What is KPI?

What is KPI? KPI(Key Performance Indicator) are financial and non-financial metrics used to help an organization define and measure progress toward their goals Financial measures are too late normally to be able to change things in time. This type of measures is normally called a 'lagging' KPI or measure.

It is better to include 'leading' non financial measures which help determine the financial results.

A bank manager once told me that many businesses do not know how they have actually performed until weeks or even months after their financial year has closed...far too late to do anything. This is why a balanced scorecard derived from a cause and effect objectives strategy map is ideal.

Each of the driver objectives or goals would have a KPI set Here are some examples of 'What is KPI?'

  • Number of sales demonstrations per month relates to the eventual sales performance
  • Number of of service calls per week relates to the quality of the product and in turn that relates to the customer satisfaction level

For each KPI you would set a target. The selection of your KPI is extremely important. If they are going to guide you to your goal they must encourage the right behaviour within your organisation.

For example, if you want to improve customer satisfaction of your software product by answering your support calls quicker...the KPI is the support call length, there is a danger that your support staff do this at the expense of really fixing the issue. The customer is then forced to call again giving them more hassle and pushing up the number of support calls.

Key Performance Indicators selection has to be done very carefully. First, it is important to limit them to those factors that are essential to reaching the organisation's goals, and secondly to keep the number of Key Performance Indicators small so to keep everyone's attention focused.

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