HR Glossary

Key Performance Indicators (KPIs)

Key performance indicator refers to a form of quantifiable performance measurement that companies use to measure tasks that are central to the success of a business and show strategic, financial or operational goals.

what-is-key-performance-indicators-kpis

Key performance indicators definition (KPI)

Key performance indicator refers to a form of quantifiable performance measurement that companies use to measure tasks that are central to the success of a business and show strategic, financial or operational goals.

The KPIs are selected according to industry standards and are used at both an operational level) and at the staff appraisal level.

Key performance indicator sub-groups

• Quantitative indicators: which can be measured numerically

• Qualitative indicators: which can’t be measure numerically

• Directional indicators: specifies whether an organisation is improving or not

• Process indicators: which measure the efficiency of a specified procedure

Key performance indicator classification

1. Financial perspectives like cost per unit produced, profit per unit sales etc.

2. Internal business perspectives like inventory turnover ratio, manufacturing lead time, sales turnover ratio etc.

3. Learning and growth perspectives like employee turnover, employee skill sets and training requirement.

4. Customer perspective like market share, old customer retention, after-sales services etc.

Key performance indicator steps

1. Defining the business process.

2. Identifying the requirements of the business processes.

3. Determining the qualitative/quantitative measure of the result and comparing with the benchmark.

4. Monitoring, controlling and measuring variance.

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