key Performance indicator

Topics: Strategic management, Balanced scorecard, Management Pages: 2 (460 words) Published: November 18, 2013
A performance indicator or key performance indicator (KPI) is a type of performance measurement.[1] An organization may use KPIs to evaluate its success, or to evaluate the success of a particular activity in which it is engaged. Sometimes success is defined in terms of making progress toward strategic goals,[2] but often success is simply the repeated, periodic achievement of some level of operational goal (e.g. zero defects, 10/10 customer satisfaction, etc.). Accordingly, choosing the right KPIs relies upon a good understanding of what is important to the organization. 'What is important' often depends on the department measuring the performance - e.g. the KPIs useful to finance will be quite different from the KPIs assigned to sales. Since there is a need to understand well what is important (to an organization), various techniques to assess the present state of the business, and its key activities, are associated with the selection of performance indicators. These assessments often lead to the identification of potential improvements, so performance indicators are routinely associated with 'performance improvement' initiatives. A very common way to choose KPIs is to apply a management framework such as the balanced scorecard. Identifying indicators of organization[edit]

Performance indicators differ from business drivers and aims (or goals). A school might consider the failure rate of its students as a key performance indicator which might help the school understand its position in the educational community, whereas a business might consider the percentage of income from returning customers as a potential KPI. The key stages in identifying KPIs are:

Having a pre-defined business process (BP).
Having requirements for the BPs.
Having a quantitative/qualitative measurement of the results and comparison with set goals. Investigating variances and tweaking processes or resources to achieve short-term goals. Key performance indicators (KPIs) are ways to...
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