Why Do Kpi Analysis?
The modern performance management world is simply a-buzz with terms, such as key performance indicators, objective management, and metrics. These simply all pertain to the essential idea of using timely, relevant data to measure current performance, with the aim of maintaining or improving it. This approach works because it allows both managers and employees to get a clear, concrete idea of where they presently stand against the company?s goals and objectives. In contrast to past management approaches based more on intuition and personal discretion, today?s hot strategies all revolve around consistency, objectivity, and being grounded in hard data. KPI analysis, in particular, has proven to be a viable, effective way of tackling the age-old problem of managing groups, especially as they grow larger.
It all boils down to a problem of scalability. Personal approaches to management work for very small groups because it is still possible for each member of the group to know one another closely. Leaders can then rely on one-to-one relationships to let them know whether things are going well or badly. Quick action can be taken because it is relatively easy to mobilize a small number of people as compared to an entity as humongous as today?s corporations. As the size of the group increases, however, it quickly becomes more difficult to get a handle on performance just through informal means. This is why bureaucracies and hierarchies of authority and organization form, to enable the continuing management of ever larger groups. The problem of ascertaining performance becomes quite a difficult one, which fortunately can be solved in a number of ways, all related to the use of specific, targeted measurements.
Key performance indicators, as their name implies, are carefully chosen parameters that give the greatest insight into specific aspects of performance. It is virtually impossible to measure and keep track of every single detail of every employee, process, and transaction that a modern company undergoes. Hence, it becomes necessary to select only the most important ones to act as representative samples.
These metrics are chosen to be in line with the group?s overall goals and objectives. In many cases, the selection process meshes well with the formulation of a strategy map. This strategy map aims to clarify the relationships between the company?s mission and vision and the objectives and goals of each of its component parts. As each goal is formulated, it becomes quite easy to identify one or more key performance indicators that would measure progress towards that goal. This process can be continued until a full KPI system is defined.
Of course, the fruition of this system comes only with KPI analysis. The gathered data will form the basis for seeing certain trends and patterns in performance. Under the proper analysis, these metrics can be powerful guides for decisions big and small because they will reflect the effects of past and present policies. They say history repeats itself, but in business, the history as shown by KPIs should only be a springboard for greater achievements and better performance in the future.