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.
A business must determine specific, measurable, and organization-driven KPIs as a first step. Then Goals can be set based on the original KPIs selected. Finally, projects can be selected based on the goals identified. It’s important that the identified KPIs can be formulated into future-based goal statements that summarize what an ideal result might be.
The following are important characteristics of key performance indicators
- KPIs are mission-critical objectives for the organization and must be quantified. Don’t worry about when they will be achieved; you can translate KPIs into more specific goals and projects as the initiative advances.
- KPIs serve as organizational performance targets. Each organization will have unique KPIs based on the industry and customers it serves. KPIs must reflect an organization’s goals and measure progress toward them; if projects don’t align with important goals or aren’t measured, they may waste resources.
- KPIs must be quantifiable. And the quantifiability must have substance and not just be for the sake of measuring.
- KPIs must be tied to an organization’s success to provide value to employees
During the improvement goal identification phase, strategic leaders and mid-level managers work together. As a team, they identify and prioritize a manageable number of goals that are aligned with organizational KPIs. At this phase, a team will need to take specific steps:
- identify strategic improvement goals (SIGs) in specific areas
- develop outlines of measures to be used to track progress toward goals
- prioritize strategic improvement goals
- develop a deployment strategy
- create buy-in and leadership
During the improvement project prioritization phase, more mid-level managers and employees become involved. The objective is to list and select projects that align with goals and established KPIs. Team members must understand what project benefits will be produced in what time frame. The improvement project prioritization phase involves steps, as
- identify projects that align with strategic improvement goals
- decide which projects have paybacks and what type
- agree upon a variety of projects and prioritize based on payback
- assign plan champions to each project chosen
During the project planning and control phase, members of all organizational levels need to be involved. The main objectives of this phase are to select appropriate project metrics based on the original KPIs, and to use these KPIs to motivate employees. During this phase, additional steps are taken for the initiative
- form teams of Black Belts and plan champions
- create project charters, scorecards, and dashboards
- motivate employees and manage people
KPI Dashboard
KPIs overlap and influence each other. Displaying these alongside each other helps you see instantly which goals are being met at the expense of others. You can start to play around with adjusting targets and policies, in order to be more effective overall.
A KPI dashboard brings all KPIs together in one place. You can see how you’re performing on each different measurement, side by side.
Typically, too, businesses divide their KPIs into ‘high level’ and ‘low level’ KPIs. These are, respectively, the big, overarching goals of the organization and narrower, departmental or individual targets.
The great thing about having these laid out on a dashboard is that you can see how the smaller goals flow into the bigger ones. You get an instant snapshot of which areas are on target and how this impacts on the company’s overall performance. In turn, this can help you identify where problem areas are forming, as well as giving insights that help you hone your targets and business strategies to meet high-level KPIs.
For example, let’s imagine that your company wants to increase its yearly profits by 10%. Meanwhile, you’ve told your sales team that they’re expected to hit, say, 30 sales of a new product a month.
Most of your team are hitting their targets, but profits are stagnating. When you take a look at your KPI dashboard & KPI tracking, you see that renewal rates are falling, eating into your profits. You realize your team is too focused on new sales at the expense of nurturing relationships with existing customers, so you play around with your KPIs to place more emphasis on securing renewals than bringing in new clients.
KPI Dashboard Design
Depending on the dashboard software you choose, you could opt to include a huge range of KPIs, from net profit, revenue growth, and churn rate, through to your ability to keep projects on time and on budget, how much revenue you earn per customer, or how much you spend onboarding each new client.
You can also adapt your dashboard to the user’s position. For example, your CEO’s KPI dashboard might well be laid out very differently to that of an IT project manager or a marketing executive, according to the insights most pertinent to their role.
