Key performance indicators (KPIs) are measurable goals used by organizations to track progress and success. They can be financial or non-financial and are presented in reports, spreadsheets, or charts. KPIs must be clearly defined and consistent to effectively monitor progress towards goals.
Simply put, key performance indicators (KPIs) are measures of achievement, tools used by organizations to track their progress and success in achieving the organization’s purpose. They consist of a set of pre-determined measurable goals for an organization and can involve any aspect of an organization considered vital to its success. To create effective KPIs, an organization must have a mission statement with clearly defined goals and objectives. Vague goals, like being the best in the industry, for example, won’t work because they’re too broad. Goals must be expressed in measurable terms and agreed upon by those involved in the organization.
KPIs can be presented in any combination of reports, spreadsheets or charts. They provide a real-time visual snapshot of a company’s or organization’s strength based on specific pre-defined measures. The method in which they are displayed varies as it largely depends on the target being measured and its target audience.
These measures vary from one organization to another, depending on the type of activity and its objectives, and can be both financial and non-financial. For example, a trucking company might use a comparison of the number of truck accidents involving drivers that occurred per distance traveled to the national average. This would be a way to keep track of their security records. An emergency health facility can use the average wait time for patient treatment by hour of the day, which would allow them to determine whether adjustments to staffing levels or training are desirable.
Similarly, a sales company may use the percentage of new customers referred to by existing customers as a key performance indicator. The same sales company could also use a percentage comparison of current year’s profits to last year’s profits with a target of a specific percentage each year.
Once a key performance indicator is defined, it is rarely changed unless the actual goals of the organization change. Indeed, to be useful, it is very important that these goals consistently maintain the same definition from year to year so that the organization’s progress can be effectively monitored. In this way, business practices and/or strategic planning can be reviewed if progress towards defined goals decreases.
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