How To Use Key Performance Indicators

Many organizations use Key Performance Indicators (KPI) to evaluate their success as it relates to different facets of their business.  KPIs measure not only the obvious metrics such as sales, profits and losses, but are commonly used to measure less tangible concepts that organizations need to understand in order to be successful.

One of the main components of understanding how to use Key Performance Indicators is to know what needs to be measured.  Companies reporting on KPIs will use them to keep track of progress in areas related to the overall success of the enterprise, such as customer service, repeat business, new customer acquisition, new product implementation, and anything else that the business leadership decides is vital to success and can be measured.  Items listed as KPIs really should be those things that are key to the strategy and long-term goals of the organization.

Often, those who use Key Performance Indicators will have them condensed into a single report, frequently referred to in the business world as a "Dashboard."  KPI Dashboards offer a quick at-a-glance look at performance, and can be as overarching as a view of the entire company's performance, or as detailed as the measurement of a single division, store or department.

KPIs are useful not only to company managers and executives in getting snapshots of business performance, they are critical in helping individuals at all levels of the organization understand the focus and strategy of the leadership, so they can adjust their actions accordingly.  For a retail business, a KPI might be how long the customer waited in the check-out line.  A manager can impact this KPI by training the cashiers on how to be most efficient, by staffing appropriately at busiest times, and by making sure back-up is called quickly if the lines start to get long.  For a non-profit organization, the best way to use Key Performance Indicators might be to measure how many new contacts are made each week, how many of those contacts donated to the cause, and the average amount of each new donation compared to those made by regular contributors.  The goals of each organization will determine their true KPIs.

Using Key Performance Indicators works best when it is understood that success must be measured using "benchmarks" that set minimum acceptable performance levels, and also recognize high achievement.  Goals that seem unattainable can decrease moral.  Benchmarks offer steps in reaching the top, and KPIs report the success. 


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