Business Performance Management with Key Performance Indicator

KPI stands for Key Performance Indicator, a quantifiable measure of performance over time for a specific objective. KPIs provide teams with goals to strive for, milestones to track progress, and insights to help everyone in the company make better decisions. Key performance indicators help every area of the business, from finance and HR to marketing and sales, move forward at a strategic level.

KPI Meaning vs Metrics Meaning

KPIs are key performance indicators that you should monitor in order to have the greatest impact on your strategic business goals. KPIs help your team focus on what’s important and support your strategy. “Targeted new customers per month” is an example of a key performance indicator.

Metrics track the success of day-to-day operations that support your KPIs. They have an impact on your results, but they aren’t the most important ones.

Why Are KPIs Important?

KPIs are an important way to ensure that your teams are supporting the organization’s overall goals. Here are a few of the most important reasons to use key performance indicators.

Keep your teams aligned:

KPIs keep teams on track, whether they’re measuring project success or employee performance.

Provide a health check:

From risk factors to financial indicators, key performance indicators give you a realistic picture of your company’s health.

Make adjustments:

KPIs allow you to clearly see your successes and failures, allowing you to focus on what works and less on what doesn’t.

Hold your teams accountable:

Confirm that everyone contributes value by establishing key performance indicators that allow employees to track their progress and managers to move things forward.

Types of KPIs

There are many different types of key performance indicators. Some are used to track monthly progress toward a goal, while others are more long-term in nature. All KPIs have one thing in common: they’re all linked to strategic objectives. Here’s a quick rundown of some of the most common KPIs.

Strategic

These big-picture KPIs keep track of the organization’s objectives. Executives typically use one or two strategic KPIs to determine how well the company is performing at any given time. Return on investment, revenue, and market share are just a few examples.

Operational

These KPIs are focused on organizational processes and efficiencies and typically measure performance in a shorter time frame. Sales by region, average monthly transportation costs, and cost per acquisition are just a few examples (CPA).

Functional Unit

Many KPIs are linked to specific functions, such as finance or information technology. Finance KPIs track gross profit margin or return on assets, while IT KPIs track time to resolution or average uptime. These operational or strategic KPIs can also be classified as functional KPIs.

Leading vs Lagging:

You should understand the difference between leading and lagging indicators regardless of the type of key performance indicator you define. While leading KPIs can aid in the prediction of outcomes, lagging KPIs are used to track what has already occurred. Organizations use a combination of the two to make sure they’re tracking the most important information.

How to Develop KPIs

It’s tempting to measure everything—or at least the things that are easiest to measure—with so much data. However, make sure you’re only tracking the key performance indicators that will help you achieve your business objectives. One of the most important aspects of the KPI definition is the strategic focus. Here are some guidelines for creating the right KPIs.

Define how KPIs will be used:

Find out what people want to achieve and how they’ll use the KPI report by talking to the people who will be using it. This will assist you in defining KPIs that are useful and relevant to business users.

Tie them to strategic goals:

You’re wasting time if your KPIs have nothing to do with what you’re trying to accomplish in your business. While each key performance indicator may be related to a specific business function such as HR or marketing, they should all be linked to your overall business objectives.

Write SMART KPIs:

The most effective KPIs adhere to the tried-and-true SMART formula. Ascertain that they are Specific, Measurable, Attainable, Realistic, and Time-Bound. “Grow sales by 5% per quarter” or “Increase Net Promoter Score by 25% over the next three years” are two examples.

Plan to iterate:

You may need to revise your key performance indicators as your business and customers change. Perhaps some are no longer applicable, or you need to make adjustments based on performance. Make sure you have a plan in place to evaluate key performance indicators and make changes as needed.

How can PQSmitra help you in Business Performance Management?

PQSmitra has the following methodology or as we call it PQSmitra DNA

• Understanding all the Processes in detail of your Organization
  Each and every department of the Organization is reviewed as per the latest industry standards and detailed SWOT analysis is performed

• GAP Analysis
  GAPs found compared with Industry standards is presented to Management

• Implementation & Hand Holding
  The optimum solutions are Implemented and Hand holding is provided throughout the Process

• Internal Audit Report
  Internal Audit is performed to ensure changes are Implemented for Best Business Performance Management.
• Training and Routine Support
  Training is Imparted and routine monitoring is performed

About PQSmitra

PQSmitra has developed an effective module “PRAGATI” for Business Process Reengineering. It is a simple and practical solution towards the development of good culture at your organization. Pragati will help the concerned person keep an eye on critical parameters related to the functioning of your organization using simplified key indicators. This would help organizations in identifying their strength & opportunities and improve profits.

PQSmitra provides Business Performace Management Consultation for Industries Ranging from Manufacturing, Textile to Supply Chain. With over 20 years of experience in quality assurance & Business Performance, we at PQSmitra are ready to help your business reach new heights and achieve Business Goals.