Each and every organisation is unique and requires its own set of Key Performance Indicators (KPIs). It is important when measuring performance to consider what outputs are important to stakeholders, and which inputs drive these outputs. It is also essential to combine traditional performance measures, which are typically based off cost accounting information, with more dynamic measures that identify improvements seen by other stakeholders such as the customers. So how do you decide on which KPIs to use? First it’s important to understand why we measure performance …
Why use KPIs?
- To compare results achieved to goals set
- To identify opportunities
- To identify strengths and weaknesses
Why review KPIs?
- To help set targets that are achievable and motivational
- To ensure existing targets are met and quality is upheld
- To allow for comparison of performance across time
- To enable employees to track their own performance
- To identify strengths and build on them
- To identify weaknesses and improve on them
- To provide a feedback loop
What must we consider when measuring performance?
The Department of Trade and Industry* say that performance measures must be:
- Meaningful, unambiguous and widely understood
- Owned and managed by the teams within the organisation
- Based on a high level of data integrity
- Such that data collection is embedded within the normal procedures
- Able to drive improvement
- Linked to critical goals and key drivers
How can we use KPIs to improve an organisation?
1) Establish the organisations objectives
2) Develop key metrics using the SMART framework (Specific, Measurable, Achievable, Relevant, Timely)
3) Assess the performance of the organisation by using KPI’s that cover effectiveness (are the desired results being achieved?), efficiency (how efficiently is the organisation using inputs?), and productivity (how productive is the organisation?)
4) Review the organisation’s performance and make a plan for improvement
5) Implement the plan and reassess!
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