This article will give an overview of key performance indicators (KPIs) and offer some helpful tips and advice when it comes to defining KPIs.

Overview of Key Performance Indicators:

A performance indicator is a measurement by which some sort of performance is gauged. A key performance indicator is a specific type of performance indicator that has been identified as being critical to the performance of a business, company or organization.

Obviously, the nature of an organization or company will affect the types of key performance indicators examined. Businesses tend to look at issues/events such as:

* The amount of income from new and returning customers.
* Total sales per month, year, etc.
* Sales by department, sales personnel, etc.
* The return on investment (ROI) from advertising and marketing campaigns.
* Turnover of accounts payable.
* Cash flow return on investments.
* Processing costs of invoicing.
* Amount of bad debt versus revenue.
* Return on equity.
* Monetary value of overdue invoices.

Defining and monitoring KPIs, as well as taking action based upon KPI results, are critical parts of any professional performance-management process.

Types of KPIs:

Key performance indicators can be differentiated by the nature of their measurements. Some types of KPIs are:

* Quantitative indicators, which represent a finite number.
* Directional indicators, which represent upwards or downwards trends.
* Financial indicators, which represent some sort of finance-specific values (e.g., ROI).

Defining Key Performance Indicators:

It is important to have a few things in place before defining KPIs:

1. Have a formalized business process. KPIs should allow for some type of action to occur, based on KPI values. Modifying processes can be difficult if those processes are not documented and understood.
2. Define business goals. Know what it is you want to achieve and then utilize key performance indicators that will help you achieve those goals.
3. Be able to quantify your business metrics. Most often this is done via customer relationship management (CRM) software, along with a back-end database system. Company data should always be stored in electronic format so it can be easily queried.

The next step is to think about what metrics play an important role in your success – and from that define key performance indicators that measure those metrics in a way that is “actionable.” In other words, a KPI’s value should result in some sort of possible action being taken. The exception is a KPI’s value that represents either success or failure: in the case of “success” an action may not be required.

Once you have determined what your key indicators are going to be you must then set some sort of numerical targets for them. Numerical targets can be:

* An upper or lower limit.
* A specific value.
* A range of values.
* A percentage.
* A date (by which time something should be completed).

Your key performance indicators must then be analyzed by users who have the authority to take action or initiate some sort of action based on KPI values.

Note that KPIs are most often included in data visualization software such as performance dashboards.

Conclusion:

This article has just scratched the surface on the importance of key performance indicators. However, it should be apparent that performance management and KPIs can and should play a crucial role when it comes to achieving your defined goals and objectives, whatever they may be!

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As mentioned, there are several key performance indicators workforce that you can choose from. You can always view them so that you will be able to select wisely. There are actually three categories that you should bear in mind before you choose the workforce KPI for your business. These are the performance, the areas and the methodology. In the first category which is performance, you can have key performance indicators workforce such as the number of employees that are under fixed term contracts in every division, the number of temporary employees and the number of contactor employees working on the specific sites or departments. Since the category is performance, the employment indicators should be able to tell you whether the said types of employees are working hard during the assessment.

On the second classification which is the area, you can evaluate the human resources department and how they are being managed internally. If your company has several other branches in various cities, districts, regions or countries, you can also check the performance of your human resources team and how they are being handled internationally. This means that you have to take note of the places from where your employees are located.

The third one which is methodology, you can measure how well each group, department or individual is able to perform the work that has been assigned to them. Large companies often have problems here especially since there are a lot of areas that are needed to be covered. If this is a difficulty for you as well, you can always assign a specific team that will handle the job of updating the key performance indicators workforce. The rest of the work can be given to the workforce KPI set since those indicators that are entered here will monitor the performance of the staff in various departments.

Managing your workforce is not actually a hard task. There are managers that are assigned to perform this job. However, even if you are the business owner, you should make sure that the managers are doing the responsibility that you have given them. After all, they are also a part of the workforce. In the end, the key performance indicators workforce will allow you to keep track of the status of all the people in the company from the top to the bottom levels.

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Every business that competes in a particular industry should have access to one of these applications. Many corporate statistics can be accessed quickly, but a review of the current industry performance can take days.

One benefit of the KPI dashboard is that sales figures from one quarter to another can be easily compared. This helps the organization make decisions about sales strategies as well as about the performance of employees. It can also show how well an organization measures up to its competitors.

There are numerous decisions made within an organization that should be done with the most accurate information possible. A suitable software application can help provide much of the information needed.

In the airline industry, such an application can track the financial performance of many different carriers, as well as additional statistics like the frequency in which various types of aircraft are flown or the number of seats sold on each flight within a specific time period. In the health care industry, an application can track how many patients come through the emergency room in each hospital within a region, provide information on which facility gets the most trauma cases or show the frequency in which specific diseases are diagnosed.

For organizations with several domestic or global locations, such an application can show which are the highest performing in terms of revenue, compare levels of productivity, or indicate which locations are most cost effective. Various features of such applications include the ability to generate graphs, bar charts, pie charts and many other visual aids used in data analysis.

Applications also typically include various types of data that can be chosen for analysis or comparison. Filters are also used to look at specific events or ranges of events. This can include dates, selection of specific product sales within an organization, or for more refined data that is highly dependent upon certain factors.

While there are many software companies that offer such applications, they can also be created in Microsoft Excel. It can be used to show percentiles or various distributions of different performance measures. For those who are unfamiliar with the advanced functions of the Microsoft application, there are many books and some instructional videos available online to help with the process. For those who wish to have something they believe is more user friendly, there are many software products that can be tailored for the specific corporation or industry.

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KPIs are a commonly used business performance management tool, particularly popular because of their ability to measure a very wide-variety of criteria across all business departments – including often hard-to-measure criteria. KPIs are developed to measure important business processes in your organisation. The KPI will measure for success based on your criteria and then provide results, whether quantitative or qualitative, as to whether the process is under-performing, on target, or exceeding expectations.

Every business is unique and it is important to develop KPIs that are relevant to your business and your expectations. It is advisable to develop your KPIs to that well-known acronym SMART:

Specific

Measurable

Attainable

Relevant and

Time-bound

For example, an important KPI within the call centre industry is ‘call answer time’. It is a specific business process, measurable in seconds, attainable, extremely relevant as a lost call may be a lost sale, and will be time-bound either within a month, quarter, year etc. The results will highlight weaknesses or strengths within a team, may highlight the need for more or less staff or another solution to ensure this area of the business is on track to achieve the overall goal.

Implementing or improving the KPI system within your business will assist everyone to work towards common goals with clear objectives. KPIs will also assist managers to manage effectively, help define expectations and recognise success, evaluate progress and provide evidence for necessary changes to business processes. Externally, results against KPIs can prove an important snapshot of the business to investors, stakeholders and regulatory bodies.

However, your unique KPIs need to be developed with a few considerations in mind. You must recognise which KPIs align to your business success – it is not a Key Performance Indicator if it is not vital to your business success. Then determine how many you can effectively manage – only choose KPIs you can successfully monitor and ensure you implement systems to support supervision. Plenty Systems recommends deciding on no more than 20 KPIs for a small to medium sized business – any more will be too hard to manage. Additionally, develop your KPIs using historical data, customer feedback, industry benchmarks and other relevant indicators – don’t guess or the targets may not be attainable. You must also establish where it is fine to be average and where you need to excel. For example, sales figures may need to exceed all others comparisons, but you may only need to meet industry benchmarks for employee training hours to still achieve your business goals.

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Key Performance Indicators should be measurable, actionable and quantifiable. So how will you measure a KPI without an indicator value? You will need figures and mathematical calculations in order to perform a correct measurement and these are all affected by which indicator value will you use and put.

Basically, a Key Performance Indicator value can be measured in two ways. First is, it could be a KPI value which is a mathematical mixture of relevant Performance Indicators (PI) value. Performance Indicators are the supporting grains that give basis for a Key Performance Indicator value calculation.

Scaling units from a variation of numbers is a known method of measuring, not only in business. It is also applicable in terms of measuring an indicator value. For example, in a scale of 0-100, how will you measure customer satisfaction? Usually, these ratings are based from lowest to highest; meaning the lowest number in the scale depicts a very unsatisfactory rating while the highest shows a very excellent one.

Nowadays, KPIs are installed in an on-site based server in order to promote real time evaluation. With the technological advancement, single and multiple usage softwares have been incorporated, even in the business world. Despite this though, an automation does not mean that the organization will no longer have to calculate figures. Technology just made it a little easier for them, as there are additional metadata that provides various information as to how a user will be able to see the displaying of computations by the KPI software.

Note that this is not the only thing that composes a KPI, however. Usually, a basic KPI is consisted of basic information, goal, achieved actual value, status value, trend value and a folder in which the KPI can be viewed. Obviously, the basic information displays what the KPI is all about. More often than not, you will see what they call Multidimensional Expressions (MDX) or calculated members in a KPI. All values (actual, status and trend) are expressed using MDX and usually calculates into a concrete number.

Simply said, Key Performance Indicator value makes up the entire KPI. Why? We said that KPI gauges the business performance through figures and numbers. What will you calculate without actual numbers in the first place? It is important to provide accurate indicator value whenever you will compute measurements, as wrong input will result into wrong output. This will then mislead the entire organization and the Balanced Scorecard, along with the KPI inside it will render useless.

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