KPI- Key Performance Indicator

Why KPI is considered in the modern methods of performance appraisal?

A KPI defines itself, to a large extent, by its name; it is a  performance indicator, i.e. the performance of the process it is measuring should be clearly indicated by the KPI. At an organizational level, a Key Performance Indicator (KPI) is a quantifiable metric that reflects how well an organization is achieving its stated goals and objectives. KPI are quantifiable measurements, agreed to beforehand, that reflect the critical success factors (of the company, department, project. In fact, among all the tools available to executives to change the organization and move it in a new direction, KPI’s are perhaps the most powerful.

KPI’s focus employees’ attention on the tasks and processes that executives deem most critical to the success of the business. KPI’s are like levers that executives can pull to move the organization in new and different directions. Without KPI an organization will not perform to its maximum. There are two major types of KPI’s leading and lagging indicators. Leading indicators measure activities that have a significant effect on future performance, whereas lagging indicators, such as most financial KPI’s, measure the output of past activity.

KPI’s need to be

• Specific
• Measurable
• Achievable
• Result-oriented or Relevant
• Time-bound

Advantages of KPI(Key Performance Indicator)

1.Identifying problems
2.Defining Benchmarks
3.Reducing costs
4.Refining Bids
5.Improving quality
6.Increasing productivity
7.Improve sales
8.Focus on performance

Checklist of KPI (Key Performance Indicators)

Key performance indicators let you evaluate how well your business is meeting its targets. For KPIs to be effective, they must have characteristics that define business performance and clearly communicate the resulting information to you. Based on KPI changes, you have to be able to determine where the problems lie and what action is required to fix them. A KPI checklist makes sure the KPI’s you choose to fulfill these requirements.

Relevant: A KPI must measure a variable of interest for determining how well the company is progressing toward an objective. Relevance means that a change in the KPI is meaningful in guiding you to take corrective action or continuing on the existing path without intervening.

Quantifiable: Effective Key Performance Indicators consist of a number that measures one characteristic. KPIs are quantitative and measurable to indicate clearly how performance is changing. The single number tells you at a glance how the monitored quantity is behaving, and whether the underlying performance characteristic is on track to achieve your objectives.

Specific: Each indicator must give information about a specific area of activity. When choosing a KPI, you have to ask what specific purpose you are pursuing with the particular choice, what information you expect to receive and what action you will take if the KPI behaves a certain way.

Actionable: For a Key Performance Indicator to be actionable, it must reflect activities that the company is carrying out. If you act to influence those activities, the KPI has to change to reflect the action you have taken. You can then decide whether the action was effective in improving performance.

Timely: Fast response times are important for KPIs to allow quick intervention. A timely KPI must show you a situation soon enough for you to act to improve it or to change the approach of the company to the problem. The idea is to choose KPIs that approach real-time feedback, showing you the effects of your actions with as low a time lag as possible.

Attainable: KPIs are most effective when they set an attainable target and allow you to work to achieve it. Such KPIs show you the progress you make and give you feedback to what extent you have reached the company’s goals. This feedback allows you to increase your efforts if you fall behind.

Objective: A critical feature of KPIs is their objectivity. They must be based on observable variables that enter directly into the calculation of their value without subjective intervention. The calculations must be reproducible so you can demonstrate the reasons for your actions.

What Good Key Performance Indicator does?

1. Key Performance Indicator is always connected with the corporate goals.
2. A Key Performance Indicator is decided by the management.
3. It belongs to an individual who is accountable for its outcome.
4. They are leading indicators of performance desired by the organization.
5. Easy to understand.
6. A Key Performance Indicator leads to action.
7. Few in number.
8. It should be balanced not undermine each other.
9. Users can gauge their progress overtime .
10. KPI’s loses its value overtime so they must be periodically reviewed and refreshed.

The employees themselves are made aware of the existence of the indicators. They will try to improve their own selves in terms of performance, then a significant increase in the overall productivity of the company is not a long way off at all.

What are the 10 Characteristics of Effective KPIs(Key Performance Indicators)?

For a set of KPIs to help drive business performance, they must have a variety of characteristics. Some are here:-

1. RELEVANT – in support of business objectives

2. COMPREHENSIVE – covers all key aspects of the business

3. MEASURABLE – objective measures

4. TARGETED – compare measure to budget or target

5. DEFINED – clear and easily understood

6. COMPARABLE – trends over time, and comparable to other businesses

7. RELIABLE – sufficiently accurate to be trusted

8. TIMELY – appropriate frequency and timeliness

9. COST-EFFECTIVE – worth the costs of collection

10. SUSTAINABLE – can be compiled and reported regularly on an ongoing basis.

There are a lot of things to learn in every job. Besides the job description, there is the corporate culture, policies and expectations for every employee. Here are some of the things that each employee should know about a company.

Goals Statement: Companies seek profits, of course, but they do so by fulfilling a Vision & Mission for their customers. You need to understand that Goals in order to know why you were hired and what your contribution is expected to be. Financial goals of a company should be aware of each and every employee of an organization.

References to Customers: Every company has their vendor list & this is the better option to check the company’s reputation. Every company exists to serve customers, and so does every job within a company. Know your company’s customers, even if you have no direct contact with them, and you will be able to do your job better.

Financial Condition: It is very important to know the financial condition of a company. If it’s weak then there is no bright future to stay in. It’s better to study the position of the company before joining in.

Workplace environment: You must know the workplace environment, how is the culture? What are the positive /negative points of the company, what is the chain of command up to management, what are the reviews of existing staff members? This answers will automatically reflect the overall company reviewing

Insurance offer: Before joining you should whether health insurance is an offer to an employee or not. Its the prime duty and responsibility of every company who is hiring employees must give the facilities of insurance plan like ESIC to their staff members and workers.

Retirement Plan: After health insurance, retirement-plan options may be the most complicated of all employee benefits. Your employer may offer a simple plan or no retirement plan at all. You should know your options, how much you can contribute, your employer’s matching contributions, vesting periods and how your money is invested.

The HRD department: You need to know and understand all the employee benefits giving to the company. Also, need to learn the corporate policies and regulations. In fact, HR policies and grievance procedure must be check by any new employee for their better reference.

Alcohol Policies: Almost every company has a written policy prohibiting the use of drugs or alcohol at work. Some reserve the right to test employees under certain circumstances or at random. Rules must be bind to smoking and alcoholic policies in any workplace

Disciplinary Procedures: Supervisors must know what disciplinary options are available to them, from informal warnings to termination. Workers should know what each form of discipline means to them, and the consequences of the further need for discipline.

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