A Key Performance Indicator (KPI) is a measurable value that a company sets to gauge its progress towards achieving its goals. High level KPIs are used to evaluate the overall performance of the business. Whereas in-depth KPIs focus on processes and operational metrics of departments. Each department like Finance, Sales, Marketing, Support, Operations and HR will be having its own specific KPIs, which give the detailed insights into their specific goals. Hence, the importance of tracking KPIS are very crucial for the growth of any organization.
I have interacted with many clients who do not have defined KPIs or track their numbers. They tackle every challenge, as and when it comes. This might not put forward a roadblock, however, the importance of tracking KPIs can’t be undervalued. One of the most important point for tracking KPI is that, it helps you keep a track on your company vitals at any point in time. Like how a car dashboard gives you the fuel, engine, brake and all vehicle vitals. Tracking the right KPI’s will always keep you in control of the overall health of your organization and take corrective or preventive actions early on. Thus achieve your organizational objectives faster.
Tracking the KPIs also help you in forecasting your future. The future is unknown to all. Hence, we can use the KPI trends in the past and present to forecast the future performance. Accordingly, steer your organization towards the targeted goal, . Thus it is important to track KPIs.
How to set KPIs?
Setting of the right KPIs depends on the nature of your business, the industry you cater to and your organizational goals. A key performance indicator, should be a measurable goal that will be set to evaluate a particular performance. There should be an unique KPI set for all functional arms, including individuals, teams, business units/departments, from top to bottom.
Follow the below pointers to identify the right KPIs for your organization:
- List out your organization’s objectives
- Set Financial goals, Sales goals, Customer goals, Operational goals, Team & Individual goals
- For each of the above goals, define performance indicators and set targets that will help you continuously monitor and achieve your goals. Make sure they are SMART targets
- Targets should be SPECIFIC and not vague
- Targets should be MEASUREABLE
- Target should be ATTAINABLE
- Target should be RELEVANT to the organization or team
- Targets should be TIME-BOUND
The most important point is, your nature of business and the industry you cater should decide on what KPIs to choose. It is essential that the KPIs must be simple and easy to adopt. Also, taking the right decisions and avoiding mistakes early on to drive the organization towards the targeted goal, should be the primary purpose of tracking KPI’s and not finding fault with the team.