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Implementing the right KPIs

businessportrait30393821.jpg Key performance indicators (KPIs) are financial metrics and non-financial metrics that are used to define and measure the progress of a company toward its goals. The business world has found that a company can either thrive or fail based upon their use of KPIs. A good business is able to identify, define, track and act up their KPIs.

Many business use KPIs to determine a particular course of action to take to help the company progress toward its goals. For each company, there are different KPIs that need to be measured. A KPI is determined by measurable objectives such as: "Increasing Customer Satisfaction by 10% for 2008." The KPI in this scenario would be `Customer Satisfaction'.

So how do you implement the right KPIs? Again, the KPIs differ for each business. The most common KPIs that are used involve the goals of the company. Some standard KPIs are as follows:

  • Define your business process

  • Define your company goals

  • Have a performance process in place

  • Have set goals in place to measure the results of measurable performances

  • Many companies believe in following the acronym "SMART: when they are identifying and applying KPIs:

  • Specific

  • Measurable

  • Achievable

  • Result-oriented or Relevant

  • Time based

A good KPI will include customer related numbers such as: new customers, satisfied customers, or customer turnover. Bad debts are another good KPI to use as you can track where you are losing money.
The data from KPIs are becoming a large concern for many companies. The quicker they have results, the quicker they can make a decision. Having large delays can slow your business process down and even cause headache for your customers. The KPIs you identify should yield a weekly or daily availability to your data.

KPIs can be summarized into several sub-categories such as:

  • Actionable indicators - These are great for helping a company control the effect of change.

  • Directional indicators - These specific if you business is growing or getting worse.

  • Practical indicators - What is interfering with your existing company process?

  • Quantitative indicators - These can be presented as a number.
KPIs target what is of value to your company. What does your business value and need the most? Remember that a good KPI will provide you will success and will measure activities that can be critical to attaining this success. KPIs can help your company to have success and structure across all levels, not just one area.

If you are not sure how to identify proper KPIs, you can always hire a company to do this for you. Several companies specialize in helping smaller organizations succeed by identifying and implementing proper KPIs. Strategy maps are a common tool used to measure the KPIs. These maps allow you to understand the KPI process and the management procedures that need to be used. Another good factor of hiring a KPI company is that you will have ongoing consulting and training services.

KPIs can also be used in other business management programs such as business performance management (BPM). In order for the BPM software to work, it must generate information using the key performance indicators (KPIs) in order to determine what direction the company is going. The KPIs are wonderful as they provide the tool BPM software needs to evaluate data. The BPM software will create feedback loops from the data it collects and analyzes. The quick results you will receive from the BPM software will allow you to identify problems quickly and take corrective actions before the problems become worse.

As you can see, KPIs are a great tool to help your company achieve success!

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Posted by DF
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