KPIs or key performance indicators are financial or non-financial measurements used to measure the degree of compliance with previously established objectives; they are generally contained in the organization's strategic plan and reflect its performance in a given period; KPIs are used in various areas of a company, including purchasing, sales, logistics, and customer service and attention.
KPIs are used to determine the current state of a business or project and allow defining a future line of action; they express the variables to be taken into account to increase favorable performance in order to achieve progress, positioning and significant profits for the company. The KPI measures the conditions for performance and key performance.
It is unavoidable to take them into account to study how a company's work is produced and how it influences its results, so the company's main objective must be defined beforehand and expressed in percentage figures.
Key performance indicators can be created for different aspects of the business activity, as long as they are measurable, among them we have:
Economic indicators, they allow to measure revenues, costs, profitability, expenses, profits, etc.
Financial indicators, allow measuring debt levels, debt capacity, liquidity, solvency, payback, among others.
Production indicators allow the evaluation of production levels, process efficiency, materials used in the production process, etc.
Quality indicators allow measuring the percentage of defects in the production process, product quality level, number of failures in equipment and processes, unexpected or forced interruptions, etc.
Logistics indicators, which can be used to measure the number of orders, deliveries, stock, inventory turnover, delivery times and replenishment times.
Attention and service indicators, they can measure average personal or telephone attention times, unattended orders, number or percentage of returns, number of complaints, number of new customers, etc.
KPIs must be measured during previously defined periods of time and must be associated with specific units of measurement; it is normal in companies for each of the core units or departments to create their own key performance indicators; in many companies there are areas or departments that provide specialized support for this process.
It is important to consider a series of parameters that must be set for each KPI to be created, among them:
- Activity that evaluates.
- Measurement units.
HOW TO CHOOSE A KPI?
Now that we understand what a KPI is, we will pose a series of questions to create that will help us to establish with more criteria what KPI we should choose.
What goals and objectives do we pursue? We must be clear about the objectives pursued by the company, as it will be a fundamental point in our strategy.
How often are we going to show progress? Monitoring should be in most cases daily, but we must know what periods we will evaluate in our final reports that we will deliver to our superiors. This may define a bit more what kind of KPIs will be more relevant than others.
Who will measure the KPIs and with which tools? It seems obvious but it is essential to know what professional level and resources the person responsible for measuring them has. It makes no sense to design a KPI table for someone who either does not know what they are measuring or does not have the means to do so.
These are some questions we should ask ourselves to start developing and creating KPIs. Each project, each company and each objective pursued will have totally different KPIs, from here we intend to give you some small guidelines to start thinking about how to develop them.
Use these worksheets to define your objectives
Tools for your objectives
Use these worksheets to collect your data
Worksheets to collect your data