KPIs

Performance Management Tools

One part of the performance management process is to translate the future state of affairs into long and short-term objectives, output and outcome performance indicators and targets against which performance and progress can be measured (Mackie, 2008).

 

Key Performance Indicators (KPIs) are instruments / tools used in performance management that monitor the performance of key result areas of business activities, which are absolutely critical to the success and growth of the business (smartKPIs.com, 2010).

 

The development and use of the KPIs should form the basis for the analysis of an organisation’s current performance, its future requirements and the improving strategies required for ongoing success.

 

Why using KPIs?

  • Perspective: KPIs indicate the health, improvement and / or success of an organisation’s strategy, project, process or area of service delivery
  • Focus: KPIs are focused, relevant, measurable, repeatable and consistent
  • Evaluation: measurement of critical success factors
  • Management: support decision making process for performance management
  • Strategy implementation: KPIs create a powerful linkage between the strategy and the initiatives / activities.

 

Typology

The usage of KPIs can range from measuring the achievements of a department in relation to a business area or the enterprise overall. Based on the impact stage, we can have:

 

  • Input KPIs: used as input elements within a process or project, such as financial or human resources.
  • Process KPIs: used to improve a process, its efficiency and results: time variance, budget variance, employees training etc. 
  • Output KPIs: cost of a specific deliverable or functionality relative to plan, budget or benchmark, functional capacity relative to plan, budget or benchmark, usage factors, system downtime expressed as a percentage for all time and/or peak business hours etc.
  • Outcome KPIs: customer satisfaction, stakeholder satisfaction - used as benchmark comparisons with comparable agencies or private sectors organizations.

 

Various attributes can be used in examining, selecting, designing and using KPIs:

  • Financial / non-financial
  • Customer / process / learning and growth (Balanced Scorecard perspectives)
  • Lagging / leading / coincident
  • Inputs / process / outputs / outcomes
  • Binary / absolute / comparative / trend based

 

Rules for using KPIs

KPIs are a particular category of Performance Indicators and provide an organization with quantifiable measurements of factors that are important for long-time success. The skill in applying KPIs is in the selection of the optimum number and appropriateness of KPIs. This maximizes the benefit of using them whilst minimizing the cost of using them.

 

During the use and application of KPIs, certain principles should be taken in consideration:

  • KPIs should not be an end in themselves, but be considered as an aid to management. They are a start to a proper informed debate that should lead to a plan for improvement.
  • KPIs should be seen within their local context and have more a meaning as a comparison over time than as a comparison between organisations.
  • A set of KPIs should be balanced. For example, measures of efficiency should be set against measures of effectiveness and measures of cost against quality and user perception.
  • After being proposed and applied, KPIs should be reviewed and updated. The review determines the management utility of each indicator and the feasibility of getting source data for continuing use.
  • The targeted performance description, which is described in measurable terms through the KPIs, must be deployed to the organisational level that has the authority and knowledge to take the necessary action (smartKPIs.com, 2010).

 

References

Integration : Tools

 

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