KPI

KPIKey Performance Indicators

Tell me how You manage a business and I'll tell you how you are

A Personal View

Rafael Esguevillas Ruizhttp://es.linkedin.com/in/rafaelesguevillas

jueves 21 de junio de 2012

http://es.linkedin.com/in/rafaelesguevillas


✓Introduction

✓What Are Key Performance Indicators (KPI)

✓Key Performance Indicators Reflect The Organisational Goals

✓Key Performance Indicators Must Be Quantifiable

✓Key Performance Indicators Must be Key To Organisational Success

✓Good Key Performance Indicators vs. Bad

✓What Do I Do With Key Performance Indicators?


KPI | Rafael Esguevillas Ruiz [http://es.linkedin.com/in/rafaelesguevillas] | 21/06/2012

Introduction

Key Performance Indicators (KPI) Or Key Success Indicators (KSI)

➡We have the mission

➡We have identified all the company stakeholders

➡We have the company goals

➡We need a way to measure progress toward those goals

Key Performance Indicators are those

measurements




What Are Key Performance Indicators (KPI)

KPI's are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organisation



KPI Could Be

Depending on the Organisation could be• The percentage of its

income that comes from return customers

• A school may focus on graduation rates of its students

• Percentage of customer calls answered in the first minute

• Number of clients assisted during the year





KPI Must BeThey must reflect the organisation's goals

They must be key to its success

They must be quantifiable (measurable)




The definition of what they are and how they are measured do not change often

The goals for a particular KPI may change as the organisation's goals change, or as it gets closer to achieving a goal




Key Performance Indicators Reflect The Organisational Goals



[Business Company]

We want to be the most profitable company in our

industry

• Good KPI will be

• Pre-tax Profit

• Shareholder Equity

• Bad KPI will be

• Percent of Profit Contributed to Community Causes





[Educational Institution]

We want to be the most profitable company in our

industry

• Bad KPI will be• Pre-tax Profit• Shareholder Equity

• Good KPI will be• Graduation Rate• Success In Finding

Employment After Graduation




Key Performance Indicators Must Be Quantifiable



Define KPI

If a Key Performance Indicator is going to be of any value

There must be a way to accurately define and measure it.

• Generate More Repeat Customers• Need some way to distinguish

between new and repeat customers

• Be The Most Popular Company• Need a way to measure the

company's popularity or compare it to others

• An may be it is not easy• Or event impossible• Or too much expensive to get the

relevant data





KPI Definition Longlasting

Important to define and stay with the same definition from year to year

• Increase Sales• We need to define• Measure by units sold or

by dollar value of sales?• Will returns be deducted

from sales in the month of the sale or the month of the return?

• Will sales be recorded for the KPI at list price or at the actual sales price?





Set Targets

You need to set the targets for each KPI• A company goal to be the employer of choice might include a KPI

of "Turnover Rate"• We can consider the KPI def as the number of voluntary

resignations and terminations for performance, divided by the total number of employees at the beginning of the period

• A way to measure the KPI it has been set up by collecting the information in an HRIS (Human Resources Information System), for example

• Target can be definited as• Reduce turnover by five percent per year• Is a clear target that everyone will understand and be

able to take specific action to accomplish




Key Performance Indicators Must be Key To Organisational Success



How Many KPI’s?

• Many things are measurable• That does not make them

key to the organisation's success

• It is critical to limit them to those factors that are essential to the organisation reaching its goals

• It is also important to keep the number of KPI's small just to keep everyone's attention focused on achieving the same of them





KPI will be focused differently in different departments

If a company Key Performance Indicator is

"Increased Customer Satisfaction"

•The Manufacturing Department may have a KPI of "Number of Units Rejected by Quality Inspection"

•The Sales Department has a KPI of "Minutes A Customer Is On Hold Before A Sales Rep Answers"




Good Key Performance Indicators vs. Bad



Bad Definition?

Increase SalesDefined•Change in Sales volume from month to month

Measured•Total of Sales By Region for all region

Target•Increase each month





What's missing?

• Does this measure increases in sales volume by dollars or units?

• If by dollars

• Does it measure list price or sales price?

• Are returns considered and if so do the appear as an adjustment to the KPI for the month of the sale or are they counted in the month the return happens?

• How do we make sure each sales office's volume numbers are counted in one region, i.e. that none are skipped or double counted?

• How much, by percentage or dollars or units, do we want to increase sales volumes each month?





Good Definition I?

Employee Turnover

Defined

•The total of the number of employees who resign for whatever reason, plus the number of employees terminated for performance reasons, and that total divided by the number of employees at the beginning of the year•Employees lost due to Reductions in Force (RIF) will not be included in this calculation





Good Definition II?

Measured•The HRIS contains records of each employee•The separation section lists reason and date of separation for each employee•Monthly, or when requested by the SVP, the HRIS group will query the database and provide Department Heads with Turnover Reports•HRIS will post graphs of each report on the Intranet

Target•Target: Reduce Employee Turnover by 5% per year




What Do I Do With Key Performance Indicators?

Once you have good Key Performance Indicators defined

•Ones that reflect your organisation's goals

•One that you can measure

•What do you do with them?



use to manage performance

You make sure that everything the people in your organisation do is focused on meeting or exceeding those KPI's





use as a carrot

• Post the KPIs everywhere: in the lunch room, on the walls of every conference room, on the company intranet, even on the company web site for some of them. • In the lunch room• On the walls of every conference

room• On the company intranet• Even on the company web site

for some of them¡¡¡¡¡• Show what the target for each KPI is

and show the progress toward that target for each of them• People will be motivated to reach those

KPI targets




KPIs give everyone in the organisation a clear picture of what is important,

of what they need to make happen


KPI

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