for himself
Lack of understanding of the measure itself. It is really important, to be honest about the results. If they are not improving as you wish then work the problem, do not fudge the result so that you get the result you want as opposed to the result that you are achieving
The metric is not correctly understood, known how to be calculated etc. and therefore not correctly executed.
Have just the right amount of metrics, too few and you will not be driving your business, too many and you may end up being confused
- Finally, strive to keep things as simple as possible. Remember what Albert Einstein said..” Everything should be made as simple as possible, but not simpler”