An important key to a business’s success relies on proper management information. While ensuring cash flows and profitability, a business should also keep track of its efficiency key performance indicators (KPI) in check.
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Efficiency KPIs are mathematical measurements that indicate the business’s critical success elements. Derived from measures agreed beforehand, efficiency KPIs show a snapshot of the business at a higher level. These indicators vary according to the type of industry they characterize. For example, a company can have a key performance indicator as the yearly saes volume or a social service institution can have KPIs that have more to do with how many people they have served in a year. Also, an academic institution may have, as one of its KPIs the total number of graduating students every year.

Before choosing any key performance indicator, it is important to determine what exactly the goal/s of the organization is. These goals should be dynamic and in line with the key performance indicators adopted. It has to be noted the KPIs serve as the measure of progress so that these goals can be met. Whatever these goals are, it should be critical to the organization’s success.

The use of key performance indicators allows business superiors and executives a real time and high level view of how the company is moving. These may comprise a mix of reports, charts and spreadsheets. These may also be regional and global sales figures, trends over period, information on supply chain or other long-term consideration that may be vital in measuring the organization’s health. However, keep in mind that key performance indicators must not only mirror the organization’s goals but must be quantifiable as well.

For a truly efficient key performance indicator, there should be a method to define and gauge it accurately. This is because a KPI can meet the criteria of being reflective with the organization’s goals. It may pertain to being the most recognized company. But since a firm’s popularity cannot be compared or gauged to others, the KPI may just be useless.

Moreover, considerations with regard to how key performance indicators should be gauged must be set earlier as well. Definitions that pertain to how these indicators should be computed and whether these should be measured in currency or units must be specified too. In addition, it is important for an organization to be consistent with these definitions year after year to enable yearly comparisons.

Key performance indicators may be applied for all kinds and aspects of project management such as construction, engineering, financial management, information technology, manufacturing, quality assurance, risk management, safety, sales, supply chain and many others.

Once the KPIs will have already been defined and measured, a clear and concrete target should be distinguished and be made understandable by everybody. Also, the target must be specific so that one can take direct and necessary actions towards realizing it.

Once the key performance indicators and its respective elements will have been determined, these should be applied as a tool for performance management. Variance representation should from target levels must be defined as well, eventually ensuring that each one in the organization leans towards accomplishing target levels of efficiency KPI.

By: Sam Miller