Introduction to Key Performance Indicators

Introduction to Key Performance Indicators

7/8/2018

Key Performance Indicators

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Business

​In order to remain competitive, an organisation should analyse its mission, identify its stakeholders, and define its goals. In addition, it needs to establish Key Performance Indicators (KPIs) to measure its corporate progress.

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Mauboussin (2012) defines Key Performance Indicators as metrics that are used to record, monitor and communicate strategic results. [1] These metrics would allow an organisation to achieve its long-term goals, and connect the organisation’s various divisions and managerial teams.
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An organisation may use information from the following documents to create their KPIs:

1. Existing business strategies;
2. SWOT analysis; and
3. Internal and External Audits.

KPIs and Corporate Objectives

​In order to achieve a company’s strategic objectives, Marr’s corporate study (2010) outlines how KPIs should be integrated into an organisation’s corporate communications strategy. He explains how an organisation’s KPIs may be used for internal communications with their employees, and external communications with their stakeholders.
 
1. Internal Communications Strategies

An organisation should include KPIs in their internal communications strategy to achieve the following objectives:

• Strengthen their internal systems and processes; and
• Identify their effective strategic activities, as well as those which require improvement.

According to Marr, KPIs will provide employees with performance benchmarks, which will inform employees on how to make strategic decisions to improve their performance. KPIs would also allow managers to objectively assess an employee’s achievement of an organisation’s objectives.
Managers may use KPIs to identify satisfactory or inadequate performance, and may distribute rewards and penalties to improve their subordinates’ productivity. [2]
 
2. External Communications Strategies

An organisation should include their KPIs in their external communications strategy to achieve the following objectives:

• Maximize their competitive advantage;
• Establish market-oriented perspectives;
• Remain competitive within their industry; and
• Monitor and analyse their competitors’ performance.

Marr explains that an organisation would include its KPIs in reports that would be distributed to their external stakeholders. These reports would inform external stakeholders about an organisation’s corporate activities, and would ensure that these operations adhere to federal guidelines. Such reports would include an organisation’s financial statements or performance evaluations.
In addition, managers may use an organisation’s KPIs to convert their subordinates’ performance data into relevant information. Such information may be used to align their strategic objectives with pertinent trends in their industry. [3]

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references

[1] Mauboussin, Michael J. (2012). The True Measures of Success. Retrieved from https://hbr.org/2012/10/the-true-measures-of-success
 
[2] Marr, B. (2010). How to design Key Performance Indicators, Management Case Study. The Advanced Performance Institute (www.ap-institute.com). pp. 5-6.
 
[3] Marr, B. (2010). How to design Key Performance Indicators, Management Case Study, The Advanced Performance Institute (www.ap-institute.com). pp. 5-6.