Key Performance Indicators
What are KPIs?
In a broad sense, a key performance indicator (KPI) is a tool for business improvement,
focusing upon significant measurements within a company that indicate success or failure of
that particular business. A set of KPIs are not a "one size fits all", since even between two
businesses in the same industry there will be subtle business differences that need measuring.
A KPI is a composite of the following:
- a measure of the performance of specific goals that a business has defined to be
of critical importance to their success
- a target (or targets)
- an action resulting from that measurement.
To just talk around this briefly; if a business goal is critical, the business will
want to have a target, to show if that actual value is good, bad or acceptable.
Further to this, if the target says we are in the bad performance zone then what
do we do? There needs to be an understood action or set of actions that need to
be taken as a corrective measure.
How to select KPIs for your business is often a difficult process.
In this context a target can be a budgetary figure and comparisons between the target
and actual values should result in a corrective action in the marketing or sales
The benefits of measuring KPIs
- Can allow management to see the company or department performance in one place
- May form one part of your company's business intelligence suite.
- A team can work together to a common set of measurable goals.
- If displayed correctly it can be a very quick way of seeing the actual performance of a goal, often at a high level.
- Decisions can be made much quicker when there are accurate and visible measures to back them up.
- Can be used in a positive way by management to encourage a strong team ethic.
- May meet legal requirements.
What is the most common way of displaying them?
– This is normally a screen with areas for various informational displays about
the business. Often there are graphs, scorecards and report components.
– This is usually a table of figures. This would often be included inside a dashboard
and normally has an actual value against one or more targets displayed as a colour
coded indicator or trend arrow. Sometimes the scorecard will be termed as a 'balanced
scorecard'. This scorecard will have KPIs from all areas of the business in order
to give a balanced view to the success of the business.
- Report – Often included
in the dashboard; this could be some high level reporting numbers supported for
example with a graph.
How do I get the data to measure my KPI?
This is where we could help you as we would deal directly with your IT department
to identify which data sources are required to satisfy the definitions of the KPIs
to be measured. Note that some data sources may well be in Excel (e.g. budget figures)
and not even in the IT systems at all. In all these scenarios, technical expertise
is required to extract and consolidate the data into a data warehouse. From there
the presentation layer of the KPI is normally simple and because it is web based,
is easily accessible from all departments in your company.