Key Performance Indicators or KPI are quantifiable measurements which are fixed as targets as the critical success factors for an organization. KPIs being tied to organizational goals, varies depending on the organization, as

  • The percentage of its income that comes from return customers
  • Number of students graduating from a college
  • Percentage of customer calls answered in the first minute
  • Measure how effective marketing campaigns are at generating increased revenue and sales.

Irrespective of the KPI selected, it should be in sync with the organization’s goals and should be measurable. KPIs are applied at multiple levels across the company as, high-level KPIs focus on the overall performance of the company and lower-level KPIs on departmental processes. One most followed way to evaluate the relevance of a KPI is to use the SMART criteria, which expands to specific, measurable, attainable, relevant, time-bound as,

  • Is objective Specific?
  • Can user Measure progress towards that goal?
  • Is the goal realistically Attainable?
  • How Relevant is the goal to organization?
  • What is the Time-frame for achieving this goal?

Performance dashboards facilitate getting the data needed to measure a KPI in one place, as it is easy to see if the KPIs are succeeding in their purpose or not.

KPI Types

KPIs can be categorized in a number of different ways. They can be measures of:

  • input (time, labour, cost)
  • output (throughput, production, profit)
  • ratio (efficiency, productivity).

In practice an effective measurement system will cover all of the major operational areas within a business. A typical categorization might be:

  • financial KPIs: return on investment (ROI), return on capital employed (ROCE), stock turn;
  • customer KPIs: new customers, lost customers, on time in full (OTIF);
  • sales KPIs: total volume, total value, sales per customer
  • process KPIs: productivity, efficiency
  • people KPIs: labour turnover, training, average length of service
  • supplier KPIs: OTIF, cost per piece
The Balanced Scorecard
Financial Measures

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