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Key Performance Indicators (KPIs)

A key performance indicator (KPI) is a type of performance measurement (Carol,

1990). An organization may use KPIs to evaluate its success, or to evaluate the success of

a certain activity in which it is engaged. Sometimes success is defined in terms of making

progress toward strategic goals but often success is simply the repeated, periodic

achievement of some level of operational goal. They are also quantitative and qualitative

measures used to review an organization’s progress against its goals. These are broken

down and set as targets for achievement by departments and individuals. The

achievement of these targets is reviewed at regular intervals (Robert, 2003). KPIs are

used to monitor the performance of a company, department, process or even an individual

machine. They will also help shape the behaviors of employees within the company

(Robert, 2003).

KPIs need to be flexible and reflect the changing goals of the organization. Goals

change as the organization changes in reaction to external factors or as it gets closer to

achieving its original goals. Individual KPIs need to be directly linked to organization

goals and objectives, or overall organization KPIs where they are used. They need to

reflect organization culture and values, by indicating the types of behavior and

performance the organization will recognize as ‘successful’ and reward employees for.

(David, 2012). KPIs need to be measurable and reflect a balance between operational

and people orientated measures. KPIs are a fundamental component of sustaining a

change process and maintaining a performance management culture. KPIs should be

aligned with the organization’s vision and direction. When performance is measured, and

the results are made visible, organizations can take action to improve (David, 2012).
SMART KPIs

The acronym SMART is often used to describe KPIs (Specific, Measurable,

Achievable, Relevant, Timely, and Specific) (Bernard, 2012).

Specific

KPIs need to be specific to the individual job and if possible expressed as

statements of actual on-the-job behaviors. For example, a KPI should: Explain clearly to

the employee what he/she has to do in terms of performance to be successful.

Measurable

KPIs must be measurable, that is based on behavior that can be observed and

documented, and which is job-related. They should also provide employees with ongoing

feedback on their standard of performance.

Achievable

Performance management needs to be an open, collaborative communication

process. KPIs must be seen by all that they are achievable.

Relevant

The KPI must be realistically achievable. If it is set too high for the circumstances

(such as an ambitious production target), not only will it be irrelevant but it will ensure

failure.

Timely

KPIs should have an appropriate time frame. It should be possible to collect the

relevant information either ‘as it happens’ or within a short time afterwards, otherwise it

will lose its relevance. As outputs of the performance management system, KPIs also
need to be in alignment with other HR-related functions, including training and

development, recruitment and selection, rewards and recognition, and career planning.

Performance indicators differ from business drivers and aims (or goals). A

business might consider the percentage of income from returning customers as a potential

KPI. The key stages in identifying KPIs are: (David, 2012).

 Having a pre-defined business process (BP).

 Having requirements for the BPs.
 Having a quantitative/qualitative measurement of the results and comparison with

set goals.
 Investigating variances and tweaking processes or resources to achieve short-term

goals

References

Bernard, M. (2012). Key Performance Indicators: The Measures Every Manager Needs to

Know. Financial Times/ Prentice Hall. ISBN 978-0273750116 .

Carol, T., (1990) "Performance indicators." BERA Dialogues.

ISBN 978-1-85359-092-4.

David, P. (2012). Key Performance Indicators. John Wiley & Sons 2007, ISBN 0-470-

09588-1 .

Robert D.A. (2003). "Measuring and Managing Performance in Organizations."