KPI

KPI
Key Performance Indicators
Tell me how You manage a business
and I'll tell you how you are
A Personal View
Rafael Esguevillas Ruiz
http://es.linkedin.com/in/rafaelesguevillas

jueves 21 de junio de 2012

✓Introduction
✓What Are Key Performance
Indicators (KPI)
✓Key Performance Indicators
Reflect The Organisational Goals
Must Be Quantifiable
Must be Key To Organisational
Success
✓Good Key Performance
Indicators vs. Bad
✓What Do I Do With Key
Performance Indicators?


Introduction

Key Performance Indicators (KPI) Or Key
Success Indicators (KSI)

➡We have the mission
➡We have identiﬁed all the company
stakeholders
➡We have the company goals
➡We need a way to measure progress toward
those goals

Key Performance
Indicators are those
measurements
KPI | Rafael Esguevillas Ruiz [http://es.linkedin.com/in/rafaelesguevillas] | 21/06/2012


What Are Key KPI's are quantiﬁable measurements, agreed to
beforehand, that reﬂect the critical success factors
Performance Indicators of an organisation

(KPI)

KPI Could Be

Depending on the
Organisation could be
• The percentage of its
income that comes from
return customers
• A school may focus on
graduation rates of its
students
• Percentage of customer
calls answered in the ﬁrst
minute
• Number of clients assisted
during the year



They must reﬂect the organisation's goals
They must be key to its success
KPI Must Be They must be quantiﬁable (measurable)



The definition of what
they are and how they
are measured do not
change often

The goals for a particular KPI may change as the
organisation's goals change, or as it gets closer to
achieving a goal



Key Performance
Indicators Reﬂect
The Organisational
Goals

[Business Company]

We want to be the most
profitable company in our
industry

• Good KPI will be

• Pre-tax Profit

• Shareholder Equity

• Bad KPI will be

• Percent of Profit
Contributed to
Community Causes



[Educational Institution]

We want to be the most
proﬁtable company in our
industry

• Bad KPI will be
• Pre-tax Proﬁt
• Shareholder Equity
• Good KPI will be
• Graduation Rate
• Success In Finding
Employment After
Graduation



Key Performance
Indicators Must Be
Quantiﬁable

Deﬁne KPI

If a Key Performance Indicator is going to
be of any value

There must be a way to accurately deﬁne
and measure it.

• Generate More Repeat Customers
• Need some way to distinguish
between new and repeat
customers
• Be The Most Popular Company
• Need a way to measure the
company's popularity or compare
it to others
• An may be it is not easy
• Or event impossible
• Or too much expensive to get the
relevant data



KPI Definition
Longlasting
Important to define and stay with
the same definition from year to
year

• Increase Sales
• We need to define
• Measure by units sold or
by dollar value of sales?
• Will returns be deducted
from sales in the month of
the sale or the month of
the return?
• Will sales be recorded for
the KPI at list price or at
the actual sales price?



Set Targets

You need to set the targets for each KPI
• A company goal to be the employer of choice might include a KPI
of "Turnover Rate"
• We can consider the KPI def as the number of voluntary
resignations and terminations for performance, divided by
the total number of employees at the beginning of the period
• A way to measure the KPI it has been set up by collecting the
information in an HRIS (Human Resources Information
System), for example
• Target can be definited as
• Reduce turnover by five percent per year
• Is a clear target that everyone will understand and be
able to take specific action to accomplish



Key Performance
Indicators Must be Key To
Organisational Success

How Many KPI’s?

• Many things are measurable
• That does not make them
key to the organisation's
success
• 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 KPI's small
just to keep everyone's
attention focused on
achieving the same of them



KPI will be focused
differently in
different departments

If a company Key Performance Indicator is

"Increased Customer Satisfaction"

•The Manufacturing Department may
have a KPI of "Number of Units Rejected
by Quality Inspection"

•The Sales Department has a KPI of
"Minutes A Customer Is On Hold Before
A Sales Rep Answers"


Good Key Performance
Indicators vs. Bad

Bad Definition?

Increase Sales
Deﬁned
•Change in Sales volume from
month to month
Measured
•Total of Sales By Region for all
region
Target
•Increase each month



What's missing?
• Does this measure increases in sales volume
by dollars or units?

• If by dollars

• Does it measure list price or
sales price?

• Are returns considered and if so do the
appear as an adjustment to the KPI for the
month of the sale or are they counted in the
month the return happens?

• How do we make sure each sales ofﬁce's
volume numbers are counted in one region,
i.e. that none are skipped or double counted?

• How much, by percentage or dollars or units,
do we want to increase sales volumes each
month?



Good Definition I?

Employee Turnover

Deﬁned
•The total of the number of
employees who resign for whatever
reason, plus the number of
employees terminated for
performance reasons, and that total
divided by the number of employees
at the beginning of the year
•Employees lost due to Reductions
in Force (RIF) will not be included in
this calculation


Good Definition II?

Measured
•The HRIS contains records of each
employee
•The separation section lists reason and
date of separation for each employee
•Monthly, or when requested by the
SVP, the HRIS group will query the
database and provide Department
Heads with Turnover Reports
•HRIS will post graphs of each report
on the Intranet
Target
•Target: Reduce Employee Turnover by
5% per year



Once you have good Key Performance Indicators deﬁned

What Do I Do With Key •Ones that reﬂect your organisation's goals
•One that you can measure
Performance Indicators? •What do you do with them?


use to manage
performance

You make sure that everything the people
in your organisation do is focused on
meeting or exceeding those KPI's



use as a carrot

• Post the KPIs everywhere: in the lunch
room, on the walls of every conference
room, on the company intranet, even
on the company web site for some of
them.
• In the lunch room
• On the walls of every conference
room
• On the company intranet
• Even on the company web site
for some of them¡¡¡¡¡
• Show what the target for each KPI is
and show the progress toward that
target for each of them
• People will be motivated to reach those
KPI targets



KPIs give everyone in the organisation
a clear picture of what is important,
of what they need to make happen


KPI

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