What is a KPI? What are KPIs? Key Performance Indicators
Summary
TLDRIn this video, the concept of Key Performance Indicators (KPIs) is explored. KPIs are quantifiable measures of progress towards specific business goals, linked to strategic objectives. The video highlights the importance of KPIs in managing and improving performance, citing Peter Drucker's quote, 'What gets measured, gets managed.' It explains the characteristics of effective KPIs, emphasizing their role in decision-making, tracking performance trends, and ensuring alignment with organizational priorities. The video also outlines how to create good KPIs using the SMART criteria and provides practical insights for project managers to drive and enhance project performance.
Takeaways
- 📊 Key performance indicators (KPIs) are essential quantifiable measures of progress towards intended outcomes.
- 📈 KPIs help link performance to the achievement of business portfolio, program, or project objectives.
- 📋 KPIs focus work on delivering operational or strategic requirements.
- 📝 Peter Drucker's quote 'what gets measured, gets managed' emphasizes the importance of KPIs in managing performance.
- 🎯 KPIs provide targets to work towards and can engage and energize project teams.
- 🔄 KPIs can be statements of ultimate goals or proxy indicators measuring closely related achievements.
- ⏳ KPIs include leading indicators (progress) and lagging indicators (success post-completion).
- ✔️ Good KPIs have six main characteristics: objective evidence, measure the right things, link to strategic imperatives, track performance over time, track relevant metrics, and be SMART (Specific, Measurable, Achievable, Relevant, Trackable, Ethical, Supported, Time-bound).
- ❓ Creating good KPIs involves asking key questions about desired outcomes, influence, responsibility, measurement, review timing, achievement recognition, and understanding.
- 🏢 Large organizations like Tesla may focus on a single critical metric, but complex organizations benefit from multiple KPIs to measure progress, track issues, and drive project performance.
Q & A
What are Key Performance Indicators (KPIs)?
-Key Performance Indicators (KPIs) are quantifiable measures that help gauge the progress towards achieving specific business objectives or desired outcomes. They are crucial for tracking performance and guiding strategic decisions.
How do KPIs help in managing business performance?
-KPIs provide measurable targets that focus efforts on achieving strategic and operational goals. They allow organizations to monitor performance, make informed decisions, and ensure alignment with business priorities.
What is the significance of Peter Drucker's quote in the context of KPIs?
-Peter Drucker's quote, 'what gets measured, gets managed,' emphasizes that by measuring performance through KPIs, organizations are more likely to manage and improve their outcomes effectively.
What are proxy indicators in the context of KPIs?
-Proxy indicators measure elements closely related to desired outcomes that are difficult to quantify directly. They stand in for the actual objectives and help in assessing progress towards those goals.
What is the difference between leading and lagging indicators?
-Leading indicators predict future performance and show progress towards achieving goals, while lagging indicators measure the results after the work has been completed, reflecting past performance.
What are the six main characteristics of good KPIs?
-Good KPIs should: 1) provide objective evidence of progress, 2) measure the right things for decision-making, 3) link to strategic imperatives, 4) track performance changes over time, 5) focus on what matters to the organization, and 6) be SMART (Significant, Measurable, Achievable, Relevant, Trackable, Ethical, Supported, and Time-bound).
Why is it important for KPIs to be specific and measurable?
-KPIs need to be specific and measurable to provide clear, unbiased data on performance. This specificity ensures that progress can be accurately tracked and managed, avoiding subjective interpretation.
How can KPIs energize and engage project teams?
-KPIs provide clear goals and benchmarks, which can motivate project teams by giving them targets to strive for and a tangible way to measure their progress and achievements.
What questions should be asked to create effective KPIs?
-To create effective KPIs, ask: What are your desired outcomes? Why are these outcomes important? How can these outcomes be influenced? Who is responsible for each outcome? How can progress be measured? When will progress be reviewed? How will you know when the outcome is achieved? Who needs to understand the KPIs? What is the review process for the KPIs?
How does Tesla's approach to KPIs differ from that of large complex organizations?
-Tesla focuses on a single, critical metric that aligns with their core objective, while large complex organizations use a broader set of KPIs to track various aspects of their performance and address diverse priorities across different areas.
Why is it important to review and update KPIs regularly?
-Regularly reviewing and updating KPIs ensures they remain relevant and aligned with changing business goals and conditions. It helps in keeping the focus on current priorities and adapting to new challenges or opportunities.
Outlines
📊 Understanding Key Performance Indicators (KPIs)
This paragraph introduces Key Performance Indicators (KPIs) as the most important, quantifiable measures of progress toward desired outcomes. KPIs are linked to business portfolio, program, or project objectives, helping to focus work on delivering operational or strategic requirements. The famous quote by Peter Drucker, 'what gets measured gets managed,' highlights the importance of measuring performance to manage and achieve desired results. KPIs provide targets and can engage and energize project teams. They can be direct measures or proxy indicators for harder-to-measure goals. KPIs can be leading (predictive of future success) or lagging (reflective of past success) indicators.
📈 Characteristics of Good KPIs
Good KPIs have six main characteristics: 1) They provide objective evidence of progress, offering reliable numbers free from bias. 2) They measure the right things to inform better decision-making. 3) They link directly to organizational strategic imperatives, mirroring priorities. 4) They track performance changes over time to understand trends. 5) They measure important aspects like timeliness, efficiency, effectiveness, quality, governance, compliance, team behaviors, resource utilization, economics, financial performance, and overall project performance. 6) They are 'smartest': significant, measurable, achievable, relevant, trackable, ethical, supported, and time-bound. Creating good KPIs involves asking the right questions about desired outcomes, influence, responsibility, measurement, and review.
📌 Implementing KPIs in Large Organizations
This paragraph emphasizes the importance of KPIs in large, complex organizations for measuring progress, tracking progress, and highlighting issues. Tesla is mentioned as an example of a company that focuses on a single metric. Project managers can adopt the KPI process to drive projects and improve performance. The paragraph concludes with a call to action for viewers to like the video, subscribe to the channel, and hit the notification bell for more project management content.
Mindmap
Keywords
💡Key Performance Indicators (KPIs)
💡Objective Evidence
💡Leading Indicators
💡Lagging Indicators
💡SMART Criteria
💡Proxy Indicator
💡Strategic Imperatives
💡Trends in Performance
💡Project Performance
💡Tesla's KPI Process
Highlights
Key Performance Indicators (KPIs) are quantifiable measures of progress towards intended outcomes.
KPIs are linked to the achievement of business objectives, helping to focus work on delivering operational or strategic requirements.
Peter Drucker's quote emphasizes the importance of measurement in managing performance.
Performance indicators provide targets and can energize project teams.
KPIs can be statements of ultimate goals or proxies for harder-to-measure objectives.
KPIs can be categorized as leading indicators, showing progress, or lagging indicators, reflecting past success.
Good KPIs provide objective evidence of progress, free from individual bias.
KPIs should measure the right things to inform better decision-making.
KPIs must link directly to an organization's strategic imperatives.
KPIs should allow tracking of performance changes over time to understand trends.
Good KPIs track aspects such as timeliness, efficiency, effectiveness, quality, governance, compliance, and resource utilization.
KPIs should be SMART(est): Significant, Measurable, Achievable, Relevant, Trackable, Ethical, Supported, and Time-bound.
Creating good KPIs involves asking the right questions about desired outcomes, influence, responsibility, and measurement.
The process of creating KPIs includes defining outcomes, measuring progress, and reviewing achievement.
Organizations like Tesla focus on a single key metric, while complex organizations benefit from a range of KPIs.
Project managers can use the KPI process to drive and improve project performance.
Engagement with the video is encouraged through likes and subscription for more project management content.
Transcripts
in this video i want to answer the
question what are kpis
key performance indicators
[Music]
key performance indicators are your most
important
quantifiable
measures of progress
towards your intended outcome
we link kpis to the achievement of your
business portfolio
program or project objectives
as a result kpis help us to focus our
work
on delivering the operational or
strategic requirements that we have for
our business
peter drucker's famous quote reminds us
that what gets measured
gets managed
that is if we put in place ways that we
can measure our performance in a
particular domain
then we are likely to manage our
performance in that domain and therefore
more likely to get the results that we
want
so performance indicators provide us
with targets to work towards
as a result they can also be powerful
ways to help us to engage and energize
our project teams
they can be statements of what we
ultimately want
or they can stand in for the things that
we want
they can measure things that we believe
are closely related
to things that we want to achieve but
that are harder to measure
this type of indicator is a proxy
indicator
kpis can also be either leading
indicators or lagging indicators
leading indicators give us a measure of
the progress towards achieving what we
want to achieve
whereas lagging indicators give us
information about how successful we have
been
after we have completed the work
so what are the characteristics that
make for good kpis good key performance
indicators
well i think there are six main ones
firstly they provide objective evidence
of progress towards achieving our
desired outcome
objective in the sense that when we
measure the performance against the kpi
we get a reliable number
that is not subject
to opinion or preference or prejudice of
one or more individuals
secondly good kpis measure the right
things
to inform better decision making
thirdly good kpis have to link directly
to the organization's strategic
imperatives
we have to craft a set of kpis that
closely mirrors our organizational
priorities
fourth kpis need to allow us
to track how performance changes over
time
so that we can understand the trends in
our performance
is our performance improving is it
decreasing or are we staying at a level
the fifth requirement for good kpis is
they have to track things that matter to
us
these include things like
timeliness and efficiency
effectiveness and quality
governance and compliance
team behaviors and performance
resource utilization
economics and financial performance
and for us as project managers overall
project performance
the final criterion for good kpis
is that they need to be smart no
smarter
no
smartest
in this context i'm using smartest to
stand for significant
measurable
and if you're wondering why the s isn't
specific well if something's measurable
it's got to be specific so significance
measurable
achievable
relevant
trackable
ethical
supported
and time-bound
so the question i expect you're asking
yourself is how do you create good kpis
and to do this you need to ask the right
questions
what are your desired outcomes
and why do you want
each of these outcomes
how can you influence each outcome
and who will be responsible for each of
them
how can you measure progress against
each outcome
and when will you review
that progress
how will you know when you have achieved
your outcome
who needs to know about and understand
your kpis
and what is the process and cycle
reviewing which kpis you work to
some companies notably tesla for example
take the kpi process to extreme
they articulate the one metric that
matters to them
however
in a large complex organization the use
of kpis to measure progress to track
progress
and to highlight issues is really
important and as project managers
we can adopt the kpi process
not only as part of the wraparound to
drive projects but also as a mechanism
to drive and improve performance on our
projects
please do hit the thumbs up if you like
this video
i'll be creating loads more great
project management videos for you so
please do subscribe to the channel and
hit the notification bell so you don't
miss any and i look forward to seeing
you
in the next one
[Music]
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