Utilizing Key Performance Indicators (KPI) and KPI Software

Many strategic management approaches have been developed and tested over the years. Nearly all managers have found that the best approaches draw upon relevant, quantitative data gathered from the workplace. This emphasis on measurement and subsequent analysis may be embodied in the concept of key performance indicators or KPI's.

Key performance indicators refer to carefully selected parameters which are important in describing performance. They are called key because they are usually either very descriptive of or very significant to an individual or group's performance. Naturally, each organization would have a different set of key performance indicators depending on its field and its particular goals (its mission and vision, in other words).

For example, net sales and net profits are nearly always key performance indicators for any group that deal in sales. This is because profits are important in keeping any commercial or business organization afloat, as well as in providing for future growth. Hence, whether or not a group is bringing in profits, and the magnitude of the gain or loss, is an important parameter to keep track of.

A firm dealing in customer service would have other, additional factors to consider, such as customer retention, the percentage of return clients, and so on. These key performance indicators would then serve to measure how well the firm is dealing with its customers. Middlemen groups who do not have to deal with end customers directly, on the other hand, would not find this same set of customer service KPI's to be as useful. And so on.

So the first step in applying this concept to one's own organization is to select the most useful and relevant KPI's. This would depend on the factors mentioned and illustrated above. This selection should not be difficult, as it is these same parameters that management should already be tracking.

In the actual implementation of the KPI system, KPI software can facilitate matters. What these programs can do is to effectively centralize the distribution and monitoring of these key performance indicators. A central control center under the eye of management can transmit the selected KPI's to many different computers throughout the organization. It then becomes easier to transmit and receive feedback on these KPI's, as well. An efficient network system will make KPI software really shine.

KPI software can also store all the data on these performance indicators that are sent in from all over the organization. This digital storage then makes it much easier to process and analyze the data regarding these KPI's. Graphs and charts tracking the development of a KPI over time can be easily created. Comparison of the performance of different parts of the organization also becomes easy to perform, with all the data stored in a central database.

The KPI concept has helped many managers and organizations to base their management decisions on sound data and observations. The use of KPI software will make the implementation of these key performance indicators easier and more effective. The use of key performance indicators is a management approach that is definitely worth a try.