Importance of KPI's

To ensure that you succeed it is important to set yourself Key Performance Indicators (also known as Critical Success Factors), here is some information to help you to understand them and create your own. ​

Terminology

• Definition: A measurable expression for the achievement of a desired level of results in an area relevant to the entity’s activity
• Alway ensure your targets are SMART objectives = Sizable, Measurable, Achievable, Realistic, Timed
• KPI naming standards 
• Value of net profit - £
• Number of Defects - #
• Percentage of budget variance - %

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Value added by KPI’s  

• Clarity – paint a clear picture of your strategy
• Focus - Focus on what matters and what the required attention is
• Improvement – Monitor the progress as it moves toward the desired state

 
Different departments will have different KPI's

• Accounting – Billing accuracy, Cost of goods sold, Client cash per revenue, invoices under query
• Compliance and risk – loss expectancy, operational risk, frequency of inventory audit, turnaround time for audits
• Customer services – speed of answer, complaints received, call handling time, complaints resolved
• Finance – Berry ratio (The Berry ratio is the ratio of a company's gross profits to operating expenses. This ratio is used as an indicator of a company's profits in a given period of time), basic earning power ration, labour multiplier

 
KPI section technique: value flow analysis

• Input – cost of training budget and number of training support staff
• Process – number of hours of training per employee and the number of training courses organised
• Output – percentage of employees trained and the percentage of participant satisfaction with training experience
• Outcome percentage of staff meeting desired competency levels and skill level

 
Data visuals do’s and don’ts

• DO – Bar Charts, line graphs, bullet graphs, Sparklines, small multiples and waterfall charts
• DON’T – Pie charts, 3D Graphs, dark backgrounds on charts, non-zero baseline, overcrowded, gridlines

 
KPI selection criteria 

• Relevant – aligned with organisational strategy; significant for the specified domain of services
• Clearly defined – KPIs should be described by using clear and intelligible terms. Avoid the use of management jargon
• Balanced  - Quality / Quantity and Efficiency / effectiveness and subjectivity / objectivity