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How do KPIs directly affect profitability and satisfaction?

E = mc2 with real KPIs

The difference between genuine key performance indicators (KPIs) and no KPIs (or false KPIs) is night and day when you look at Einstein's special theory of relativity. Genuine KPIs (E) directly impact the three most important result areas of the organization (mc2): profit, employee satisfaction, and customer satisfaction. Normal (performance) indicators like revenue or profit margins don't directly impact all three of these, or only do so with a greatly delayed effect.Take, for example, the phenomenon of college drop-outs. Students who enroll for higher education, but quit after a year or two, before finishing their studies. How do drop-outs directly impact profitability, customer (student) satisfaction, and employee satisfaction?

1. School drop-out: direct impact on profits

Public colleges receive a budget per student. They only get a part of the budget when the student successfully completes their degree. When the student drops out, the school doesn’t receive the entire budget, despite their costs in areas like housing and personnel. Drop-out rates thus directly impact the organization’s profitability.

2. School drop-out: direct impact on the customer

A student that drops out is probably not satisfied, for any number of reasons. Maybe the course was above their level, or the student didn’t get the guidance they needed, or they had a problematic home situation, or the material was too dull. Usually, it’s a combination of factors. Dropping out is the biggest cause of (very) dissatisfied students. With the right degree, young adults have much better perspectives on their future employment.

3. School drop-out: direct impact on the employee

The college staff is, ideally, passionate about preparing students for their future careers. A student that drops out early disappoints both the teachers and other staff. They’ve invested time and resources into the student, but didn’t get the reward and satisfaction of seeing them graduate. Needlessly high drop-out rates negatively impact employee satisfaction, because it signals a collective failing of their mission.

Learn how to manage more effectively

Using the management tool KPIs (examples & definition) allows you to more accurately target the goal of reducing drop-out rates. That KPI also offers opportunities to structurally improve processes, approaches, and co-operation within a region between schools and municipalities.

The formula E = mc2

The focused efforts (E) of schools in enabling students to succeed and enter the labor market with a good degree translates directly into positive results in multiple areas (mc2 ). Do you want to start using genuine KPIs? Order the SMART KPI Toolbox 2022. This practical handbook contains dozens of examples, exercises, and explanations to help you define the most essential KPIs for your organization, no matter which industry you operate in.

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