According to AbbreviationFinder.org, KPI are the key performance indicators in a company. Metrics are generally established in the strategic planning stage, in line with the business objectives. Each objective of the company is accompanied by one or more KPIs that help the manager to coordinate the path to be taken and to see the results.
It is a management tool that allows the company to follow the company’s goals clearly, at different levels of the business. From a defined KPI, both the manager and the employee can periodically observe the results of their work.
Performance indicators must emerge from the objective in each area of the business. Human Resources, Marketing, Finance, Customer Service, that is, each sector of the company must have its own indicators that then create a map of the general position of the company in relation to the macro objectives.
That is why these metrics are called key indicators. It is not just raw data to be measured at random, but a system of periodic monitoring of quantitative and qualitative measures, essential to determine the success of the business.
KPIs must always be measurable. Subjective questions should only be asked as a performance index only if there is a formula that can quantify them.
The indices can be divided between Financial KPIs, that is, those whose results are in currency, and Non-Financial KPIs. In the latter there is some frequency of qualitative metrics, duly transformed into measurable questions.
- Profit per project
- Revenue per employee
- Average sales value per customer
- Cost per customer
- Conversion into sales generated by promotions
- ROI – Return on Investment in Advertising
- Cost Per Click
- Customer Satisfaction Level
- Market Share
- Local customers vs. foreign customers
- Brand Awareness
- Leads from Social Networks
- Turnover – Personnel Turnover
- New products / services developed per year
Among the main KPIs in logistics, for example, are the quantity of products delivered in a given period, transportation costs x inventory, rate of losses in transportation and inventory turnover.
How to establish KPIs
KPIs can be built exclusively for a single company. If among the objectives is a metric never used, usually a qualitative index, if there is a way to transform it into a measurable formula, it can become a KPI.
To verify that the desired metric is a KPI, the SMART technique is applied, in which the index in question must meet the following criteria:
And S PECÍFICO
If the index corresponds to all of these items, it may prove to be a key performance indicator.
What are performance indicators
The performance indicators serve to enable a company to visualize the performance of each sector, as a way of monitoring the objectives outlined by the strategic planning, analyzing what has already been achieved and what needs to be adjusted to achieve the goals.
The development of an organization can be strongly influenced by the demonstration of these indicators, which must be used in the different activities that add value to the business. With these analyzes, it is also possible to know the points of improvement, necessary in each process.
Examples of performance indicators
A company can analyze performance levels in its sectors in different ways, with the necessary measures. The most important thing is that the indicators should reflect the goals of the organization, easily presented through charts, graphs, flowcharts or another dashboard.
The most used type of measurement is through Key Performance Indicators, better known as KPI (Key Performance Indicator).
Key performance indicators – KPI
KPIs analyze the detailed performance of each process in a company, presented in a simpler and more direct way, unlike the indicators for general strategy, which are more complex and for the organization’s overall analysis.
These indicators are presented to the company’s employees, so that they are easy to understand and accessible for everyone to fulfill their duties according to the established goals.
The indicators are presented as forms of performance measures of the organization, demonstrated in different ways, such as:
- Quantitative indicators: numbers to be reached, such as the quantity to be produced in a production;
- Qualitative indicators: quality of products or services;
- Capacity indicators: demonstrating the maximum that can be achieved or what can be increased;
- Productivity indicators: also related to the reliability that the company experiences, for example with deliveries made in periods on or off deadlines.
For better use of these indicators, it is also necessary to establish performance targets for the purpose of comparisons, that is, to make “judgments” of the company’s performance. Among the most applied approaches are:
- Historical goals: comparison of current performance with previous performances;
- Strategic goals: established to reflect the level of performance to be achieved;
- External performance goals: present in the company’s participation in the market in which it participates, as an example the sales goals.
The combination of all indicators, by means of established goals of a company, presents the main strategic points (key), which can increase the performance of the organization as a whole.
Organizational performance indicators
These indicators are used as KPIs in a company, for the organizational management in each sector that it has, and the application of work strategies or improvements.
The most common sectors they use are:
Logistics : they reflect the objectives in all the logistical part, mainly in companies that this sector is responsible for the main activity, such as the carriers.
Financial : try to be in contact with the financial reality on the part of sales, as well as cost control. Through financial analysis, it is possible to study the viability, stability and profitability of a business.
Production : mainly use productivity indicators. The efficiency of a productive sector can be found by analyzing all the functionality involved, from the production capacity (if it is being achieved), even the amount of rework or waste is presented.