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
Posts Tagged ‘Kpi’
Efficiency KPI for Effective Project Management
April 3rd, 2010Training KPI and Effective HR Management
March 20th, 2010
The use of KPI’s or key performance indicators is quite a useful concept that has become popular in strategic management. Over the past years, the practice of management has been becoming more and more based on facts and observations, and it became logical to try and define which parameters could determine performance.
Being able to have quantifiable bases with which to measure various aspects of the performance and condition of an employee, group, or company has become one of the basic principles of sound management. After identifying the various measurable quantities available, it then becomes a matter of choosing the most relevant parameters. The most important of these parameters then became known as key performance indicators (KPI).
For instance, a training KPI is the average number of training hours that each employee has undergone within a specified time period, usually a year. This parameter would be able to roughly indicate the amount of training that an employee, on average, is able to get within that time period.
By considering both the magnitude and the rate of change of this parameter, management would be able to get a clearer idea of whether their employees are receiving enough training. Conversely, if this average number is too small, or if the rate of change is negative – that is, if the number of hours show a decreasing trend – then it might be necessary to route more resources to training.
Another training KPI that might prove useful is the average training cost, per employee, over a specified time period. This cost can then be compared against the average increase in productivity, to see if the training regimen that has been implemented actually worked. For example, a high average training cost together with a low average increase in productivity would seem to point towards an ineffective training program. A lower average training cost, on the other hand, together with a high average increase in productivity would mean that the training program implemented was a cost-effective one.
It can be seen from these examples, then, that considering training KPI’s individually would not always yield accurate evaluations. This is because many of these parameters are actually interrelated, and must be considered together to represent a meaningful way of measuring performance.
It is still important, of course, to be able to identify what these most important training KPI’s are, to be able to monitor all of them effectively. Once data has been gathered according to these known key performance indicators, then the data can be evaluated, in light of the relationships between these KPI’s. A proper selection of KPI’s would help to limit the data to be analyzed to those data that would really be relevant.
In today’s world, organizations are more often than not forced to adapt to changing conditions and a dynamic marketplace. This places more importance on being able to evaluate and implement effective training programs. With the use of training KPI’s, managers would be able to judge better and craft good training programs for the betterment of their organization.
By: Sam Miller
