The KPI (Key Performance Indicator) is defined as a factor which is critical to the success of our business. As such it should be measured regularly by collecting and analysing reliable internal and external data. This data allows the company to evaluate its performance and subsequently benchmark it against the rest of the industry. Additionally, it makes our achievements directly comparable to those of our competitors.
The process of identifying and selecting the appropriate KPI’s for our business is paramount as this is the stage when a formal system for measuring our performance is established. The company’s commitment to measuring and analysing the collated data can lead to business objectives’ realisation and continual improvement. However, the KPI’s are only a business tool for decision making and at no point can it replace the formal strategic planning of the company.
The benefits seized by such a methodology are presented below:
- KPI’s can be an initiator for directing and driving our business forward through influencing our business processes. The successful management of our business processes can result into an efficient and profitable company as a whole.
- KPI’s consist a great tool that supports the company’s vision and goals; two of the major “team binders”. It is generally accepted that integrated teams work more efficiently and produce results in shortest time. Time reductions mean less cost and so greater profitability and predictability of performance.
- KPI’s can be a mean for driving improvement through comparison. They can reveal the strengths and the weaknesses of a business and prepare the ground for building a competitive advantage. They reinforce our knowledge for the industry by learning from our competitors.
- KPI’s could drive innovation. This is why a failure to identify meaningful and measurable KPI’s can put our business in danger as we become short sighted, having limited visibility and finally becoming counter-productive.