KPI's (Key Performance Indicators)
KPI's are used to distill key trends from the
cluttered repository and present them in the form of clear-cut index series - a
snapshot of corporate performance.
Key Performance Indicators (KPI’s) are the critical
(key) indicators of progress toward an intended result. KPIs provides a focus
for strategic and operational improvement, create an analytical basis for
decision making and help focus attention on what matters most.
Managing with the use of KPI’s includes setting
targets (the desired level of performance) and tracking progress against that
target. Managing with KPI’s often means working to improve leading indicators
that will later drive lagging benefits. Leading indicators are precursors of
future success; lagging indicators show how successful the organization was at
achieving results in the past.
Terminology Example: Let’s say someone wants to use KPI’s to help them lose
weight. Their actual weight is a lagging indicator, as it indicates past
success, and the number of calories they eat per day is a leading indicator, as
it predicts future success. If the person weighs 250 lbs / 113 kg (a historical
trend is called a baseline), and a person they would like to emulate is 185 lbs
/ 84 kg (comparison research is called benchmarking), they might set an 1,700
calorie-per-day target (desired level of performance) for the leading KPI in
order to reach their lagging KPI target of 185 lbs / 84 kg by the end of a
year.
The relative business intelligence value of a set of
measurements is greatly improved when the organization understands how various
metrics are used and how different types of measures contribute to the picture
of how the organization is doing. KPI's can be categorized into several
different types:
Inputs
measure attributes (amount, type, quality) of resources consumed in processes
that produce outputs.
Process or
activity measures focus on how the efficiency, quality, or consistency of
specific processes used to produce a specific output; they can also measure
controls on that process, such as the tools/equipment used or process training.
Outputs
are result measures that indicate how much work is done and define what is
produced.
Outcomes
focus on accomplishments or impacts, and are classified as Intermediate
Outcomes, such as customer brand awareness (a direct result of, say, marketing
or communications outputs), or End Outcomes, such as customer retention or
sales (that are driven by the increased brand awareness).
Project measures
answer questions about the status of deliverables and milestone progress
related to important projects or initiatives.
Terminology Example: Let’s say my business provides coffee for catered
events. Some inputs include the coffee (suppliers, quality, storage, etc.), the
water, and time (in hours or employee costs) that my business invests. My
process measures could relate to coffee making procedure or equipment
efficiency or consistency. Outputs would focus on the coffee itself (taste,
temperature, strength, style, presentation, accessories, etc.). And desired
outcomes would likely focus on customer satisfaction and sales. Project
measures would focus on the deliverables from any major improvement projects or
initiatives, such as a new marketing campaign.
The true value of KPI's lies in enabling you to
interpret your data at a glance.Without them, it is not even possible to get
lost in the stack of data provided by your web analytics solution partner.
KPI’s not only provide instantaneous information about
the overall health of your marketing efforts, but also help you realize
potential problems and deviate in the right direction before attempting to find
solutions in the depths of your data.
References
Arash Shahin, M. A. (2006). Prioritization
of key performance indicators. Iran.