Key Performance Indicators are the measures that monitor the performance of key result areas of business activities, which are absolutely critical to the success and growth of the business. The development and use of the KPIs should form the basis for the analysis of an organization’s current performance, its future requirements and the improving strategies required for ongoing success.
Getting the most from your KPIs
The ultimately purpose of performance management being to drive future improvements in performance, there are two main ways you can use KPIs to achieve this kind of management power.
The first is to use your KPIs to spot potential problems or opportunities. Remember, your KPIs tell you what's going on in the areas that determine your business performance. If the trends are moving in the wrong direction, you know you have problems to solve. Similarly, if the trends move consistently in your favour, you may have greater scope for growth than you had previously forecast.
The second is to use your KPIs to set targets for departments and employees throughout your business that will deliver your strategic goals.
During the use and applications of KPIs certain principles should be taken in consideration:
Every initial proposal for KPIs is expected to be imperfect. However, it is important for the organisations to understand and apply the appropriate KPIs so that they can develop some experience in using them from which they can derive real expertise.