KPI Discussion - How to measure a firm’s success

Also known as Key Success Indicators, Key Performance Indicators (KPI) are quantifiable measurements that help a firm define and gauge progress towards achieving its goals. These usually reflect factors that are important to a firm’s success. Key Performance Indicators may vary from one organization to another. For instance, a business can have the rate of its income from return customers as one of its key performance indicators. On the other hand, a school’s key performance indicators may focus on the rate of graduation of its students. Moreover, a customer service department can also have the rate of customer calls taken in the first minute as one of its Key Performance Indicators, alongside the overall KPIs of the firm. Additionally, a social service institution’s Key Performance Indicator may be the number of persons assisted for a given year.

Key Performance Indicators are a way to gauge an organization’s progress towards achieving its goals. KPI is usually done once an organization has studied its mission, determined its stakeholders and set its goals. Whatever type of Key Performance Indicators a firm adopts, they should be quantifiable as well as reflective of the firm’s goals and should be a key to its success. Usually, Key Performance Indicators can help a firm look at the bigger picture of things and on a more long term note. What these indicators are and how these are measured do not often change. Moreover, the goals for a specific key performance indicator can also change as the firm’s goals change or as it draws nearer towards realizing its goal.

If the goal of an organization is to be the industry field’s most profitable firm, then its key performance indicators will largely focus on measuring profit and other fiscal measures. Among these measures may include shareholder equity and pre-tax profit. However, the rate of profit contribution to community causes may not be a part of its key performance indicators. Meanwhile, because schools are not usually geared towards profit making, it will more likely have different key performance indicators. These may include graduation rate or success rate in job employment following graduation. These key performance indicators can give an accurate reflection of the school’s vision, mission and goals.

If you want your key performance indicators to be of intrinsic value, you should be able to define and gauge it accurately. For instance, if one of your firm’s key performance indicators is to drive more repeat customers, but you cant find ways to distinguish new customers from the repeat ones, then this indicator is more likely to be as good as none. Moreover, a firm’s goal of becoming the most popular in the industry will not work as your key performance indicator if you cannot find a way to gauge your firm’s popularity or compare your firm with others.

Also, make sure to define your key performance indicators and be consistent with these definitions from one year to the next. You should also set targets for every key performance indicator. Once you will have defined them, it will be easier to motivate people and go down towards achieving your organizational goals.