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Key Performance Indicators

Do you know what a key performance indicator (KPI), a key performance measure (KPM), or a key performance factor (KPF) is?  The short answer is they are all acronyms for the same thing – a performance metric.

The rest of the answer lies in the word “key”.  Regarding performance measures, key means most important or most relevant.  Why make the distinction?  Isn’t everything we are tracking in our organization important?

Well….. it depends.  Sometimes a metric is tracked because it’s easy or fun to measure.  That doesn’t mean it’s not a valuable metric, but it may not be a key metric.

So what makes a metric so important or relevant that it becomes key, that it becomes vital for your organization to monitor?  It tracks something valued by your client so much that they will either compensate or penalize you for it, or it tracks one of your organization’s goals.

Just because something is easy to measure and track doesn’t mean you should monitor it.  You may find yourself tracking so many things that you suffer analysis paralysis when it’s time to evaluate your company’s performance and make decisions.  You may instead discover you tracked items that aren’t important to your customers.

If you are self employed or a small business owner and need assistance with developing KPIs (KPMs, KPFs), contact me and I will help you develop metrics that will foster success!  You may contact me here.

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Why measure business performance?

Performance should be tracked whether you’re self employed, a small business or non-profit owner with few employees, or a department within an organization.  In this post, I’ll tell you why.

They provide objective information that can be used to make informed decisions, unlike subjective opinions which can vary widely among people.  The objective information helps prevent purely emotional decisions.

They help you understand how your business functions, how its processes work, the problems your organization is having, and whether improvement attempts were effective.

Performance measures assist planning.  They help you see how a change in one thing will affect other people, inputs processes, outputs, products, and services.

They help motivate individuals and promote teamwork.  People naturally want to perform well and succeed.  When people see that their efforts are leading them toward the goal, they become enthusiastic about reaching it and want to continue.

They create support for changes.  If the numbers show a goal may not be met, people will be willing to take corrective action so they can head toward the goal again.

They reduce the chances of unpleasant surprises.  Even if you understand some of the problems, you may not understand others, let alone be aware that other problems exist.  Knowing what’s going on is vital for determining the solution.

They clarify responsibilities and objectives.  Everyone knows what they’re supposed to accomplish.  Each person can see how well they’re performing.  They show who is accountable for what.

When a company’s performance measures match it’s plan, it’s members are more likely to work toward the same company goals.  Without metrics, time and money may be lost to activities that, although produce something, don’t lead to progress.

If you’re self employed, or own a small to medium sized business, I would love to help you develop metrics that will foster success!  You may contact me here.