The Easiest Way to Derive Accurate and Effective KPIs

Key Performance Indicators (KPIs) and targets are the tools used to help verify if your processes, your business operations, are successfully fulfilling the needs of the business and achieving their purpose.

In 5 easy steps, you can ensure that you have KPIs derived from your operational processes, meaning that your measures will actually monitor your progress towards your goals and strategy. 

  1. Map out operations processes and implement any necessary improvements 

In order to derive KPIs from the reality of your operation, you must map out your processes. Once they are mapped as they are today, you can then identify process improvements. 

2. Based on your processes, define key measures that monitor whether or not your process is being executed, and to what level

Once you have mapped your processes, examine your captured operations. KPIs should be based on key points within your process, so take your time deriving where it is crucial that the efficacy of the process is measured or monitored. For example, if you want to improve your staff payroll process, you could track when payroll is submitted versus the deadline and the number of employee queries raised. Remember that processes will indicate your resource and asset utilisation and potential – use this information to treat your team fairly and not overstretch employees, or face the potential of unmotivated, stressed, and absent teams. Processes and KPIs which capture how operations run will ensure that you can reference them in case of scalability, to ensure quality levels are maintained. 

3. Communicate KPIs and measurement information with your teams

Communication is a two-way street- make sure that your teams are aware of their KPIs. You should use stretch KPIs to ensure your employees are performing to the best of their potential. However, partner this with sincere discussions about the feasibility of targets. This will help guarantee buy-in and keep your teams motivated.

4. Prepare and publish scorecards

Scorecards take information based on KPI achievement and generate reports across all levels of the organisation. This is an excuse to exclusively chastise staff. It should be remembered that your KPIs actually measure your processes and not people. Staff may be in charge of a process and hence accountable, but the process is foundational. Use this as a learning and readjustment exercise.

5. Set key points for review and compensation

KPIs need to be reviewed alongside processes and strategy. Assign key milestones and targets for regular review. Remember to decide how you will acknowledge, reward, or compensate employee performance.

KPIs are a useful tool when used appropriately. Often, they are viewed as authoritarian or wielded as a ‘stick’ to motivate employees through fear or stress. This is not a sustainable approach to KPIs. Likewise, it is likely to indicate a poor understanding of the reality in your operational processes. Use your KPIs wisely and review them as part of a measuring strategy. 

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