Good Key Performance Indicators vs. Bad

good and bad

 

By , About.com Guide

Bad:

  • Title of KPI: Increase Sales
  • Defined: Change in Sales volume from month to month
  • Measured: Total of Sales By Region for all region
  • Target: Increase each month

What’s missing? Does this measure increases in sales volume by dollars or units? If by dollars, does it measure list price or sales price? Are returns considered and if so do the appear as an adjustment to the KPI for the month of the sale or are they counted in the month the return happens? How do we make sure each sales office’s volume numbers are counted in one region, i.e. that none are skipped or double counted? How much, by percentage or dollars or units, do we want to increase sales volumes each month?(Note: Some of these questions may be answered by standard company procedures.)

Good:

  • Title of KPI: Employee Turnover
  • Defined: The total of the number of employees who resign for whatever reason, plus the number of employees terminated for performance reasons, and that total divided by the number of employees at the beginning of the year. Employees lost due to Reductions in Force (RIF) will not be included in this calculation.
  • Measured: The HRIS contains records of each employee. The separation section lists reason and date of separation for each employee. Monthly, or when requested by the SVP, the HRIS group will query the database and provide Department Heads with Turnover Reports. HRIS will post graphs of each report on the Intranet.
  • Target: Reduce Employee Turnover by 5% per year.

 What Do I Do With Key Performance Indicators?

Once you have good Key Performance Indicators defined, ones that reflect your organization’s goals, one that you can measure, what do you do with them? You use Key Performance Indicators as a performance management tool, but also as a carrot. KPIs give everyone in the organization a clear picture of what is important, of what they need to make happen. You use that to manage performance. You make sure that everything the people in your organization do is focused on meeting or exceeding those Key Performance Indicators. You also use the KPIs as a carrot. Post the KPIs everywhere: in the lunch room, on the walls of every conference room, on the company intranet, even on the company web site for some of them. Show what the target for each KPI is and show the progress toward that target for each of them. People will be motivated to reach those KPI targets.

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About rianstefan

My practical approach based on experience is to create a website for real Internet users, not for search engine spiders.
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