What are KPIs
Key Performance Indicators(KPI) aka quantifiable inputs which an organization uses compare performance of workforce towards achieving strategic organizational goals. This terminology varied from company to company. It is also called Key Success Indicators. An organization should first forecast and establish its strategic goals and then then set the KPI to reflect the goals. The main performance indicator of all companies would be to make maximum profits.
What is the need to measure performance? This is a big question isn’t? For example we use the same in our daily life to improve our health. We measure or diagnose the key health points like Blood sugar levels, Blood pressure levels etc, to improve our health. In the same manner organization uses some key indicators to measure the performance of employees with an aim to improve their output which ultimately helps the company to better decisions that lead to improvements.
Another reason to collect these KPI’s are to show the company’s external stakeholders by publishing the companies annual report so that the stakeholders know the company is heading in the right strategic goal as forecasted and established earlier. One more reason is it can be used internally within the organization to guide and control staff’s action so that the desired goals are achieved.
Main issue is these KPI’s should be used properly. The organizing authority should know for what these indicators are used.
One should clearly understand for what you need indicators: Learning or Improvement.Is it used externally, internally or both as discussed above?For controlling or guiding manpower.
These three important things should be kept in mind before and after setting KPI’s.
Many a times both organization and staff see KPI’s as mere numbers, But in reality it is not so. Because there are certain things like customer satisfaction, Organization Culture, goodwill of the company etc which cannot be merely measured in terms of numbers. So in modern business it goes beyond numbers. For example take a movie, before we could go for a movie we tend to see the previews, star ratings or hear from our friends or watch trailers.
Can we measure anything? Yes is the answer. But we have to keep in mind no one can design perfect indicators that can measure perfectly. Saying so the KPI’s helps in reducing uncertainties so that we are prepared to face them. For example take todays economy, simple example being the cost of petrol. Our government would have set indicators to measure them, but what is happening? There have been so many changes in petrol prices every day. So the KPI’s which was set earlier is helping our government to face these uncertainties in price rise of world oil prices so that our economy runs smoothly.