What are Key Performance Indicators (KPIs)?
KPIs measure progress of a business towards it’s intended goals. KPIs reflect both financial and non-financial critical success factors and assist strategic management of the business.
Why clear definition is important?
Accurate and appropriate definition of KPIs are vital for effective use and strategic management of business performance in achieving the strategic goals.
KPIs should be derived from critical success factors of the business. They should be quantifiable and measured frequently, encourage strategic management team to take necessary action, and clearly indicate the required action.
Many business fail to clearly identify and define KPIs and work with wrong measures. Each business is different and has varied methods, processes and approaches to achieve their strategic goals. In defining KPIs to assist strategic management of it’s strategic goals each of these characteristics have to be considered.
Performance management: Measuring what matters most
High performing businesses understand what measures are required for performance management. They carefully select, define measures to avoid information overload. And establish process to frequently report and monitor on those measures.
Beware of unintended outcomes
Every measure in performance management process has it’s negative consequence. Managing the negative and uninteded outcomes is vital in achieving strategic goals. The best practice is to openly communicate with staff and discuss performance management process and positively response.
Regularly review the chosen measure for their relevance as the business grows. The KPIs have to be changed to reflect the business’s current, and future strategic goals. It’s a process of evolution.