The Various Applications of KPIs – From Marketing to Honorary KPI

Key performance indicators or KPIs are important components of any organization’s measurable objectives. They consist of both financial and non-financial measures that reflect how well an organization is performing, with respect to the goals it has set for itself. Many different applications of this concept exist in management practice: manufacturing KPI, customer service KPI, internal process KPI, and even bonus or honorary KPI.

These key performance indicators vary widely across different types of organizations with various different objectives. For marketing-oriented organizations, for example, important key performance indicators could include customer growth rate, customer profitability, customer attrition, and customer satisfaction. Manufacturers, on the other hand, would focus on a set of KPIs that includes overall equipment effectiveness, total effective equipment performance, loading, availability, and quality. Other organizational aspects would also come with their own sets of key performance indicators.

KPIs should arise from a good understanding of the organization’s business processes, strategic objectives, and measurement capabilities. Understanding business processes simply means that management should be aware of what interrelated tasks go into the day to day running of an organization. For example, when formulating bonus KPI for a customer service agent, it would be best to have a clear idea of what tasks and responsibilities such an agent performs on a daily basis. Without knowing about internal and external business processes, managers would find it difficult, if not outright impossible, to set about improving organizational performance!

Then, managers should be able to formulate and clearly articulate the organization’s strategic objectives. By looking at the various business processes, managers should be able to identify points for improvement. These areas for improvement can be emphasized and worked on by the setting of appropriate objectives. If we go back again to the example of determining bonuses or honoraries for customer service agents, the objectives that could be set for agent performance include faster handling times and better satisfaction rates.

Lastly, key performance indicators would be utterly useless if they turn out to be non-measurable! Even if these KPIs were grounded on a firm understanding of the business process, and aligned with the appropriate organizational (or individual) objective, if they are impossible to measure, they are useless. Hence, when setting KPIs, managers should ensure that they are measurable either with existing infrastructure, or with the setup of new measuring methods throughout the organization.

For the KPIs governing individual employees’ bonuses or honoraries, for example, it might become necessary to install specialized software on individual workstations. This software could then monitor such information as handling times or even customer satisfaction, and relay this useful KPI information to the management for processing and analysis.

Key performance indicators, when utilized properly, can significantly boost organizational performance in many aspects. From marketing KPI to manufacturing KPI to honorary KPI, they can prove useful in monitoring and subsequently improving performance. Managers should take care to have a good grasp upon organizational processes, strategic objectives, and measurement capabilities, in order to take advantage of the key performance indicator paradigm to the fullest.