Tips when setting up Key Performance Indicator (KPI):
- The company should set up KPI for each job position.
- KPI should be determined based on the company, department and individual goals.
- The business owner should be clear of the company’s key objective as the KPI is a goal that the company works towards achieving.
“My employees often ignore the KPI goals we set for them, what should we do about it?”
“I want to make KPI goals for my employees, but I am only familiar with setting sales targets. What should I do to set up KPIs for other departments?”
“My employees don’t even know the basic job requirements. I want to set performance goals for them so that they can understand clearly. Is this what KPI goals refer to?”
“Our company has an employee handbook in place, but the employees simply ignored it and they know we can’t do anything about it.”
Above mentioned are the most common questions and challenges about Key Performance Indicators (KPI) from our clients over the past years. Are those familiar to you, too?
Perhaps, are you facing the same challenges as well?
Many small and medium enterprises (SMEs) approached us for help to develop a KPI system for their businesses.
Haste makes waste, and it usually takes 1 to 2 months to resolve such issues. Setting up KPI goals for employees is the key solution instead of focusing on sales targets only.
Once the KPI goals are in place, workplace supervision and performance appraisal should be implemented to improve the work efficiency or else the KPI system will not be helpful for your business.
- Query 1: What is a Key Performance Indicator (KPI)?
There are plenty of articles and explanations regarding Key Performance Indicator (KPI) on the net. However, we would like to emphasize that KPI serves as a performance “indicator” for your business.
We could understand the company’s performance clearly through this indicator as it is a quantifiable metric that reflects how well an organization is achieving its stated goals and objectives.
- Query 2: KPI only needed for the Sales Team?
Not at all. For instance, sales performance is a kind of achievement, same goes to employee productivity, it is also an indicator for work performance.
Thus, no matter which job it is, such as human resource and general affairs, accounting, servicing or others, employees have their own performance goals that must be achieved.
Performance indicators are divided into company, departmental, and group/individual and the goals should be determined from top to bottom level.
- Query 3: How to start making KPIs?
Going to start setting up performance indicators? It should be determined depending on the company’s goals.
You can think of performance goals as a thermometer. The temperature scales indicated in the thermometer could be the targets you would like to achieve. Each temperature measurement level refers to each goal target, thus, the business owners should make up their mind to set up different goals clearly.
For example, if you think that the most comfortable room temperature is 23°C, then you must switch on the air conditioner and to keep the room temperature at 23°C.
This could be applied to your business as well. If your target market share for your business is 50%, which is to achieve a certain value of revenue, then you should boost your team productivity and optimize the operating workflows to achieve the said goals.
- Query 4: Can we change the KPI goals?
Yes, of course.
If you don’t feel that the room temperature at 23°C is comfortable anymore, and would like to change it to 20°C then your target should be revised accordingly. However, the performance indicator still remains unchanged.
In other words, the ‘market share’ for your business remains the same, but the target will be adjusted from 50% to a new target as when required based on the latest market trend and analysis.
- Query 5: How to deliver the KPI goals to your employees?
Once the company has set up clear guidelines and KPI goals for the business, the management should proceed to the next level, which is to set up KPI for each department.
For instance, the KPI goal for the company is to achieve a certain portion of ‘market share’. Hence, the company should review and list out the factors that will make an impact to it, such as product and service quality, customer satisfaction, etc.
Nonetheless, execution is also one of the main factors and challenges for it.