Key Performance Indicators
What is a Key Peformance Indicator?
Key Performance Indicators (KPIs) are metrics used to measure the performance of an organization or business in achieving its goals. These metrics are chosen based on the organization's objectives, and are used to track and evaluate the success of specific activities and processes. They are used to measure the performance in different areas of the business such as finance, operations, customer service, human resources and more.
KPIs are divided into two main categories: leading indicators and lagging indicators.
What is a Leading Indicator?
Leading indicators are metrics that predict future performance, they provide early warning signals of potential issues, and they are used to identify trends and patterns that can inform decision-making. Examples of leading indicators include customer satisfaction, employee engagement, website traffic, and lead generation.
What is a Lagging Indicator?
Lagging indicators, on the other hand, measure past performance and are used to evaluate the effectiveness of past decisions and actions. These indicators provide feedback on whether the organization has met its objectives, and are often used to measure financial performance, such as net profit, revenue, and return on investment (ROI).
It's important to note that both leading and lagging indicators are important, leading indicators provide early signals to take action, while lagging indicators are used to evaluate the effectiveness of past decisions and actions.
For example, a leading indicator for safety performance in a factory would be the number of near-miss incidents. If the number of near-miss incidents increases, it's a sign that the factory is at risk of an accident. A lagging indicator for safety performance in a factory would be the number of accidents that occurred in a certain period. If the number of accidents increases, it means that something went wrong and corrective actions should be taken.
Why KPI’s are Important in your Business
I recently saw a post where KPI was crossed off and a whole list was below, like ‘keep people informed’. Inferring that KPI’s are a thing of the past and other more ‘soft’ expressions matter more. You can see the image below:
It makes me cringe.
KPI’s are all around us. Whether it’s the distance we need to drive each day to make it to a family reunion on time, or the glucose level we need to maintain our health.
Much like our personal lives, we can choose to focus on KPI’s- or not. If we ignore them, we can still achieve them.
Maybe we don’t plan our trip and make it on time anyway, by chance. Or maybe we make it to a family reunion a few days late. Maybe our glucose is good, or maybe we have to take insulin.
When a spotlight is on a goal or serious problem in the business, KPI’s are used to measure progress. Sure, we can ‘keep people informed’ and support their development while also ensuring that the business doesn’t go into oblivion because KPI’s weren’t measured.
It would be negligent to look at a glaringly obvious problem on an income statement and cross off a KPI because we need to ‘keep people interested’ instead. Ideally we combine the two via soft skill leadership AND metrics to ensure the business doesn’t float along or worse, die. We can’t afford to ignore KPI’s in a recession!
The post is viral and wrong. Don’t cross off anything- combine the two!
Here’s a more relevant image showing the combination of traditional key performance indicators, along with the ‘New Leadership’ of keeping people informed, keeping people inspired, keeping people interested and keeping people involved.
