Key Performance Indicators (KPI)
Key Performance Indicators (KPI) is a measurement tool that used to measure the success factors of an organisation, in quantitative way.
The KPIs must reflect the organisation’s goals, usually in long-term; must be keys to its success; and must be measurable. The goals for a particular KPI may change as the organisation’s goals change, however, the KPIs definition and the ways they are measured do not change often.
In selecting KPIs, it is critical to limit them to those factors that are essential to the organisation reaching its goals. It is also important to keep the number of KPIs small just to keep everyone’s attention focused on achieving the same KPIs.
The below is an example of KPI:
Company’s KPI: Increased profit
Human Resource department, for instant, may support the above company’s KPI with the following departmental KPIs:
1. To improve employees’ performance - in order to increase profit, it is essential to make sure that the employees are performing
KPI: % of employees receiving regular performance review (more than a time a year)
Target: 20% from the total number of employees within an organisation are reviewed at least 2 times a year
2. To improve recruitment efficiency
KPI #1: % of reduction in average recruitment cost
Target: To reduce *average recruitment cost by 10% as compared to previous year. (*total recruitment cost / number of new recruit)
KPI #2: % of *turnover rate of new employees. (*number of new staff leaving within 12 months / number of total new hire)
Target: 5% of new employees turnover rate
3. To improve employees’ satisfaction
KPI: % of employees receiving disciplinary actions
Target: 5% of employees receiving disciplinary actions.
4. To improve employees’ skills
KPI: average number of training hours per employee
Target: average 16 training hours per employee
Once the KPIs are set, they can be used as a performance management tool, as well as a carrot. KPIs give everyone in the organisation a clear picture of what is important, of what they need to make happen. Show the target for each KPI, and show the progress towards the target. People will be motivated to reach those KPIs.
