The Advantages of Key Performance Indicators

pencil pie chart and calculator image by patrimonio designs from <a href='http://www.fotolia.com'>Fotolia.com</a>

Good information is critical to the success of any organization, be it a major corporation or a charitable project. An organization that doesn't have a clear picture of its own strengths and weaknesses can't formulate a strategy to improve performance. Key Performance Indicators, called KPIs, are measures of progress toward an organization's previously agreed upon Mission, Vision and Critical Success Factors, called CSFs, which are written into a strategic plan. KPIs measure against a benchmark to provide clear data, thus helping the organization to move forward more effectively.

Quantifiable Results

Good Key Performance Indicators are always quantifiable and easy to understand.
financial charts image by Chad McDermott from <a href='http://www.fotolia.com'>Fotolia.com</a>

KPIs provide actionable information because they are always measurable and quantifiable. For example, if one of a hotel company's identified CSFs maintains a high level of occupancy throughout the year, a KPI would be the percentage of occupancy of rooms, measured on a weekly basis, using the previous year as a benchmark.

Alignment Toward Common Goals

Correctly communicated, KPIs can focus everyone in an organization on common goals.
business team image by Jorge Casais from <a href='http://www.fotolia.com'>Fotolia.com</a>

It's often difficult to keep all departments or teams within an organization aligned and working toward common goals. Once an organization's Mission, Vision and CSFs have been written into a strategic plan, KPIs break down complex information into understandable metrics that provide constant feedback on the organization's progress. Communication of progress toward KPIs keeps everyone moving forward in the same direction.

Platform for Future Strategies

Over time, the proper use of KPIs will improve organizational performance.
laptop-graph isolated on black image by Olaru Radian-Alexandru from <a href='http://www.fotolia.com'>Fotolia.com</a>

Information gained from KPIs provides a platform for future strategies. If the CSF for a hotel company is full room occupancy throughout the year, its KPI of charting the percentage of occupancy over the year will show management the time periods in which it should, for example, increase advertising or offer discounts. The success of this new strategy can again be measured using the KPI. Over time, the use of KPIs to achieve CSFs will improve the performance and strength of the organization.

Incentives for Personal Performance

KPIs empower teams and individuals to accomplish their goals.
happy successful business man image by MAXFX from <a href='http://www.fotolia.com'>Fotolia.com</a>

KPIs are often linked to incentives. Teams or individuals are offered an incentive to improve their KPIs to a particular level during a specific time period. In order for this to be successful, the KPIs have to be clearly understood and quantifiable, and reporting must be accurate. The information provided by KPIs empowers people to improve their own personal performance along with that of the organization.

References

About the Author

Since 1973, Cathy Clifton has written for catalogs (Windsor Vineyards), websites (Bionaire.com), and on the subjects of wine, food and travel for Beringer Blass Wine Estates. She is the author of a non-fiction book and her blog, Back in the Good Old World. Clifton has a Bachelor of Arts in English from University of Arizona.

Photo Credits

  • pencil pie chart and calculator image by patrimonio designs from Fotolia.com