Key performance indicators (KPIs) are among the most common tools used in business to help manage more effectively and guide the progress of the organization. They provide clarity to murky issues and put the spotlight on potential opportunities. Key performance indicators can help an organization predicate an impending storm and avoid potential downfalls.
Leaders often misunderstand or overuse the term. They tend to relate key performance indicators to any type of business data measurement. To be effective, key performance indicators need to be metrics that matter to the business of the organization. KPIs need to be linked to the overall strategy of the organization, which means to first identify what matters the most and what provides the proper measurement. Leaders and key stakeholders can monitor these indicators over time and adjust plans and programs as needed to improve the KPIs in support of the organization’s strategic goals. The ideal process for identifying and implementing key performance indicators involves the leaders and contributors regularly revisiting and revising the measures. This is a fine-tuning process, which takes time and diligence by all parties.
Key performance indicators can shape strategy and fact-based decision making inside organizations. It doesn’t matter how brilliantly you’ve aligned your KPIs to your strategy, or even how brilliantly you have captured and presented the relevant KPIs. If leaders aren’t using your KPIs to inform their decisions and drive performance, then they are wasting time and effort. A well-designed set of KPIs should provide a clear indication of current levels of performance and help leaders make better decisions that brings the organization closer to achieving its strategic objectives. By avoiding the pitfalls, leaders can ensure KPIs are designed, implemented and used exactly as they were intended – to help the organization succeed and avoid the inevitable storm.