Do you ever get the feeling that you could achieve your corporate goals so much quicker if every was pulling in the same direction? Or know the situation when everyone is working flat out yet the overall performance leaves much to be desired?
Typical reactions such as staffing measures, organisational changes or rounds of cost-cutting turn out to be unnecessary if a process is introduced in good time that sees all employees commit to the key priorities and incorporate action plans with measurable goals, e. g. in the form of KPIs. Managing with KPIs is in the meantime a measure used by many companies as a simple, fast-to-implement solution for achieving goals and improving performance.
What are KPIs?
In business management, the term key performance indicator (KPI) refers to a value that can be used to measure or determine the progress or degree of performance of important goals or critical success factors within an organisation.
Successful KPI management is based on performance indicators that are individually determined for an organisation, e.g. from traditional, economic figures for the company and the appropriate connection with other variables. What is important here is that the performance indicator is measurable and essential for achieving the company’s key goals.
How do you determine the essential KPIs for a company?
The starting point for a KPI process should always be the vision of the company. If this is defined as, for instance, being the European market leader for heating system heat pumps in 5 years then the short- and medium-term plans must be drawn up accordingly. This includes sales planning, contribution margin planning, quantity planning, financial planning, HR planning, etc. The ideal scenario is to also have a parallel customer survey to determine what criteria are decisive for customers when purchasing heat pumps.
Depending upon the approach, top-down and/or bottom-up, the employees are involved and the plans segmented according to areas and periods of time. No later than this point in time must a dialog process with the responsible members of staff take place to determine the criteria that according to the employees are decisive for achieving the above mentioned goals. An additional cross-check with the results of the customer survey offers additional security. The transformation of the currently abstract criteria into KPIs must be such that the KPIs are plausible, comprehensible and as far as possible measurable. At the same time, it is necessary to prioritise them to keep the number manageable.
Depending on the characteristics of the business and the effect on results, it is sensible to form KPI areas.
What should be kept in mind when working with KPIs?
Crucial to the successful application of the defined KPIs is a suitable, visual overview of the actual status, e.g. in the form of a traffic light system or a dashboard or cockpit chart. With these simple display formats, it is possible to evaluate at a glance the current situation on the respective target date.
By integrating the KPI reports as a management tool in the respective meetings and using them in the individual target agreements the process has come full circle.
What are the advantages of an individual, company-based KPI process?
The focus of the employees will be directed for the current period towards the truly important parameters relevant for the company and, in doing so, towards achieving the vision or the sub plans associated with it. Thanks to the joint KPI identification process and the consistency in management and individual evaluation, the acceptance and obligation is clearly higher than in other more theoretical goal-tracking scenarios.
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