3.1.1 Using Key Performance Indicators

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3.1.1 Using Key Performance Indicators

As mentioned in the first chapter, key performance indicators (KPIs) are tools that are used to provide a quantitative measure of performance against predefined targets. In determining if you have successfully earned profit, maintained productivity, and met your targets, it is important to have KPIs in place. These three indicators have different relationships with KPIs, as will be discussed below. Most importantly, being able to understand and integrate these concepts will help you effectively measure your success in relation to your overarching goals and objectives set in your operational plan.

Targets and KPIs

Most people would confuse targets and KPIs, using the terms interchangeably. However, there is a fundamental difference between the two. While KPIs are digestible metrics that help you understand how well you are performing, targets are the defined small-scale goals that your KPIs ought to work towards.

Below is an example that illustrates the difference:

In essence, your strategic objective serves as the foundation of your KPI, and your target is the specified goal that you intend to meet.

“Progress has little to do with speed, but much to do with direction.” Source unkown

Profit and KPIs

The most common function of KPIs is to measure and improve productivity and profit. Using KPIs to determine progress and success in earning profit is beneficial as it promotes accountability, provides support in decision-making, and helps you gauge the performance of your employees. Some examples of KPIs relevant to determining progress in achieving profit include:

Sample KPIs for Profit in Different Industries

Productivity and KPIs

Along with profit, productivity is the most common factor KPIs attempt to measure. There are many facets of productivity that a KPI can measure, but the most important ones would include:

In measuring your productivity-based KPIs, you can use tracking applications and software available.