Itís easy to underestimate the importance of key performance indicators (KPI). When they are well thought-out and used effectively, no one even looks at them twice. But take them away (or replace them with KPI that donít match your goals), and your organization (or unit or even your project) is reduced to shambles. So whatís going on, and what are these KPI, also known as Key Success Indicators, all about?
Simply put, your organization has certain goals that need to achieved, and to measure the success in achieving these goals, we use key performance indicators. By identifying the quantifiable attributes and factors that can be used to measure the organizationís success in achieving its goals, we can easily select the right KPI. It simply becomes a matter of figuring out (through experience) which indicators are critical to your success, and then using them as primary benchmarking tools to regularly measure your progress.
The key to selecting KPI lies in selecting indicators that are a) quantifiable, and b) critical to the organizationís goals. A hit-or-miss approach simply doesnít work; by making sure that your key performance indicators (based on your main organizational goals) can be measured (such as revenue statistics for a retail store), youíre ensuring that the organization is on the right track.
Selecting the right key performance indicators however, is only half the battle. As a manager one must also know how to handle these indicators effectively. Apart from setting targets (such as achieving 10% revenue growth per quarter), the indicators can be used as mini targets themselves to continuously monitor progress as well as maintaining momentum. With the right approach, KPI can be the stimulus as well as the benchmark to your organization.