Content on Key Performance Indicators (KPIs) covered:
Introduction to KPI’s
Benefits of KPI’s
KPI -v- CSF
Critical Success Factors (CSFs)
Setting KPIs and CSFs
Example HR KPIs
More example KPIs
Sample KPI page
What is a Key Performance Indicator?
A key performance indicator is a financial and non-financial measure used to help an organization measure progress towards a stated organizational goal or objective.
- Can allow management to see the company or department performance in one place.
- A team can work together to a common set of measurable goals.
- It can be a very quick way of seeing the actual performance of a goal or strategic objective
- Decisions can be made much quicker when there are accurate and visible measures to back them up.
KPI -v- CSF
Key Performance Indicators should not be confused with a Critical Success Factors (CSFs).
- CSFs are elements that are vital for a given strategy to be successful
- KPIs are measures that quantify objectives and enable the measurement of strategic performance
A Critical Success Factors (CSF) would be something that needs to be in place to achieve that objective; for example, the launch of a new product or service. For example:
KPI = Number of new customers
CSF = Installation of a call centre for providing managing the customers
A plan should be designed and implemented in a way that considers an environment for growth and profits as well as takes into consideration the following typical Critical Success Factors:
- Money: Positive cash flow, revenue growth, access to finance and profit margins
- The future: Acquiring new customers and/or distributors
- Customer satisfaction: How happy are they?
- Quality: How good is your organizations products and service?
- Product or service development: What’s new that will increase business with existing customers and attract new ones?
- Intellectual Capital: Increasing what the organization knows that is profitable
- Strategic Relationships: New sources of business, products and revenue
- Employee Attraction and retention: Your organizations ability to do extend your reach
- Sustainability: Your organizations ability to keep it all going
While there may be many Critical Success Factors in an organization at any one time, the chances are that only one or two in a given department or division.
The number of Key Performance Indicators however may be prolific throughout an organization The reality is that the most successful organizations limit KPIs to a handful.
KPIs are measurable performance objectives. This begs the question “How many objectives should you have?”. While there is a lot of debate about this, one thing is known, individuals appear to become less efficient and effective when trying to juggle more than 10. It is often said in OD text that 7 is optimum. So if seven is optimum, can a manager really handle 20+ KPIs?
We would argue that to be effective any part of an organization should have between 5 and 8 KPIs.
A Key Performance Indicator (KPI) can be effectively used as a visual cue that communicates the amount of progress made toward a goal. The use of dashboards, intranet summary pages and graphics on notice boards.
By using graphical representations of KPIs, you can easily visualize answers to the following types of questions:
- What are we ahead or behind on?
- How far ahead or behind are we?
- What is the minimum we have achieved to date?
Typical departmental or organizational key performance indicator or measure include:
- Number of active customers
- Number of new customers
- Customer churn
- Total revenues
- Percentage of screened newly recruited employees
- Percentage of employees receiving regular performance reviews
- Average response time for routine HR inquiries
- Percentage of new employee retention
- Job offer acceptance rate
- Average Number of Interviews from Submitted applications/ CV’s
- Percentage of vacancies filled within x days
Are available on our Sample KPIs page
Key performance indicators in construction, healthcare, housing, manufacturing, maintenance, call centres, not-for-profits, local authority, public sector, schools, education
Service level agreements can use key performance indicators as metrics