This article discusses what a business KPI is and how they are identified. It includes the definition of the term as well as the categories and issues that are related to Business KPIs.
Mother's gauge their kid's physical development by the increase in their height and weight, companies do the same also. A Company gauges it success by what we call the Key Performance Indicators or KPI's. KPI's may be as broad as Customer satisfaction result or as specific as annual sales turnover. No matter what kind of KPI a company uses, the main goal is the same and that is to see how a company is doing by looking at the values accredited to whatever area the company may choose. Key Performance indicators can be both non-financial and financial gauges that show how a company or an organization is doing.
The KPI is most often based on the company's goals and objectives. If a company aims to sell the most products in comparison to their competitors, then a good KPI for them will be a quantitative look on how much the company has sold over a period of time and how does the company's sales stand up against those of other companies. It is important that a company figure out what type of Key Performance Indicators they can use to measure how the company is doing. In doing this, the company must have a clear set of goals that they can rely on. Having a clear set of goals helps the company in figuring out what factors can help them pinpoint how they are doing. An example of goals relating to Business Key Performance Indicators is as follows:
If a company's goal is to provide the best and most affordable health and medical service in the area that they are in then their KPI can be measured using a chart that compares the fees of other similar institutions in the same place. If the company wants to look further at customer satisfaction, KPI for this can be done by having customers take a survey.
KPI's can be categorized as follows:
Quantitative KPI's - these are KPI's that can have a number or a monetary value attached to them. Most often this takes the form of sales or customer and employee turnovers.
Directional KPI's - this KPI is a compilation of a lot of different factors. It is used to indicate whether a company is doing better or not by the direction of the data that has been gathered.
Actionable KPI's - these KPI's are those that can easily be acted upon by the company.
Practical KPI's - these KPI's are those that are related to processes that currently exist with the company itself, it can be an indication of the company's output or it can be the number of days that the company has been accident free.
A problem that is often seen when using KPI's is associated with the fact that Qualitative data are difficult to gauge. If a company gauges itself against customer satisfaction or the morale of the staff, it is oftentimes difficult to put a number to this, it will take a very comprehensive survey to get the “sentiments” into a numeric form.
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