Reference C

Key Performance Indicators

KPI is:
Once an organization has analyzed its Vision and Mission, identified all its stakeholders, and defined its goals, it needs a way to measure progress toward those goals. Key Performance Indicators are those measurements. KPIs reflect the "critical success factors" of an organization. Help an organization define and measure progress toward organizational goals. Key Performance Indicators Vary for Each Organization. Without good KPIs, an organization has no way to measure their performance in relation to their strategic goals. Each department will have their own contributing KPIs. The departmental KPIs should be selected so that they can be rolled up in support of the overall strategic goals. Many common mistakes that are often made when implementing KPIs; in the main KPIs are introduced can neither be measured nor acted on. Selecting good KPIs relevant to you business goals is achievable if the KPI has the characteristics as defined below:
Characteristic Aligned Owned Predictive Actionable Few in number Easy to understand Balanced and linked Trigger Changes Standardized Context Driven Relevant Reinforced and incentivized Description Must always be aligned to corporate strategy and objectives Every KPI must have an owner by an individual or group who is accountable KPIs measure value and are therefore an indicator of business performance Should be populated with timely actionable so that remedial action can be taken where required and not when it's too late KPIs should focus people on a few high value tasks and not scatter attention on too many things KPIs should be easy to understand and not based on complex formula that users cannot influence KPIs should balance one another and not undermine others sub optimizing process The act of monitoring a KPI should trigger action and positive change KPIs should be based on standard definitions across the organization so that dashboards show a consistent set of results Targets and thresholds should be linked to performance so that users can gauge performance over time Over time KPIs loose impact and need to be reviewed The impact of a KPI can be magnified through careful use of incentives

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 KPIs should

Be simple (almost effortless) to compile. Be clear and easy to understand. Be numeric and tangible. Encourage behaviors that have a positive effect on the business. Be owned by those that influence their outcome. Be something to be proud of that focuses the team on a common goal.

KPIs should not

Be tough to compile, taking valuable resources away from other activities. Be used as a weapon for political ends. Be confusing or ambiguous. Cause people to find "a way around" to make the number look good

Motivate Employees by Posting Key Performance Indicators

Post the KPIs for everyone in the company to see, and be motivated by. Knowing the target and their progress will encourage employees to meet and exceed their goals. Their success will fuel even greater progress. Check in to make sure everyone is focused on meeting or exceeding the KPIs. Post the KPIs everywhere: in the lunchroom, on the walls of every conference room, on the company intranet, even on the company web site for some of them.

What Do We Do With Key

Performance Indicators?
Use Key Performance Indicators as a performance management tool. Also, use it as a carrot. Use it to manage performance. Show what the target for each KPI is and show the progress toward that target for each of them. Regularly review progress in relation to the KPIs and adjust methods of operation when needed.

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 Good Key Performance Indicators vs. Bad

Bad:

Title of KPI: Increase Sales Defined: Change in Sales volume from month to month Measured: Total of Sales By Region for all region Target: Increase each month

What is missing? Does this measure increases in sales volume by dollars or units? If by dollars, does it measure list price or sales price? Are returns considered and if so do the appear as an adjustment to the KPI for the month of the sale or are they counted in the month the return happens? How do we make sure each sales office's volume numbers are counted in one region, i.e. that none are skipped or double counted? How much, by percentage, dollars, or units, do we want to increase sales volumes each month? (Note: Some of these questions may be answered by standard company procedures.) Good:

Title of KPI: Employee Turnover Defined: The total of the number of employees who resign for whatever reason, plus the number of employees terminated for performance reasons, and that total divided by the number of employees at the beginning of the year. Employees lost due to Reductions in Force (RIF) will not be included in this calculation. Measured: The HRIS contains records of each employee. The separation section lists reason and date of separation for each employee. Monthly or when requested by the SVP, the HRIS group will query the database and provide Department Heads with Turnover Reports. HRIS will post graphs of each report on the Intranet. Target: Reduce Employee Turnover by 5% per year.

Visual is better A picture paints a thousand words

Ship & C.R.E.W Original KPI Form (QSF-08-01)

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