Many people who have worked in corporate settings may be familiar with the term KPI or KPI process. This is an acronym for Key Performance Indicator, something used to measure the effectiveness and performance of an employee. In most cases, this is the most valuable tool for evaluating employees whether or not they have worked according to company specifications. Some employers also use or measure core values in addition to the Key Performance Indicators. However, some companies also believe that performance should be based on actual performance and not on perceived behavior.
The use of Key Performance Indicators is important in the development of an individual and the company. These measured numbers are what managers use to determine whether or not an employee’s activities are aligned with the organization’s goals. In most cases, organizations that use KPI as a management approach are also very particular about employee training. Obviously, measuring performance on a regular basis will be useless if the employee does not receive adequate feedback on how they are performing.
The process of measuring key performance indicators is quite simple. One has to identify which metrics have a significant impact on the organization’s performance in various aspects like financial perspective, customer satisfaction, quality, etc. These things are then translated into metrics called KPIs. For example, there are some companies that need people to be present and a single absence will significantly affect production or operation. As a result, attendance will be included in an employee’s performance scorecard or KPI. This will most likely also incorporate tardy-based performance. Each occurrence of lateness or absence will affect the employee’s status in the organization, and this will also affect their salary evaluation and eligibility for promotion.
KPI is an important tool in business performance management. People know that to run an organization effectively, there have to be numbers. However, there are still those who make the mistake of relying on personal observation, rather than documented and validated performance. This type of management often leads to bias and unfortunate employees who experience unwarranted judgment from the manager will often be disgruntled and unmotivated. On the other hand, using a standard set of metrics as key performance indicators will help employees understand what is expected of them.
The use of KPIs is at the very core of having an organized organization. If employees know how they are measured and what these measures are for, they will know how to perform well and why. They will have a clear idea of what they need to prioritize and they will also know what to achieve. Employees have goals, perhaps career advancement, and an organized management process will certainly help these people achieve these goals. If employees perform to the best of their abilities, the company will not be on the losing end. In fact, the company may very well identify potential leaders in the organization and train them. Personal development is at the very core of the KPI process, if you really think about it.