Corporate Intranet

Continued from part 1 of Drive Business Forward By Tracking Key Performance Indicators

To begin tracking Key Indicators in your business:

Consider where you are and where you want to be.


Determine the key areas that need tracking in order to get you to your goals.


Determine the range of values you will use to measure the Key Indicators.


Develop a description for the minimum and maximum values. (This will assist you when measuring the values.)


Measure the value of the Key Indicator.

You should share the measurement & evaluation responsibilities of Key Indicators with employees or co-workers. You will find that once you start using them to set the goals & parameters of your business, you can begin working towards achieving them. Develop strategies to achieve your goals. Be bold but be realistic in setting the goals & there is a good chance you will reach & exceed what you have set as the best case scenario.

KPI's Reflect Business Goals, They Must Be Quantifiable (Measurable)& Key To Business Success .

If one of your business goals is to be the most profitable company in your industry, some indicators could be the measure of profit and related fiscal measures. They must be quantifiable ( measurable). If a KPI is going to be of any value there must be an accurate way to measure and define it. If you use "generate repeat customers" as an indicator, it may be useless without some way to distinguish between new & repeat customers. It's important to find the indicators and stay with the same definition from year to year. Also set targets for each indicator.

A company goal to be the employer of choice might include a KPI of "Turnover Rate" if an indicator has been defined as "the number of voluntary resignations & terminations for performance, divided by the total number of employees at the beginning of the period" and a way to measure it has been set up by collecting the information in an human resources, the target must be established. A target such as "reduce turnover by 5 % per year" is a clear target that everyone will understand & take action to accomplish.

Many things are measurable but that does not make them key to business success. Limit those factors that are essential to the business reaching its goals. Keep the indicators small to keep everyone's attention focused on reaching the same KPI's.

If a KPI is "Increase Customer Satisfaction", it may be focused differently indifferent departments such as:

Manufacturing department may be "number of units rejected by quality inspection."


Sales may be "minutes a customer is on hold before a sales rep answers."

Successes in these departments and many others may help the company meet its overall KPI.

Good KPI's VS. Bad KPI's

Bad:

TITLE OF KPI : Increase Sales

Defined:

Change in sales volume from month to month

Measured:

Total of sales by region for all regions

Target:

Increase each month

(What's missing?, Does this measure increases in sales volume by dollars or units?, If by dollars, does it measure list price or sales price? Etc...)

Good:

TITLE OF KPI: Employee Turnover

DEFINED:

total number of employees who resign for whatever reason, plus the number of employees terminated for performance reasons and the 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 .

MEASURED:

The human resources dept. contains records of each employee. The separation section lists reasons and date of separation for each employee. Monthly or when requested by the SVP, human resources group will query the database and provide department heads with turnover reports. Human resources will post graphs of each report on the intranet.

TARGET:

Reduce employee turnover by 5% per year.

What Should You Do With Key Performance Indicators ?

Once you have good indicators defined, ones that reflect your company's goals, ones that you can measure, what should be done next? Use them as a performance management tool. They give everyone in the business a clear picture of what is important & what they need to make them happen. Make sure that everything that is done in the company is focused on meeting or exceeding the KPI's. Post them everywhere as a reminder: office, bulletin board, lunchroom, company intranet, etc... Develop strategies to reach those goals. Show the target for each KPI & progress toward each target. It will motivate you or others to keep those targets.