Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization. They will differ depending on the organization.
A employees’ success depends on how well they understand their job responsibilities and the specific tasks their jobs entail. A job description provides this information. A well-crafted job description communicates your expectations to job candidates and serves as a manual for hiring the best person for the job. After the candidate has been hired, the description becomes an assessment tool that helps you measure the employee’s performance against the stated job requirements. Key performance indicators, or KPIs, are measurable outcomes tied to specific tasks the job description lists.
Two main components in job descriptions: The job and the competencies required to do the job. Within the job section are key result areas, or KRAs, comprising groups of related tasks that explain the purpose of the job. A key result area for a retail clerk might be upselling to customers as they approach the cash register. Tasks associated with upselling might include promoting opt-ins to a loyalty program. The key performance indicator for that task might specify that the employee is responsible for increasing loyalty program membership. This key performance indicator would, in turn, support an overall objective to increase sales.
Key Performance Indicators Reflect The Organizational Goals
Whatever Key Performance Indicators are selected, they must reflect the organization’s goals, they must be key to its success,and they must be quantifiable (measurable). Key Performance Indicators usually are long-term considerations. The definition of what they are and how they are measured do not change often. The goals for a particular Key Performance Indicator may change as the organization’s goals change, or as it gets closer to achieving a goal.
It is also important to define the Key Performance Indicators and stay with the same definition from year to year. For a KPI of “Increase Sales”, you need to address considerations like whether to measure by units sold or by dollar value of sales. Will returns be deducted from sales in the month of the sale or the month of the return? Will sales be recorded for the KPI at list price or at the actual sales price?
Key Performance Indicators Must Be Quantifiable
For a KPI of “Increase Sales”, you need to address considerations like whether to measure by units sold or by dollar value of sales. Will returns be deducted from sales in the month of the sale or the month of the return? Will sales be recorded for the KPI at list price or at the actual sales price?
You also need to set targets for each Key Performance Indicator. A company goal to be the employer of choice might include a KPI of “Turnover Rate”. After the Key Performance Indicator has been defined as “the number of voluntary resignations and terminations for performance, divided by the total number of employees at the beginning of the period” and a way to measure it has been set up by collecting the information in an HRIS, the target has to be established. “Reduce turnover by five percent per year” is a clear target that everyone will understand and be able to take specific action to accomplish.