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Objectives should be set for the business at the beginning with review frequency. Each objective will be followed by action plan to achieve it. On the completion date, these objectives are analysed to check it is totally achieved, partialy achieved or not achieved. Based on this result new objectives are set with previous result as base line. Simple example is customer satisfaction. New objectives can be set as increase customer satisfaction as 80%. Baseline will be 70 % from previous result.
KPI helps in continual improvement of the business in all fields.
First you have to translate your business objectives into goal. Once you have determined your goals, you will select KPIs for each of these goals. You will use these KPIs to measure the performance of each goal. Take for example your target acceptance is 100% for each goal and you get only 80% after computation then you have to check for the causes why did not meet the target and make action plan to correct those low value in the next period. KPI prevent major deficiency from reoccurrence, save time and accumulated cost.