What do we achieve with Key Performance Indicators?
We have previously looked at the importance of key performance indicators and we have seen that the main purpose of establishing KPI's is to extract information from the results.
Not only do we want information but we want information that we can use for future reference.
Unfortunately, not all the information we receive from KPI's is positive but as we are now looking at how we can use this feedback to our benefit it is a good thing that we have some negative feedback as well.
The 3 Main reasons why we use Key Performance Indicators
First, we have to recap on the reasons why we are using key performance indicators and here are the main reasons:
- To monitor if current processes are performing as well as we intend to.
- To see if we are on par with our long-term goals and organizational strategy.
- To find anomalies and plan to rectify this in order to improve how performance.
Without this kind of feedback in an organization, it is difficult to notice when things are going out of balance.
Let's first be clear that key performance indicators are not there to find a reason to blame someone or something for underperforming.
It is often seen that the only reaction from Key Performance Indicator results are negative and a waste of time.
This type of response can be seen where the responsible person does not understand the proper use of key performance indicators or does not feel the need to pay attention to the indicators.
Where there is real leadership present these indicators will be precious and treated in the correct manner.
In this type of environment, you will find that by using the key performance indicators correctly the whole team will be committed to innovation and improvement.
We also found that employees that who are aware of the importance will also remain engaged at a different level.
How do we use feedback to our advantage?
We can now look at how we can effectively apply this feedback to our work environment.
To do this we need to follow a process that not only makes sense but also adds value to the organizational vision and mission statements.
This is important as your Key Performance Indicators is a crucial part of your long-term strategy.
The first part of the process is to establish whether the main purpose of a specific indicator is to merely measure your performance against the standard or was it designed to indicate deviation.
If it was the former then it will only indicate if we have achieved a target or not but it will not tell us if there is an underlying problem.
A KPI that was designed to indicate deviation is much more useful for you and your team if you are interested in improving current processes.
This type of indicator is typically used if we want to see if an individual or any other type of action performs the way it was expected to.
For example where the standard output required for a production line per employee was 300 units per hour but a key performance indicator used to measure output shows only 240 units per hour were achieved then there is a clear problem that needs further investigation.
This type of indicator can be applied in any process or part of a process.
At times where a process is very complicated or lengthy then it might be necessary to break down the process into further measurable actions.
Using your key performance indicators in this manner will ensure that you eventually can pinpoint any problems that need to be rectified.
Using Key Performance Indicators to stay on target
Company growth can also be detected by means of your key performance indicators as you will detect an imbalance between planned targets and actual performance.
It is therefore important to reassess your key performance indicators on a regular basis for it to remain effective.
This imbalance will enable management to establish what additional resources are required to maintain the overall strategy and performance.
As we said earlier key performance indicators should be used as part of your reward system instead of punishment handouts.
By using these indicators the correct way individuals of your organization will understand their responsibility and be more acceptable to changes required by leadership to achieve targets.
There are many benefits from using key performance indicators that are not discussed here but I hope that you have a better understanding of why you are doing this and the importance that it has on your future operations.