Good information is critical to the success of any organization, be it a major corporation or a charitable project. An organization that doesn't have a clear picture of its own strengths and weaknesses can't formulate a strategy to improve performance. Key Performance Indicators, called KPIs, are measures of progress toward an organization's previously agreed upon Mission, Vision and Critical Success Factors, called CSFs, which are written into a strategic plan. KPIs measure against a benchmark to provide clear data, thus helping the organization to move forward more effectively.
KPIs provide actionable information because they are always measurable and quantifiable. For example, if one of a hotel company's identified CSFs maintains a high level of occupancy throughout the year, a KPI would be the percentage of occupancy of rooms, measured on a weekly basis, using the previous year as a benchmark.
Alignment Toward Common Goals
It's often difficult to keep all departments or teams within an organization aligned and working toward common goals. Once an organization's Mission, Vision and CSFs have been written into a strategic plan, KPIs break down complex information into understandable metrics that provide constant feedback on the organization's progress. Communication of progress toward KPIs keeps everyone moving forward in the same direction.
Platform for Future Strategies
Information gained from KPIs provides a platform for future strategies. If the CSF for a hotel company is full room occupancy throughout the year, its KPI of charting the percentage of occupancy over the year will show management the time periods in which it should, for example, increase advertising or offer discounts. The success of this new strategy can again be measured using the KPI. Over time, the use of KPIs to achieve CSFs will improve the performance and strength of the organization.
Incentives for Personal Performance
KPIs are often linked to incentives. Teams or individuals are offered an incentive to improve their KPIs to a particular level during a specific time period. In order for this to be successful, the KPIs have to be clearly understood and quantifiable, and reporting must be accurate. The information provided by KPIs empowers people to improve their own personal performance along with that of the organization.