With the advent of new technologies, various metrics have emerged to assess the behavior of organizations, some of these metrics are of general application and others can be specific depending on the type of organization in question: whether it is dedicated to transformation processes, providing services, is dedicated to agriculture, be a company in the banking sector or any other. These metrics are known as key performance indicators (KPI) and Jorge Zuñiga Blanco, a business and commerce expert from Costa Rica, discusses how they can be used to improve performance at any organization.
A KPI is a measure or indicator that helps an organization understand how well it is with respect to its defined strategic goals and objectives. That is, a KPI shows whether an organization is on the right path or not. KPIs also help reduce the complexity of organizational performance to a small and manageable number of indicators – these indicators provide information that can, in turn, help decision-making and therefore improve the performance of that organization.
Explains Zuñiga, “When defining a KPI, it is always best to clearly specify which strategic objective it relates to so that everyone who looks at that KPI immediately appreciates its relevance and its application within the organization’s environment.” KPIs are not for everyone; you have to define your main audience – for who this information is, who will have access to it and what area it applies. With this, we will be able to make dashboards (Dashboards) defined for certain types of auditoriums.
Key performance questions that the indicator is helping to answer should be indicated. This helps to provide context surrounding this particular KPI and on which particular topic it will improve the most. You need to specify how the KPI will be used so that everyone is clear about how the information is intended to be used. It will also be necessary to define how this KPI will not be used, as people are sometimes afraid to report on the measures because they fear that negative results can work against them. Here, it can be reported that the KPI will not be used to determine people’s performance and will not be linked to the bonus payment.
Each KPI needs a name so that it can be discussed collectively and has a unique meaning within the organization. As far as possible, confusing names should be avoided and other metrics interpreted, so you have to choose a name that clearly explains what it is. “You must identify and describe the data collection method to use for each KPI,” adds Zuñiga. “Data collection methods may include surveys, questionnaires, interviews, sensor data collection, focus groups, automatic collection of computer system data, as well as data collection from files of various formats.”
Describe how performance levels will be determined. This can be qualitative, in which case the evaluation criteria must be identified, can be numeric or use a scale, in which case the formula or scales must be identified with categories. Example: Using a scale of 0-10 (Not likely – it is extremely likely), participants will respond: How likely is it that a friend recommends us? It is recommended to define a target or reference point for each indicator. Performance thresholds can also be outlined here, i.e., in terms of how performance levels are judged as good or bad. You must specify where the data comes from so that people using the KPI can be a security of its reliability and validity.
It is necessary to indicate how often the KPI data will be collected and coordinate the collection dates. Some KPIs require data that must be collected continuously. Others specify hourly, daily, monthly, quarterly, or yearly collection. Ensure that the schedule allows and you have enough time to collect the data, prosecute people when needed, analyze it, add it, resolve any issues, and deliver the report while ensuring that the data it contains is as recent as possible.
You must also specify when and how often the data will be reported for the KPI; how often it makes sense to coordinate data collection and reporting to ensure that the data being reported is as up-to-date as possible. The worst thing to have happens is that the data is collected in January, but not reported until the end of the year.
You should always include an expiration date or revision date. KPIs are sometimes only needed for a specific period of time and without an expiration or review date, these KPIs can continue indefinitely, causing unnecessary work. Even if the indicators are not time-specific or project-specific, they should be assigned a review date to ensure that they remain relevant and useful.
It is necessary to briefly describe how these indicators could influence incorrect behaviors or how people can cheat with this KPI. For example, people might influence customers before taking the survey, or they might select customers who are likely to respond positively. “If you already have KPIs defined in your organization, check whether they meet the above points, whether they need to be adjusted, or whether some new ones that are built under those recommendations need to be added,” concludes Zuñiga.
