Key performance indicator (KPI)
- is a subset of metrics that are used for performance measurement. KPIs should be always measurable so you could understand if you were able to achieve your strategic goals. As an example, you want to sell 2000 units of your product in the next quarter. When you set your target that way, it is easy to measure the progress and apply necessary steps in case the achievement of the KPI is under the risk.
If you track relevant metrics and set challenging yet achievable objectives and KPIs, then you get a powerful tool to drive your business. You will be able to receive the following benefits:
- monitor and measure the performance of the whole company, each department, and every employee;
- make your vision transparent to your employees, thus moving into one direction as far as all metrics, plans and taken steps are clear;
- reveal hidden issues and obstacles that might go unnoticed during some period of time;
- improve decision making by setting clear and measurable goals, adjust your strategy based on factual data.
There is no use in setting up KPIs and metrics if you do that only for the sake of having them. Such an approach is totally irrational and can result in a waste of your time and resources, discourage of your employees as no one likes to do useless work, and accumulation of old and new problems. Unfortunately, a huge amount of organizations made such mistakes at least once, but it is never too late to admit that something was done wrong and correct it. If to talk about the correct way of choosing metrics and setting up your company's KPIs, we can define the following principles:
- understand what metrics are vital for the existence of your business (like net income or sales revenue);
- start monitoring processes related to those metrics and set up objectives and KPIs to improve them;
- do not forget that you should cascade your KPIs across an organization so that each department and employee is involved in the achieving of a common goal.
Don`t think only about data when you set up your KPIs, think about employees too, because they will be the ones to achieve them. Your goals should be challenging yet achievable
. In that way, you won`t discourage your employees with unrealistic tasks but will help them to progress, move forward, and drive your business` growth. Concentrate on the most problematic spheres that require the most attention and improvement.