Why you should be using KPIs in your business
Most businesses could be improved simply by understanding how well their employees are working.
- Are they applying their skills?
- Are they reaching their targets?
- Do they understand how to reach these targets?
If an HR department can evaluate the performance of an employee and then use this information to skilfully manage employee performance, then this should lead to a well-balanced and productive workforce. A real and effective way to achieve this is through the use of KPIs.
A KPI or Key Performance Indicator, put simply, is a method to assess how competently your company is meeting and achieving its targets; basically it is a tool for you to gather information.
KPQ comes before KPI
When assessing your business, it is first important to ask what you are assessing.
How do we make the decision? Finding the right KPI should start with knowing exactly what your business goals are. So therefore you must find the right KPQs?
Right, so what is a KPQ? A KPQ is a Key Performance Question. By knowing what questions to ask to assess your company you can develop the correct KPIs.
For example, you could ask:
- How well are our partnerships progressing?
- How well are we meeting our customers’ demands?
- To what extent are we enhancing our international reputation?
Once you have your list of relevant KPQs you can now ask the relevant people to collect enough information to create a list of informed and directed KPIs.
Selecting & implementing your KPIs
Using the information from your KPQs it is possible to create number of targeted KPIs. The point of a KPI is to allow the HR department and executives to easily and effectively monitor whether goals are being reached.
Some examples of KPIs are:
- Customer lifetime value
- Sales by region
- Percentage of product defects
So how can KPIs help your business? KPIs can focus your employee’s attention. Instead of them trying to hit some vague target they will have a specific route to increase sales. They will also assist in promoting consistency. It may be all very well to have those high performance weeks, but it is important to realise why you are not constantly performing at the same rate - drawing attention as to why you have those dips.
More crucially, KPIs encourage transparency. In business it is vital to be open. Through KPI scores, it is possible to see who is performing and who may be struggling. Making it possible to offer training and support to those employees rather than having them quit or gradually lose confidence, which will in turn affect your profits.
So how can you use KPIs to improve performance? KPIs allow smoother communication between staff members. Instead of just randomly appointing praise and blame, it will now be clear exactly where the positives and negatives in your business lie.
It will be possible to have data and fact-driven meetings weekly or monthly, where you can discuss together possible areas of improvement and the areas that are succeeding. Management can offer advice and allocate a budget to the most suitable training methods for the people who really need it, rather than indiscriminate and unnecessary sessions.
KPIs do benefit everybody.
However, it is vital to invest some initial time on deciding which areas are to be targeted. Also, you need to be willing to reevaluate every 6 or 12 months. If you work hard on implementing your chosen KPIs then you will immediately begin to see results and a more efficient work force.