Using Key Performance Indicators (KPI) Correctly

Summary

This video explains the proper use of Key Performance Indicators (KPIs) in organizations, emphasizing their role in measuring the success of strategic priorities. KPIs should be tied to specific goals, such as improving customer experience or increasing brand loyalty. The video highlights the distinction between KPIs and general performance standards, clarifying that not all performance metrics are KPIs. It also demonstrates how KPIs can track progress in areas like customer satisfaction and communication quality, and stresses the importance of clear expectations for both leaders and employees.

Takeaways

• 😀 KPIs (Key Performance Indicators) are often misused or misunderstood in organizations.
• 😀 KPIs should be clearly tied to the organization's mission, priorities, and strategies to measure success.
• 😀 An organization's mission is static, while priorities tied to the mission can change over time.
• 😀 Senior leadership determines strategies to achieve the organization's priorities, and KPIs are used to measure success in executing these strategies.
• 😀 KPIs are not the same as other performance metrics; they should focus on the success of a specific strategy.
• 😀 For example, if the priority is to increase brand loyalty, the KPIs might be customer satisfaction and quality of communication.
• 😀 While other performance areas like call wrap-up time or productivity are important, they are not KPIs unless directly tied to a strategic goal.
• 😀 If an organization calls every performance measure a KPI or neglects performance standards, it leads to confusion among staff.
• 😀 KPIs should be used to measure progress against strategic goals and indicate whether the strategy is successful.
• 😀 Frontline employees care more about their individual performance expectations, while leaders use KPIs to track the success of broader strategies.
• 😀 As strategies and priorities evolve, the KPIs should shift to reflect the corresponding changes in focus, while performance standards remain more constant.

Q & A

What are KPIs and why are they important?

KPIs (Key Performance Indicators) are specific metrics used to measure the success of a strategy within an organization. They help track progress toward key priorities and goals, enabling leaders to evaluate whether their strategies are working effectively.

What is the difference between KPIs and general performance metrics?

KPIs are specific metrics that measure the success of a strategy or goal. General performance metrics, on the other hand, track broader aspects of employee or organizational performance, such as productivity or process efficiency. Not all performance metrics are KPIs.

Why is it important to tie KPIs to organizational strategies?

Tying KPIs to strategies ensures that performance is being measured in a way that directly supports the organization's overall goals. This alignment makes KPIs more relevant and impactful, as they focus on measuring the success of specific strategic objectives.

Can KPIs change over time?

Yes, KPIs can change over time. As organizational priorities and strategies evolve, the KPIs that measure success in these areas will also shift to reflect the new focus.

Why might frontline employees not relate to KPIs?

Frontline employees may not fully relate to KPIs because these indicators are primarily used by strategic leaders to assess the success of larger organizational goals. Employees, on the other hand, are more concerned with understanding their specific performance expectations.

What is the role of performance expectations in an organization?

Performance expectations are the standards set for individual employees and the organization as a whole. They are typically constant and consistent, providing employees with a clear understanding of what is expected of them in their roles, separate from the shifting nature of KPIs.

What is an example of a KPI and how does it relate to a strategy?

An example of a KPI could be customer satisfaction surveys and quality of communication evaluations. These KPIs are tied to the strategy of improving customer experience, helping to measure whether the actions taken to enhance customer interactions are successful.

What are some performance metrics that are not KPIs but still important?

Examples include metrics like productivity, average handle time, call wrap-up time, and adherence to procedures. While these are important for evaluating employee performance, they are not considered KPIs unless they are specifically tied to a strategic objective.

How can KPIs help measure progress in improving employee performance?

KPIs help track progress by providing clear, quantifiable data on areas tied to strategic objectives, such as customer satisfaction or communication quality. As strategies are implemented (e.g., staff training or role-playing), KPIs allow leaders to measure whether those actions are producing the desired results.

What happens if KPIs are misused or misunderstood in an organization?

If KPIs are misused or misunderstood, it can lead to confusion among employees and misalignment with organizational goals. It can also result in focusing on metrics that are not directly tied to strategic priorities, ultimately hindering performance improvement efforts.