Business and nonprofit making organizations are putting up plans and strategies in efforts to reach their strategic goals. Every organization, in line with its mission and vision, continues putting together its resources to see that it attains its long-term goals. For some organizations it is easy. They put together resources, lay out plans and begin undertaking activities and projects to reach these goals and get amazing results. For other organizations, they plan and begin to execute projects that will never get completed and if they do, the purpose for which they were created for will not be reached. The varying levels of organizational success in relation to stalling or completion of unsuccessful projects is probably how the organization tracks the progress of their projects.
Organizations with god tracking systems have proven to run some of the most successful projects. Contrary to a popular opinion, project tracking is not solely based on the completion of an activity but the outcome the completed activity has had. That is where the concept of Key Performance Indicators (KPI) come in handy. Key performance indicators are basically the elements of your plan that show the thing you want to achieve and when you want to achieve it (Badawy, 2015). A key performance indicator is countable and comparable. It has the ability to provide an evidence to the extent at which an objective is being realized within a specified period of time.
KPIs have distinct features that make it easy to measure level of achievement. From the basic definition, we have seen that a KPI is countable. It means that quantity can be assigned to a key performance indicator in terms of numbers or percentage. A key performance Indicator is quantifiable and that makes it easy to measure the level of success with specificity. Secondly, a key performance indicator is comparable. A KPI has a benchmark against which a number or a value is compared to. The benchmark, in this case, is the optimal, acceptable or unacceptable value or number. A KPI provides evidence. It is presented by counting and comparing. It should however be clear and be specific in relation to its meaning. A KPI shows an extent to which an objective has been met (Ariyachandra, 2016). That is one of the key features of KPIs as it determines whether what was indented has been achieved. It measure whether the project is meeting its purpose since without an objective then there will be nothing to measure against. Lastly, a key performance indicator is time bound. Everything happens within a specified period of time. Progress and achievement of objectives is therefore measured within a specified time duration.
Having looked at what KPIs actually are and their key features that make them successful in measuring achievement, it would be important to look at how useful they are. Firstly, key performance indicators are incentives for personal performance. Employees in an organization do not entirely rely on their skills to complete the tasks presented to them. To a large extent, their productivity depends on their level of motivation. Fortunately, for some, their key motivating factor is the success and achievement that comes along with the completion of their daily tasks (Toi, 2016). Measurable and time specific key indicators motivate the employees to achieve success by completing a project or a task within a specified period of time. If the indicator in question, for example, is the number of customers served in a week, then the employee will want to achieve success by not working for a week, but by serving the maximum number of customers possible in that specified time duration of one week. Improved individual performance has a consequential effect of improved productivity of the entire organization. If the profitability of the organization depends on the number of clients served, then its overall financial performance will significantly improve.
A KPI offers a platform for future strategies. When a key performance indicator is used to measure the level of success of a venture, the information can be used to predict the future and lay down strategies that can be used to seize future opportunities. Let’s take an example of a key performance indicator showing that a particular beach receives the maximum number of tourists in a particular month of the year. That information is crucial as it provides the organization with crucial information on when to give out discounts or improve its advertising (Shahin, 2017). The information helps in improving its preparedness towards market changes and future threats that would have otherwise struck unknowingly. The overall impact is eventual organizational success and optimum performance.
KPIs are key contributors to organizational alignment towards a common goal. Every organization has a single mission and vision. It puts in lace strategic plans aimed at accomplishing its strategic goals. If these goals have to be reached, then all the organizational employees and departments have to work towards a common goal (Gabčanová, 2017). It is, however, increasingly difficult to have all the employees and departments vision towards a common goal because for most of the people the strategic goals are just hard to comprehend. That is where key performance indicators come into play. The strategies and goals are broken down into simpler and measurable information that can be easily understood by the employees. These metrics provide constant feedback and spell quantifiable and specific objectives of the strategies in place and that enable the organizational members align themselves to the goals and objectives of the entire organization.
KPIs provide an organization with an actionable information. Organizations need to make annual reports on their performance, usually with the previous year as the benchmark. It is difficult to make these reports with an unquantifiable information. KPIs provide an organization with a measurable and quantifiable information that can be analyzed to spell the performance of the organization (Cox, 2017). For instance, a coffee farm will be able to measure the number of coffee tons sold in a particular year. Tis number can be compared to that of the number of tons sold in the previous year. From the information, it is possible to calculate the percentage increase or decrease in sales. That percentage can be easily acted upon by organization because of its clarity and usability. With the information, it is easy to lay strategies on how to improve the sales and consequently improve the general profitability of the organization.
KPIs are critical in organizational decision making. Every organization is involved in making decision about the next course of action in matters relating to organizational performance and the achievement of organizational goals. All the decisions made in an organization depend on information and reports from different departments. For instance, the decision to declare some vacancies in the organization redundant depends on human resource reports. To make such decisions, the reports should be in form of specific, measurable and quantifiable data (Chan, 2016). That data is what KPIs provide to an organization. For example, if the number of customers served by an organization remained the same or dropped with an increase in the number of workers, it means that the current workforce exceeds the optimum number. That information, when presented to the managerial team, makes it possible to determine on whether or not to lay off some employees. Basically, organizational decision making is entirely dependent on key performance indicators.
There ae different key performance indicators which include quantitative, qualitative, leading, lagging, input indicators among others. Each indicator works differently but all serve the common purpose of measuring performance and achievement. The qualitative indicator, for example, focuses on characteristics such as opinions, properties or traits (Cooper, 2017). On the other hand, a qualitative indicator solely measure performance by a number and is considered the most straightforward, realistic and reliable indicator. Due to its quantitative nature, it is easy to draw conclusions from it and make viable decisions. Its data can be statistically analyzed for further uses and projections. From it, it is possible to derive percentages, means, modes, among other statistical figures that are crucial in decision making leading to the eventual success and productivity of an organization. That is because it presents an organization with usable and factual data.
Overall, key performance indicators are major determinants of the success of an organization since they affect decision making. They also influence individual behavior and attitude towards work consequently affecting the overall organizational performance. The utilization of key performance indicators data, therefore, is a key determinant of organizational success in the short-term and long run.
Ariyachandra, T. (2016). Critical success factors in business performance management—Striving for success. Information systems management, 37,98.
Badawy, M. (2015). A survey on exploring key performance indicators. Future Computing and Informatics Journal, 76.
Chan, A. (2016). Key performance indicators for measuring construction success. Benchmarking: an international journal, 54,76.
Cooper, R. (2017). Winning businesses in product development: The critical success factors. Research-technology management, 65,76.
Cox, R. (2017). Management’s perception of key performance indicators for construction. Journal of construction engineering and management, 66.
Gabčanová, I. (2017). Human resources key performance indicators. Journal of competitiveness, 34,74.
Shahin, A. (2017). Prioritization of key performance indicators. International Journal of Productivity and Performance Management, 44,52.
Toi, A. (2016). Factors affecting the success of a construction project. Journal of construction engineering and management, 58.
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