What is KPI (Key Performance Indicator)? A Deeper Dive

Every organization seeks to achieve better performance and consequently higher competitive advantage in order to foster growth and sustenance. However, in order to achieve better performance, a firm must be able to measure its progress. This brings us to the concept of KPI or Key Performance Indicator. The concept of KPI, as explained by PenMyPaper is based on the principle which suggests that “anything that can be measured, can be improved.” Thus, from a business standpoint, organizations must know what is KPI and how to implement it in their business operations. In this article we have discussed about what is KPI, key examples and how it can be implemented in order to achieve better performance and long-term organizational success. The concept of KPI is absolutely crucial for your essayhelp.

What is KPI?

KPI can be defined as a measurable value which determines how effectively an organization is achieving its business goals. Companies use KPIs, at various levels of their business operations to evaluate performance and how close they are to the desired goals. If we had to answer ‘what is KPI?’ in simple words, then we should say that it is a measure of how well the company is performing. It should be noted that KPI can be used to assess the progress or performance of any specific task within the organization. For example, a higher order or high-level KPI may help in assessing the performance of the entire organization, whereas a low-level KPI can help in determining the performance of a particular division, segment or department, such as manufacturing, customer support, or sales. Before we dig deeper into what is KPI and how it works, you should keep in mind that KPIs should be objectively measurable. We recommend that you buy essay online in case you find yourself struggling with any of your academic coursework. In most cases, the values are based on quantitative research, that can be measured against set benchmarks.

Organizational Implication of KPI

By now you should already have a clear idea of what is KPI. Let us know look at what makes it beneficial for an organization. The effectiveness of KPI is largely dependent on the nature of business and organizational culture. One of the best examples is go through the Google culture. In order to pursue a quick-fix solution to its issues, organizations often adopt an industry standard set of key performance indicators, expecting it to deliver results, only to find that it was just a waste of resources and time.

KPI are performance indicators which assesses the performance of a firm. However, it must be noted that every organization may have different operational processes and internal construct. Therefore, a set of generic KPI may not always fit right into your chosen organization. Secondly, the KPI can be referred to as a form of communication which communicates the certain areas of performance to the stakeholders. But, implementing a KPI can be futile, if the organization fails to take the necessary actions to improve on the shortcomings identified through the KPIs. A firm with an organizational culture of continuous improvement is likely to benefit most from applying KPI.

How to Determine the KPIs?

In the previous section, we have just mentioned that in order to successfully implement KPI, it has to be specifically designed for the chosen organization or the situation at hand. This brings us to the question of how to define KPI? According to a dissertation finding analysis, this can be really beneficial if you want to apply KPI in any given company.

Adopting KPI for performance measurement is as valuable as the way the indicators are defined. The performance of a company and its business operations can be assessed by a bunch of indicators or variables, however all of them may not be “key” performance indicators. The operative term key, emphasizes on selecting the performance indicators which are specific to the given situation and can be used to achieve further improvement. Here are some of the most important questions that you need to ask yourself when determining your KPIs:

  • What is the intended outcome?
  • Why is this outcome important to the organization?
  • How can you measure the progress or change?
  • What can you do to influence the outcome?
  • Who are stakeholders responsible for the outcome?
  • How will you know when you have achieved the desired outcome?
  • How frequently are you going to check your progress?

Let us now look at a simple example to help you understand how to determine your KPIs. Let us consider that you objective is to increase your revenue for the next financial year. In order to achieve that we will use a KPI which is specifically focused on this objective. Let us call it “Revenue Hike KPI.” Now let us look at each of the questions that we mentioned earlier and try to answer them based on the situation at hand.

  • To increase the revenue by 15% in the coming year.
  • This will help the company to become more financially stable and attract more investors.
  • The progress will be assessed by calculating the change in revenue earned in USD for the given financial year.
  • Aggressive marketing and further product diversification can help to increase the revenue.
  • The respective managers of the marketing and product development division are responsible for this objective.
  • Assessing the revenue of the given time period and comparing it with the previous year can help us determine if we have achieved the desired outcome.
  • The review will be conducted quarterly basis.

From the example stated above, it is quite clear that KPIs need to be objectively measurable, so it is much easier if the KPI values are quantitative in nature. Moreover, you should also keep in mind that the KPIs should be actionable, so that necessary initiatives can be taken by the organization to meet its objectives.

Brief Summary

Hopefully, now you will be able to implement KPI in the Uber business model, but before that let us go over the information we have covered in this article. KPI or key performance indicator helps a firm to analyze it performance in a specific area. It helps the company to make objective measurements of its targets and its progress towards the intended target. KPI can be applied to various organizational levels depending on the requirements. In order to determine the KPIs, a firm needs to focused on certain aspects which are the intended outcome, its importance, progress measurement, influencing the outcome, responsibility for the outcome, assessing the outcome and review of the progress.The KPIs must be objectively measurable and should be actionable for the company.

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