If your planning isn't combined with precise indicators to track your progress toward your goals, it's weak and incomplete. The significance of performance measurement indicators is evident in a society prioritizing planning over execution. Every year, we make many grand and creative plans with no practical implementation steps or clear measurement standards for the required progress, which keeps us stuck in our comfort zones.
Do you wish to make your organization rank among the best of its kind and realize the lifestyle you have drawn for yourself? To reach the outcome that most closely aligns with your goals, you must establish a compass that will guide you in assessing your performance and correcting any mistakes you might make.
What Are Key Performance Indicators?
They are quantitative factors that provide an easy and reliable way to measure achievement or detect changes associated with achieving the organization’s goals. They help us measure the progress made while pursuing our goals.
What Is Planning?
Setting a performance indicator is only possible with clear goals that you want to accomplish. Hence, the foundational element of attaining success in life is planning. The strategic planner sets a strategic map based on long-term goals they hope to accomplish, concentrating on particular strategic topics while avoiding distraction and loss, such as increasing revenue and achieving work satisfaction within the organization. Then, they divide their strategic goals into goals that serve the inputs, the process, or the outputs. Key performance indicators are then established for the final sub-goals.
For example, the planner creates a sub-goal that aims to reorganize work processes related to salaries and wages to achieve the strategic goal of increasing employee satisfaction in the organization. Then, they develop a key performance indicator, the wage-to-profit ratio, to measure this goal. Employee wages should increase as the company's profits increase.
What Are the Components of the Performance Measurement Process?
The performance measurement process consists of smart goals, initiatives, and precise indicators to monitor progress and correct deviations if they occur.
For example, let's say that someone struggles with being overweight and wants to lose 75 kg by the end of the year. This person takes significant initiatives to help them reach their goal, like deciding to join a gym and commit to a diet. They develop quantitative indicators to track their progress toward these goals, such as "working out for an hour every day at the gym" and "eating meals that do not contain more than 1,500 calories per day" to demonstrate their commitment to these initiatives. They then use the prior indicators to measure their performance each month.
They must take corrective actions to reach the intended original goal if issues arise, such as exceeding the allotted calories by failing to commit to thirty hours of exercise per month. These corrective actions include changing the indicators, like increasing the exercise indicator to an hour and a half per day and lowering the daily calorie allowance to 1200 calories.
What Are the Types of Key Performance Indicators?
1. Cause and effect indicators
Some indicators precede and affect the process that a person seeks to reach, and other indicators result from that process. For example, let's say we run a restaurant and aim to satisfy and delight our customers. "Delivering products to the customer" is the process. The process will then be caused by the indicator of "delivering products on time to the customer," and its result will be determined by "achieving customer satisfaction." The most crucial indicator for achieving the intended goals is the "cause" indicator.
2. Efficiency and effectiveness indicators
Senior management-related effectiveness indicators focus on accomplishments, such as a doctor declaring that they finished five surgeries in a single day. The details behind the apparent achievements are what efficiency indicators _ which are associated with middle management levels _ are all about. Examples of efficiency indicators include measuring how well the patient was treated, how well the anesthetics were used, how well the time allotted for each procedure was used, how well the outcomes were produced, and how much the patient's preoperative symptoms declined.
3. Quantitative and qualitative indicators
Quantitative indicators include the percentage of customer complaints the company receives about its products, the percentage of employees who miss work beyond the parameters of authorized leave, and the average wait time in customer service call centers. Qualitative indicators assess sensory problems rather than quantitative ones, like how much a lecture is enjoyed and how satisfied a company's staff is.
The Importance and Benefits of Key Performance Indicators
Key performance indicators are essential for each organization. Measurement is the basis of everything in life. You cannot manage what you cannot measure. Key performance indicators can be numerical, financial, or percentage-based. Examples include calculating the number of pieces produced in a given day and comparing it to the target quantity, calculating the amount of money you wish to deduct from the project's cost and comparing it to the budget, or calculating the percentage of your goals being met.
Key performance indicators help in making effective decisions in the organization. You will not be able to decide to fire a certain number of your employees if you do not measure their performance indicators, such as the completion ratio compared to the total working hours.
Key performance indicators also help to fill performance gaps through careful monitoring of every detail of the work. They focus on the most important operations in the company by adopting specific, accurate indicators regarding each dimension: The financial and marketing dimension, the employees dimension, the customer dimension, the operations dimension, and the social responsibility dimension. For example, calculating the rate at which a factory's absorptive capacity is being used by dividing its actual production by the production that workers and machines are required to produce.
Employees' distorted view regarding performance indicators is one of the most prominent obstacles to implementing performance measurement systems. Employees refuse to adopt a new work culture based on performance indicators because they see it as an attempt to limit their freedom, retaliate against them, and impose sanctions. However, using performance indicators is the best method to ensure their rights and attain justice among them since they deter employees who do not do their best at work but get compensation and rewards at the end of the year, just like their devoted and hard-working coworkers. To implant the right vision of performance assessment indicators in employees, the person setting the indicators must communicate with them effectively.
In Conclusion
Planning entails having a genuine intention to implement and a solid determination to measure and assess implementation to ensure the desired result. It is not just about having beautiful dreams and lofty goals. So, measure your performance so you can measure your success.
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