How important is the KPI's In a large size organizations? and how can we create an accurate KPI's ?

A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the enterprise, while low-level KPIs may focus on processes in departments such as sales, marketing or a call center.

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A key performance indicator (KPI) is a business metric used to evaluate factors that are crucial to the success of an organization. KPIs differ per organization; business KPIs may be net revenue or a customer loyalty metric, while government might consider unemployment rates.

In terms of developing a strategy for formulating KPIs, your team should start with the basics and understand what your organizational objectives are, how you plan on achieving them, and who can act on this information. This should be an iterative process that involves feedback from analysts, department heads and managers. As this fact finding mission unfolds, you will gain a better understanding of which business processes need to be measured with KPIs and with whom that information should be shared.

Get S.M.A.R.T With KPI Tracking

S.M.A.R.T is an acronym for Specific, Measureable, Attainable, Realistic, and Timely. (It was mentioned for the first time in a 1981 paper titled “There’s a S.M.A.R.T way to write management goals and objectives,” published by a consultant named George D. Duran.)  This acronym is extremely important to keep in mind when determining if your KPI is going to be successful. When you create a KPI, you should be able to ask and answer the following S.M.A.R.T. questions:

Specific: Is this KPI too broad, or is it clearly defined and identified?

Measurable: Can I easily quantify this measure?

Attainable: Is it realistic for us to obtain this measure? Can I take the appropriate measures to implement this KPI and see changes?

Realistic: Is our measure practical and pragmatic?

Timely: Are we able to look at data for this measure on a monthly or quarterly basis as opposed to annually?

Examples Of Bad Measures & KPIs

To truly understand the good measures, let’s look at some examples of bad measures and why they aren’t S.M.A.R.T.

• Raw materials cost (Financial): This can be out of your control, making it unattainable.
• Share of wallet (Customer): Measuring your share of the customer’s business is not always specific or measurable. There are cases where this can work, but you need to have great insight into all of your customer purchases. 
• Project implementation (Internal): You can’t repeat this, so you really cannot measure it. It is a good project, but not a measure. 
• Employee evaluations (Learning & Growth): These usually aren’t realistic because employees can use them unfairly to their advantage. They also aren’t timely––they’re given out once a year, not quarterly. 

Examples Of Good Measures & KPIs

Now that you understand what bad measures look like, let’s look at a view good measures. Each of these are specific, measureable, attainable, realistic, and timely.

• Net new revenue (Financial): Looking at your new gross sales minus costs is extremely important for understanding financial health.
• Specific:  Make sure you have a clear definition of new sales
• Measurable:  This is easily calculated
• Attainable:  You can get this easily from your accounting system
• Realistic:  This is practical and pragmatic to track
• Timely:  You can get this each month
• Net promoter score (Customer): Your NPS score gauges the health of a company’s customer relationships.
• Number of accurate deliveries within a service window (Internal): This KPI will help you determine if your internal processes are efficient and up-to-par.
• Employee satisfaction (Learning & Growth): Unlike employee evaluations (which we have determined is not a good measure), employee satisfaction is a realistic and important measure.

Of course, every organization is different. These may or may not be attainable for your organization. Remember that every successful KPI must have a target associated with it. Don’t be afraid to set aggressive targets. For example, if you want to measure the number of accurate deliveries within a service window, you’ll need to set your target for accurate deliveries, and then use your measure to determine whether or not you’ve met your goal.

Organization size are not important while documenting KPIs, the best practiceto get KPIs is conducting a KPI workshop, call all stakeholders and any other person interested.