What Is KPI?

KPI, or a key performance indicator, are measurable values used to evaluate how successful a person or organization is at reaching a target. You can have high-level KPIs that look at the performance of your business, or KPIs that drill down into processes at the individual or departmental level, too.

Why should we use KPIs?

1. Keep employees accountable

Key performance indicators can track progress down to the individual level. If a sales team’s KPI is the number of monthly sales per person, team leads can easily understand how much each person contributes to the department’s success by whether or not they meet their goals.

2. Allow managers to adjust

Once managers have KPIs in place, it’s easier to adjust the strategy if the team or individuals don’t reach their goals. This doesn’t need to mean firing the weakest performers; it could mean providing additional training and guidance to those who are struggling.

 3. Make sure everyone is on the same page

It’s likely individuals view success differently. For example, if an IT team member and an accountant work together on a project, they’ll probably measure success differently. KPIs set a standard and common goals for everyone to work towards, making expectations and priorities clear right from the beginning. 

4. Assess a business’s health

KPIs help businesses objectively see how the organization is performing. Financial KPIs for instance, show profitability, while employee retention rates can indicate the strength of a company culture.  

What are the benefits of KPIs?

KPIs serve as a guidepost to help you and your organization reach your goals. And the pursuit of your goals depends on focused and consistent delivery of results.

A. KPIs engage employees

Employee engagement, a topic that many organizations struggle with, can directly impact your bottom line. But KPIs can help. KPIs, whether individual or organizational, are a helpful mechanism to measure performance, which has a direct tie to employee engagement. On the flip side, disengaged employees cite the same issues: poor communication about strategy between management and individual contributors. KPIs help solve this problem and unify employees to work towards a common goal.

B. KPIs connect your purpose and your culture

Your KPIs should be connected to your organization’s mission. “Making money” isn’t a mission and it’s not something that employees will connect with on a deeper level, either. Your purpose should encourage employees to show up to work with a renewed sense of excitement every day. There should be a direct link between your mission and your KPIs so that employee’s feel like their work is purposeful in achieving both. Remove any ambiguity: ensure your KPIs work towards your end goal and employees clearly understand how and why they’re working towards that.

C. KPIs make everyone accountable for performance

Traditionally, individual performance management frameworks are about setting objectives, measuring performance, and managing the related activities. So why not incorporate KPIs into performance management, too?Performance KPIs will help employees measure their impact and how their daily activities, arguably the foundation of their role, play into the success of larger organizational goals. KPIs set everyone off in the same direction, making everyone a happy contributor to your success.

“When performance is measured and reported, the rate of improvement accelerates” — Thomas Monson

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