Key Performance Indicators is how an organization defines and measures progress toward its goals. The literal definition is : Chosen factors that directly and indirectly influence the effectiveness of a product or process. For example KPIs for the HR Department can be Employee Turnover, Employee Satisfaction, Absenteeism, Staff Competency.
KPIs, or key performance indicators help organizations achieve organizational goals through the definition and measurement of progress. The key indicators are agreed upon by an organization and are indicators which can be measured that will reflect success factors. The KPIs selected must reflect the organization’s goals, they must be key to its success, and they must be measurable. Key performance indicators usually are long-term considerations for an organization.
A few key components in this definition:
Â· “Organizational goals.” It’s imperative KPIs aren’t set to standard industry goals but to your goals for your business and Web channel. The second-to-last line speaks to this again: “The KPIs selected must reflect the organization’s goals, they must be key to its success, and they must be measurable.”
Â· “Measurement of progress.” We want to look at KPIs over time as we make changes to improve the overall site performance based on those KPIs. After a change is made to the site, did it drive KPIs in the direction we expected?
Â· “Agreed upon by an organization.” This is imperative so everyone is on the same page, and the KPIs are constructed by people with different functions within the organization.
KPIs should contain both lagging and leading indicators as it is important for the business to know how well and in what areas it has performed in the past, while recognizing the significant value in understanding how business decisions today will impact performance in the future. Lagging measures indicate the state of the company today, such as balance sheet data, customer retention rate and market share. Leading measures forecast future performance, such as customer satisfaction, training budget and time to market. Each strategic focus has KPIs that are beneficial specifically to that type of focus.
Many things are measurable. That does not make them key to the organization’s success. In selecting Key Performance Indicators, it is critical to limit them to those factors that are essential to the organization reaching its goals. It is also important to keep the number of Key Performance Indicators small just to keep everyone’s attention focused on achieving the same KPIs.
KPIs are usually are long-term considerations. The definitions of what they are and how they are measured do not change often although the goals for a particular indicator may change as the organisation’s goals change, or as it get closer to achieving a goal.