Key Performance Indicators - Part 1

How to build KPI and Performance Appraisal for your company?

First, let us understand, what is KPI? KPI stands for 'Key Performance Indicators'. Depending on the type of your business, you will have to decide the key performance indicators. Through KPI, different organizations measure their performance and find out how successful they are in terms of meeting their goals.

How to find out the appropriate indicators for your organization? Indicators will vary between type of organizations. Start with what the objective of the business is. There are several things to remember while determining KPI:

• KPI must address the objective of the organization.
• KPI should be acceptable by all stakeholders.
• KPI should be based on SMART
  • Specific to the objectives
  • Measurable targets
  • Achievable by the stakeholders
  • Relevant to objective and measure
  • Time phased, so that the set goals are met in appropriate time frame

KPI objectives will vary in different stakeholders. Stakeholders are different parties whose actions affect the overall objective of the organization and vice-versa. Say, one of the corporate objective is to keep attrition rate (employee turnover) low. Hence one of the KPI for the organization is to keep attrition rate below 15%. Now key stake holder in this KPI is Human Resources and Operations. Therefore, their KPI also include this Indicator which rolls up to organization's overall KPI. For corporate to meet it's objective, the related stakeholders has to meet their individual objective.

It is important to differentiate between KPI and Critical Success Factor (CSF). They are not the same. In the example above, one of the CSF to meet the KPI of Employee Turnover is to achieve Employee Satisfaction Survey to score 89% or higher.

Similarly, for Marketing, customer churn rate should remain below 30% is a KPI, for call center operations Average Handle Time of calls should remain between 200 sec - 350 sec. is a KPI for the call center. Lower than the range would indicate poor quality of call and higher than that would exceed budget.

Recently, in very few call centers, there have been a ranking system implemented but with challenges and failures. The ranking system do not benefit KPI in any way creating an unhealthy competition among employees, increasing employee turnover and failing the corporate objectives. Question to ask yourself, are you really meeting the criteria of determining a KPI based on this?

Unfortunately, some management professionals part of the group of 'clever management' brings in as many changes as possible to the new organization they join and create a gimmicky atmosphere to extend their tenure in the organization. Their actions, in turn, most times uses high degree of company resources for different testing for changes that should not have been thought of to begin with. But the lack of intelligence and knowledge demands wastage of organization's resources which goes unnoticed. On the other hand, it is a two way benefit for them, one part is adding the successful number of projects under their belt which is usually a very low percentage and usually through stealing ideas from their colleagues; second, make under table profit from the external companies they bring in for some of these projects.