Companies use key performance indicators to measure their performance and success in meeting company goals. After company management identifies its key performance indicators, it designs reports to communicate each department's progress toward the goals. These reports label each key performance indicator and state the progress toward the goal. Each department receives a copy of its progress. Management uses these reports to identify which departments are succeeding and which need assistance to meet the goals. Management invests time working with struggling departments to find methods of improving the performance of these departments. In order to use key performance indicators, the company needs to compile a list of these indicators.
1. Identify company goals. Senior management determines what the company wants to accomplish in the next several years and shares these goals with the company.
2. Relate company goals to your department. Compare the company goals to the work performed in your department. Create goals for your department that contribute to the company goals.
3. Identify specific processes in your area that support the goals. Review the work processes that occur in your area. Determine which processes directly support your department goals. Set goals for your department that your employees can accomplish.
4. Create performance indicators for the work processes in your department that support your goals. Review each work process. Identify several measurable activities that occur throughout this process. Make a list of all activities that bear a direct connection to the success of each work process. These represent potential performance indicators.
5. Choose the key performance indicators. Review the list of potential performance indicators for each work process. Choose the three performance indicators that bear the strongest connection with the work process and the department goals. These represent the key performance indicators for each department.
- After compiling the key performance indicators, make sure you measure them on a regular basis. Share the results with each department. This allows each department to track their progress and improve when needed.
- Companies who use key performance indicators need to be careful they are not creating busywork for the employees. Some companies require employees to measure certain items because this data is easy to collect. This data may bear no relationship to the success of the department. The employees then spend time measuring data which adds no value to the company.
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