Key Performance Indicators

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Key Performance Indicators

• By
• Kamran Safdar
• and
• Tao Wei

2
Talk Outline

• Introduction
• Uses
• Identifying KPIs
• KPIs essential criteria
• Categorization of Indicators
• Problems
• Conclusion

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Key Process Indicators

• KPI or Key Success Indicators (KSI), helps an
  organization to define and measure progress
  toward organizational goals
• organization has analyzed its mission,
• identified all its stakeholders, and defined its
  goals,
• needs a way to measure progress toward those
  goals.
• Key Performance Indicators are those
  measurements.

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How KPIs are used

• used in Business Intelligence
• assess the present state of the business
• prescribe a course of action
• to "value" difficult to measure activities
• benefits of leadership development, engagement,
  service and satisfaction
• typically tied to an organization's strategy
• techniques such as the Balanced Scorecard

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Uses-Continued

• all types and in all areas of project management
  
• IT (information technology)
• construction
• engineering
• risk management
• supply chain, safety
• quality, manufacturing
• financial management, sales...

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Identifying Indicators

• KPIs are quantifiable measurements
• reflect the critical success factors of an
  organization
• Differ Organization to Organization
• Business KPIs
• percentage of its income
• that comes from return customers
• Schools focus KPIs
• graduation rates of its students
• Customer Service Departments KPIs
• percentage of customer calls answered in the
  first minute

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Identifying Indicators-Continued

• social service organizations KPIs
• number of clients assisted during the year
• Whatever Key Performance Indicators are selected
• they must reflect the organization's goals
• they must be key to its success
• they must be quantifiable (measurable).

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Identifying Indicators-Continued

• KPIs usually are long-term considerations
• Definition do not change
• what they are and how they are measured
• Goals for a particular KPIs may change
• application of Key Performance Indicators
  provides
• high-level, real-time view of the progress of a
  company
• reports, spreadsheets and charts
• sales figures (global or regional), trends over
  time, supply chain information

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KPIs reflect the organizational goals

• An Organizations goal
• most profitable company in our industry
• Its KPIs
• profit and related fiscal measures
• Not KPIs
• Percent of Profit Contributed to Community Causes
• school is not concerned
• making a profit
• Graduation Rate" and "Success In Finding
  Employment After Graduation

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Quantifiable KPIs

• Important to define KPIs
• Stay with the same definition year to year
• KPI of Increase Sales
• Measure by units sold?
• Dollar value of sales?
• Will returns be deducted from sales in the
  months?
• Or the month of the return?
• Will sales be recorded at list price?
• Or at the actual sales price?

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KPIS essential criteria

• KPIs should preferably meet the following
  essential criteria
• Be direct (no complex calculations)
• Be objective
• Be adequate
• Be quantitative
• Be practical
• Be reliable
• carefully consider the results desired
• Select the best performance indicators

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Marketing KPIs

• Among the marketing KPIs top management analyzes
  are
• 1 Customer related numbers
• New customers acquired
• Status of existing customers
• Turnover generated by segments of the customers
• Outstanding balances held by segments of
  customers
• these could be demographic filters
• Collection of bad debts within customer
  relationships
• Demographic analysis of individuals
• Profitability of customers by demographic
  segments
• Delinquency analysis of customers behind on
  payments

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Categorization of indicators

• Indicators identifiable as possible candidates
  for KPIs
• Quantitative indicators
• which can be presented as a number
• Practical indicators
• that interface with existing company processes
• Directional indicators
• specifying whether an organization is getting
  better or not
• Actionable indicators
• are sufficiently in an organization's control to
  effect change

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Problems

• organizations and businesses looking for KPI
  discover
• too expensive
• difficult or impossible
• E.g. staff morale may be impossible to qualify
  with a number
• serious issue in practice is that once a KPI is
  created
• it becomes difficult to change them
• as your yearly comparisons with previous years
  can be lost
• if it is too inhouse
• extremely difficult for an organization to use
  its KPIs
• to get comparisons with other similar
  organizations

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Conclusion

• Thus before any Key Performance Indicators are
  selected, it is vital to identify what the
  organizations goal is
• which are in turn dependent upon then its mission
  and its stakeholders.
• KPIs act as a measure of progress towards these
  goals
• Whatever they may be, they must be critical to
  the success of the organization
• It is important that after Key Performance
  Indicators and their relative components have
  been identified, they should be used as a
  performance management tool.

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References

• http//management.about.com/cs/generalmanagement/a
  /keyperfindic.htm
• http//www.visitask.com/key-performance-indicators
  .asp
• http//www.visitask.com/Developing-key-performance
  -indicators.asp
• http//en.wikipedia.org/wiki/Key_performance_indic
  ators
• http//www.envirowise.gov.uk/kpifaqs

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Thanks for your attention