Working with genuine KPIs produces instant results. Your organization will make more profit, your processes will run more smoothly, your employees cooperate more effectively, and your customers are happier. But defining KPI requirements isn’t as easy as it may seem.
The SMART KPI Toolbox will help you define crucial management information. Learn how to define and work with KPIs in 6 logical steps.
This performance management & KPI training course will teach you how to continuously improve performance using KPIs.
Not every performance indicator is a genuine KPI. It’s easy to end up with far too many “KPIs”. Directing an organization based on the wrong performance indicators is like steering a ship using a broken compass – usually, you end up hitting an ice berg. On top of that, employees often don’t know what their contributions to the organization’s goals are. So, what is the real meaning of a Key Performance Indicator?
Learn more about KPIs
The invisibility of KPIs
More than 70% of organizations have the same problems: too many Key Performance Indicators that often aren’t even actual KPIs. Because of this they lack insight and lose sight of the big picture. A lot of organizations tend to only look at financial results. When business is booming this may not be a problem, but when the business is struggling, they just fall further behind. The point of a KPI is to find predictive key indicators, and direct the organization based on those, so you can identify problems and act before it’s too late (source: Key Performance Indicators (David Parmenter).
The meaning of KPIs: what is a KPI / what are key performance indicators?
The real meaning of KPI can be found in the fact that all of these indicators are embedded in the heart of every company, business model, and organization. You can find them by closely studying your primary processes. By measuring your organization’s core activities, they’ll show you where you can do better and where you’re leaving big improvement opportunities up for grabs.
You’re not alone in your search for the meaning of “what is a KPI”. Every month, many thousands of people search the internet for the term KPI, because they want an explanation about Key Performance Indicators.
Do you want to work with a set of genuine key performance indicators? Contact one of our KPI specialists.
Find the KPIs that work
A KPI exposes clear areas of improvement – something every employee can understand. They’re perfect management tools, taking the complexity out of management. We can help you answer these questions:
• How do you find genuine Key Performance Indicators, and what sets them apart?
• How do you connect these to the mission, strategic goals, and spearheads?
• How are your employees going to immediately benefit from this in their everyday duties?
A perfect early warning system
KPIs are key indicators. Every successful company uses them. They permeate the entire hierarchy of the organization, enabling your teams to cooperate more effectively. They also make for a perfect early warning system, so you can see which area needs attention before it’s too late.
See also: our article “the 5 biggest KPI blunders”.
The impact of using the wrong KPIs
Companies that end up in trouble, or actually go out of business, almost always have problems with their Key Performance Indicators. They measure the wrong metrics, because they don’t truly understand their own business model. And they suffer the consequences.
The board of a hospital introduced a new management information system and defined their first “KPI”: personnel costs.
And it worked: personnel costs went down. Everything seemed fine. But at the end of the fiscal year it became apparent they lost almost 5 million euros. It turned out that beds were unoccupied too often (internal KPI) because the waiting lists that the hospital had always had (external KPI) had cleared up and there just weren’t enough patients to fill the available beds.
Examples of KPI per industry / discipline
There are many more examples of KPIs, of course, but here are a few for various industries and disciplines. These KPI examples will give you insight into the essential workings of key performance indicators.
- KPI examples healthcare: returning patients, OR occupancy, bed occupancy, productivity, waiting time, patients’ medication loyalty. These are real areas of interest for healthcare institutions.
- KPI examples sales & marketing: offer success rate, bounce rate, conversion rate website, email opening rate, number of new customers, number of lost customers.
- Example KPI customer satisfaction: This isn’t a genuine KPI, but a key results indicator (KRI). It’s not wrong to measure customer satisfaction, but this score is the sum of many factors.
- Examples production KPIs: machine defect rate, waste, productivity, active machine %.
- KPI quality examples: quality is an important container term. In and of itself, it can never be a genuine, directly measurable key performance indicator. The concept has so many aspects. The most important indicator is, of course, the expectation of the customer / user. The number of percentage of defects, for example, is directly related to quality.
- Examples of KPIs at a bank: late payments, uptime percentage of internet banking, fraudulent cases, erroneous transactions, number of times money was transferred late.
- KPI examples personnel: Turnover rate, promotions, demotions, relationship between managers and employees, sickness leave.
These are only a few examples. Our SMART KPI Toolbox has 350 of them, divided across various industries, each with its separate table.
Strong influences on excellent performance
Scoring highly on genuine KPIs directly influences the three biggest factors of any organization: finances, customers, and employees.
What is the most critical factor in improving the score of your KPIs? It’s an exact mix of systems, information, feedback, employees, behavior, data, vision, strategy, culture, and values. Finding that mix is a management challenge.
Even experienced managers can’t define KPIs easily
Genuine KPIs are hard to define, even for experienced managers. Our comprehensive, pragmatic approach helps you drill down to the core quickly, so we can help you find those genuine KPIs that work for you. Learn to understand the true meaning of KPI. Download the SMART KPI Toolbox, and find out if your KPIs are genuine.
What makes our approach uniquely effective?
Unlike other advisors, we don’t center the technology or the KPI model. Our approach lets your employees experience what Key Performance Indicators are in practice, and how to work with them effectively while staying true to the organization’s mission and goals.
Our approach shows what desired behavior and which changes are necessary to continually improve your KPI scores. Our goal is making your organization more intelligent. Read our book “The Intelligent Organization”.
Effects of our approach
✓ Manage more directly and easily using an intelligent dashboard.
✓ Quickly increase your margins.
✓ Organizational processes run more efficiently (from weeks to hours).
✓ Lay a foundation for the continual improvement and smarter cooperation of teams.
✓ Satisfied customers and employees that help you achieve your strategic goals.
More than 500 organizations served
We can confidently say we are the foremost KPI specialists in The Netherlands. We’ve written books on performance management and continual improvement (see our knowledge base) and have assisted over 500 organizations and helped them to work with genuine KPIs that work. We’d love to help you define clear KPIs and manage effectively too.
5 tips for finding genuine KPIs
Do you want to get started on performance management? Below are 5 tips that will help you find the key performance indicators for your organization:
- The biggest disaster: Can’t name a key performance indicator for your organization off the top of your head? Try to imagine the worst thing that could happen to your organization or department. If that never happens, try to imagine the next worst thing, and so on.
- Look at the time: Processes often stall when work doesn’t get delivered on time. Many KPIs involve time.
- Ignore financial indicators: Although key performance indicators always have a financial impact, they’re never really financial in and of themselves. That means there’s no dollar sign in front of them. When searching for genuine KPIs, feel free to ignore all financial indicators.
- Focus on satisfied customers: Finding the right KPIs is easier when looking at the most important factors in customer satisfaction. What can you do to make your customers genuinely happy?
- Infrastructure: Do your processes depend heavily on a certain infrastructure, or is that infrastructure the core of your company? A smooth infrastructure often proves critical in achieving good results.
Want more tips? The SMART KPI Toolbox helps you to find the genuine KPIs for your organization.
Example of a key performance indicator
How can you improve structurally using KPIs?
Step 1: Make a longlist of the most important performance indicators.
Step 2: Whittle the list down to a shortlist of genuine KPIs using the right method.
Step 3: Monitor these indicators using dashboards and reporting (BI).
Step 4: Use the Key Performance Indicators to manage, improve, and work.
KPI Advice from start to finish
1. Which ones matter most to your organization? The hardest part is finding the KPIs that work within your organization. Does your company have a confusing mess of indicators? Our custom-tailored advice helps you quickly determine whether an indicator is a genuine KPI. Because not all indicators were created equally, we help you to discover the truly essential ones: start measuring less and knowing more.
2. How to successfully implement KPIs in your organization. Defining KPIs (step 1) is complex, especially if it’s the first time you’re doing it. Once you’ve found the right indicators, the next step is implementing them correctly. We’d love to advise you.