These are the business metrics used by managers and executives to analyse the factors that play a crucial role in the success of business. KPIs are measurable values that describe how company is achieving its goals and objectives effectively. There are multiple levels of key performance indicators used by organisations. The low-level key performance indicators focus on the functions of departments such as marketing, sales, HR, production etcetera. Whereas the high-level key performance indicators focus on overall functions of organisations.
To evaluate KPIs, organisations need to use the SMART criteria i.e. Specific, Measurable, Attainable, Relevant and Time frame. This SMART criterion are discussed as follows:
- Are the objectives of business Specific?
- Does business Measure its plan of activities to achieve goals?
- Are the goals of business are Attainable?
- How the goals are Relevant to business?
- What is well defined Time bound to achieve business goals?
Steps to develop Key Performance Indicators
While developing Key Performance Indicators, an organisation needs to customise KPIs according to its business situation. The steps to develop KPIs are discussed in a below manner:
- Write a clear objective for KPIs - The most important step for the business is to write a clear objective for KPIs. KPIs need business as well as other objectives for the success of an organisation,
- Share KPIs with stakeholders - The next step is to share KPIs with the stakeholders of business. If the business does not communicate properly with its stakeholders, then it is useless to develop key performance indicators.
- Review KPIs on a monthly basis - The third step for business is to review KPIs for the purpose of maintenance and development of resources effectively. The KPIs must be reviewed by business on a weekly or a monthly basis.
- Develop actionable KPIs – It is essential for a business to check whether the KPIs are actionable or not. In order to make sure that KPIs are actionable, a business must follow these steps:
- To review business goals
- To analyse recent performance of business
- To set short term, medium-term and long term KPI targets
- To review targets with team members
- To review progress and readjust business functions 5.Set KPIs achievable targets – It is a significant step that analyse the current performance of business to achieve KPIs targets. A business must set a target that can be achieved quickly at any time. 6.Update KPIs objectives – After setting up the KPIs targets, the next step of a business is to update the objectives of KPI. A business must update its KPIs objectives according to the changing market conditions.