How to Develop KPI for Your Department

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Key Performance Indicators (KPIs) measure the progress of a business toward a set objective. KPIs are essential for any business as it assesses employee performance, customer satisfaction and productivity to determine what actions to take in order to rectify problem situations. There are certain processes to look into when developing key performance indicators.

Conduct a meeting with the relevant stakeholders of the business, such as owners and employees, to discuss objectives of the KPIs in relation to the goals of the business. Inform the stakeholders of the purpose of the KPIs and the role of each stakeholder in their development. Conduct research to gain information on customers' perception of the services provided by the business.

Schedule a meeting with the employees in your department to discuss their general performance and its effect on the business. Instruct them to provide information detailing their work activities and supporting documents if possible, to verify the standard of performance. Allow them to explain their work progress so as to acquire a general view of their performance level.

Evaluate the data acquired from meeting with your employees and identify the strong areas which result in a significant improvement in the department’s quality and quantity of sales and the weak areas which are responsible for the unproductive areas in the department. Ask the employees for the reasons behind the performance in order to pinpoint what operations need changes in order to boost work performance.

Set down goals and standards for employees. Present observable and measurable standards for employees. Test the KPIs to ensure they are SMART; specific, measurable, attainable, reliable and timely. Provide the employees with the resources needed to achieve these objectives.

Design a system to track and evaluate the performance of the department and its employees after a given period of time. Provide a standard of measurement of performance which the employees can refer to in order to rate their performance. Provide rewards or remuneration for employees who attain their standards, so as to keep them motivated.

Tips & Warnings

  • KPI concept under the Balance Score Card by Kaplan is useful source of reference.

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