The importance of KPI for optimizing enterprises

Posted on Oct 06, 2021 at 06:10 PM

Entrepreneurs and business owners try to achieve their goals and success by using a way that evaluates the effectiveness of their plans and strategies. Now, the performance indicator is considered the reliable way that everyone works in business, and project management is depending on. 

Why are KPI Important?

Key Performance Indicator helps to identify the ability and effectiveness of a company, organization, or individual to achieve key objectives.

It is used at a set of levels aimed to assess the success of any entity reaching its objectives. There are indicators to measure overall performance, and others for every department within the entity, and the performance indicator can measure the performance of employees as well.

What is a KPI?

It has different definitions and classifications; however, it is important to note that a performance indicator is a measurement tool that provides long-term results and an effective way to facilitate work and identify achievements and failures.

It is a benchmark that helps to make the necessary decisions, and it demonstrates the extent of a specific activity reaching the desired results.

Know about the concept of strategic planning and its elements and stages of implementation by this example:

You have a company, and you expect to reach a certain number of benefits by the end of the year, identify a set of steps such as selling in places where the target audience is located and establish partnerships with third parties.

With the first quarterly report, you find that profits are not what you expected where it is supposed to achieve the end result.

You start using the performance indicator to see how you can achieve the goal, by comparison between your beginning and steps you've taken with the actual result. Therefore, you change your strategy to reach your goal.

Performance indicators characteristics:

There are some characteristics of key performance indicators that you should consider in order to provide you with an accurate measure, give you a better view of your projects, and the ability to restore and improve the situation to achieve the main goals. One of the most important characteristics of performance indicators is the following:

• They should be linked to the strategy adopted by the organization, and suit the objective it seeks.
• Performance indicators measure either numbers (staff, apparatus, resources, time.), amounts of money, or percentages.

For example, to achieve the goal of increased profitability, performance indicators measure net income relative to profit margin. To ensure that the competencies in the organization are improved, performance indicators measure the percentage of employee satisfaction and the efficiency of the recruitment process.

• Performance indicators do not provide reasons why you fail or succeed. They give the result of the evaluation, so don't expect to know what to do about your project, your company, or even yourself in order to change the situation for the better. It is a tool for measuring and evaluating, and improving the situation is your responsibility. 
• There are no good or bad performance indicators, however, they depend on how they are aligned with the objective the organization is seeking to achieve. 
• There is no need for performance indicators that make the situation complicated, therefore, they should be simple, easy to implement, and measurable.
• In order to use KPI, they must be practical, workable, and limited in number.
• The adoption of performance indicators must be objective and appropriate to the organization's strategy and objective.

If you're interested in learning more about KPIs, check out our Key Performance Indicators (KPIs) and Optimisation Training Course.