Monday, December 11, 2017

Have you been provided clear KPIs ? What is your Experience?




What is KPI

Key Performance Indicator is a value which demonstrates how effectively a company, division or individual is achieving its set targets and objectives.

SMART KPIs




Why you need KPIs


KPIs are necessary in order to; 
1) Manage Performance
2) Reward exceptional employees for achievements
3) Motivate Employees
4) Increase individual, team and organizational performance


How should these KPIs be implemented?

These could be defined in common for each division in an organization. However these common KPI values should then be set on an individual basis with discussion with each employee. This is an essential point on which organizations sometimes do not focus. Since the capacity of each individual employee is different, it is vital to set goals on an individual basis and also to provide rewards on an individual basis. However the rewarding process should be clear and transparent. This approach would also help in engaging the employee with the organization.

Do you know your KPIs

The KPIs would differ according to the nature of the products and services offered by an organization. Here are some sample KPIs of some departments in an organization;



        1. Frequency of sales transactions 
        2. Number of Deals per Partner
        3. Average Revenue per Product
        4. Sales Cycle Time
        5. Closed Sales

        1. Average response rates of campaigns
        2. Number of Client Visits
        3. Cost per converted lead
        4. Staying in budget
        5. Website Hits




        1. Average Customer Receivable 
        2. Budgeted Expenses
        3. Cycle time to process payroll
        4. Percentage of Invoices being queried
        5. Employee available time



        1. Average Interview Costs
        2. Percentage of HR Budget spent on Training
        3. Average Number of Vacation days per Employee
        4. Percentage of employees receiving regular performance reviews
        5. Percentage of New Hire Retention



        1. Lead Time
        2. Cycle Time
        3. Estimation Accuracy
        4. Endpoint Incidents
        5. Service Desk time to Resolve


Example of a Smart KPI

Sales Growth KPI


What is your desired outcome? 
To increase sales revenue by 20% this year

Why does this outcome matter? 
Achieving this target will allow the business to become profitable

How are you going to measure progress? 
Progress will be measured as an increase in revenue measured in dollars spent

How can you influence the outcome? 
By hiring additional sales staff, by promoting existing customers to buy more product

Who is responsible for the business outcome? 
The Chief Sales Officer is responsible for this metric

How will you know you’ve achieved your outcome? 
Revenue will have increased by 20% this year

How often will you review progress towards the outcome? 
The KPI will be reviewed on a monthly basis
(Next Gear Solutions 2016)


References
Karlson, K. (2016)16 Sales KPIs that Every Team Should Measure [online] Available at https://www.scoro.com/blog/sales-kpis-for-executive-dashboard/ Accessed 28th November 2017


Micro Focus (2017) 9 metrics that can make a difference to today’s software development teams. Tech Beacon [online] Available at https://kpidashboards.com/kpi/department/human-resources/ Accessed on 11th December 2017

Next Gear Solutions (2016) Are you KPI Compliant. Restoration Business Tips [online] Available at http://www.nextgearsolutions.com/blog/restoration-business-tips/are-you-kpi-compliant/ Accessed on 28th November 2017




8 comments:

  1. Hi Dasuni! Nice article
    The challenging task for the HR department will be to set the KPI's for each departments. Sometimes the employees does not understand KPI's in some context.

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    Replies
    1. Hi Anfas. Thanks for the comment!

      Agree with your point. However, this is where the line managers should come into the picture. They should be more involved in creating the KPIs for their departments and conveying and discussing the KPIs with the employees in their department on an individual basis and setting targets for each individual for each KPI. If this responsibility is fulfilled by line managers instead of waiting for the HRM department to do the job I believe that it would be easy to come out of both the drawbacks which you have very well.identified.

      Delete
  2. YOUR KPI ANALYZING BY EACH DEPARTMENT WAS EXCELLENT.BUT SALES PEOPLE HAVE OVERALL KPI FROM EACH DEPARTMENT.

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    Replies
    1. Hi Ruchira, Thanks for the comment!

      I agree with you that there are some KPIs which are applied across the organization irrespective of the department. I believe it could be for the Sales department as well as any other department.

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    2. Ideally KPI's should start from the Top Management aligning with the Organization goal and then inherited to each functional units with respective KPI's that contributes to achieve the organisational goal.

      Delete
  3. Companies should always have a flexible and creative mindset when developing KPIs, as their ultimate goal is to drive the performance changes required by the corporate strategic plan. KPIs cause divisions and departments to act differently, improve certain processes and drive discussion and agenda items at the executive level. Well-designed KPIs enable management to ask the right questions, rather than give neat answers and results. In other words, KPIs are tools to create a climate for action and to support dynamic high-level discussion.

    However there are common challenges in setting targets

    - Striking the right balance between being realistic and challenging
    - Achieving alignment between compensation and performance
    - Setting targets rests only with top leadership
    - Meeting targets is not achievable with approved resources
    - Collecting and reporting on the target data is not possible
    - Causing anxiety among staff because of target-setting process
    - Expressing targets in a clear and simple way
    - Selecting targets that staff regard as appropriate
    - Identifying targets that are achievable within the required time frame
    - Finding alignment with broader objectives


    It is also worth analyzing why people usually dislike KPIs

    - Benefit and value of measurement is not understood
    - Individuals don't know how to use KPIs effectively
    - Accountability is placed with the individual
    - Poor performance can be uncovered as a result of KPIs
    - KPIs can be used as a means of punishment
    - Using KPIs costs money, time and effort

    KPI is something that you can only get really right by trial and error. For example, one expert may recommend a list of KPIs and another expert would likely recommend a completely different list. Neither of them is right or wrong. There always has to be a quantifiable and realistic goal.

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  4. Anyone who works for blue chip companies may know what are KPIs. KPIs mostly measured in numericaly. Sometimes it is used as window dressing to hide problems. Sometimes people manipulate their KPIs but still they get paid. Anyhow, KPIs with numbers cannot be always lie. It can be a way to know whether you are on track and if actually make effort to self analyse.

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  5. Ideally KPI's should be a top down approach where each bottom level has a link to the top level. I've seen breakdown of link in many organizations. That is where the anomalies happen in performance evaluation process.

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