What is a Key Performance Indicator(KPI)?
Key Performance Indicator(KPI) is critical for indicating progress indicators toward an intended result. KPIs focus on strategic and operational improvement, create an analytical basis for decision making and help focus attention on what matters most. KPI reports define the factors and needs of an organization for monitoring its benchmark and evaluating progress or impact. KPIs include setting standards for team member profiles, customer satisfaction, testing and automation, and many other sectors. KPI reports measure and evaluates the success of an organization.
KPIs define and measure the progress of organizational goals and objectives. They act as measurement tools that ensure an organization is on the right track towards attaining a beneficial outcome. In most cases, KPIs measure service delivery in projects.
Businesses devise KPIs based on leading and lagging indicators. Leading indicators forecast the future. They predict changes or trends and help manage the performance of a system or process. Lagging indicators indicate progress after a significant change or advancement in business. They focus on results at the end of a period.
KPIs exist in various constructs within a corporate sector. For instance, an Electronic Document and Records Management (EDRM) project measures client uptake as the system rolls out. Another example is to measure the timeliness and quality of service delivery. In this case, KPIs may measure that records services meet agreed delivery times for correspondence under a Service Level Agreement (SLA).
How to track KPIs
To benefit from intelligent business practice, tracking its KPIs is vital. Some of the ways that can achieve successful KPI tracking are:
- Set clear defined business goals
- Set your target audience
- Follow the two best business intelligence KPI practices: SMARTER (Specific, Measurable, Attainable, Relevant, Time-bound, Evaluate, Reevaluate); and Aligned, Attainable, Acute, Accurate, Actionable, Alive (Six A's). They act as checklists in your evaluation criteria.
- Keep real-time and historical data handy.
- Take the assistance of graphs, charts, and KPI dashboards to visualize your goals effectively.
Uses of KPIs
KPIs guide organizations to achieve each department's vision, mission, and goals and the overall organization. The performance measures for one department are not the same as another. Hence, for clarity, businesses take the assistance of a standard nomenclature indicated either in the control panel or in the KPI scorecard by an enterprise's business intelligence. Some of the common uses of KPIs in organizations are:
- Financial indicators : financial KPIs measure liquidity, indebtedness capacity, solvency, and other indicators related to the finances of an organization.
- Economic indicators: along with financial KPIs, they measure costs; incomes; expenses; cost-effectiveness ratio, and other indicators ideally found in the finance, treasury, and accounting departments.
- Service and attention indicators: they measure indicators that help the customer service or sales and marketing departments to track customer satisfaction, client retention, and sales, among others.
- Quality and production : these KPIs are ideal for measuring insights into mid and upper-level managerial positions, employee satisfaction, the value of production, and other similar aspects. They help in making executive decisions related to industrial processes.
- Logistics : these KPIs measure orders, deliveries, inventory rotation, times of delivery, and replacement in the warehouse and dispatch department.
Business benefits of KPIs
KPI reporting assists in tracking a company's progress through its strategic objectives and strategic goals- both long term and short term. KPIs allow businesses to:
Optimize their marketing campaigns, maximize their ROI, and provide a reliable customer experience
Keep track of team-member activities with a balanced scorecard for aligned and improved internal processes
- Set reasonable benchmarks on their net profit margins
- Get a lead on conversion rates to retain and gain customers
- Set and achieve sales targets
- Measure customer lifetime value
- Measure and track customers retention and churn value over time