Key performance indicators (KPI)
The evaluation of a business can give insight into areas that need improvement, that are performing as expected or are in need of a major overhaul. Before an evaluation can be performed, however, the company must establish some key performance indicators to track the status of the company’s performance and to use as benchmarks.
Key performance indicators are a performance measurement tool. They are used to identify the specific area of a business that is being evaluated, and will give different results based on the criteria specified.
Developing key performance indicators (KPI) should be done with the goals of the company in mind. A company that has retail locations may use repeat customers as a KPI, while an adult education company may measure the number of students who graduate as a KPI.
Areas that can benefit from KPI evaluation are:
- Marketing: demographics of the customer base, how new customers are attracted to the company, status of existing customers.
- Manufacturing: equipment effectiveness, production time, rejection rate.
- IT Operations: network downtime, number of users, hardware usage.
- Education: number of student drop-outs, teacher turnover, behavioral issues.
Key indicators can give a picture of the success or failure of a company, and help the company leadership identify areas of the company’s goals that may need additional work.
By identifying key performance indicators, companies can make changes as necessary to become more productive, or can be implemented on a larger scale as evidence of success is realized. In addition, KPI can be used in validation of a method or system to attract investors and supporters.
In summary, key performance indicators are objectives that the company wishes to reach. By evaluating the success of the company in reaching those objectives, the company can evaluate the processes used. In order for an indicator to be effective, it must be measurable, achievable and specific. The proper use of KPI can help guide a company to success, and bring a company to new levels of achievement. Identifying the specific and measurable goals of a company will help the company realize short-term goals, while establishing a precedent to reach long-term goals as well. Consistent evaluation will ensure that the company continues to progress and improve.