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5 characteristics of an effective KPI


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We know that Key Performance Indicators (KPIs) are the best way to evaluate the operating success of a business. Effective KPIs unite individuals and the team towards specific goals, helping the business to grow. It doesn’t matter if you’re creating a new KPI or evaluating existing ones, there are 5 important characteristics of an effective KPI to keep in mind.

 

1. They Must be Clear

Everyone involved in a goal should be able to recognise their role in enacting a KPI. If a KPI is clear, staff can make practical decisions that will lead to desired outcomes. A clear KPI for an individual could be ‘sell xx number of units a month’ or for a team ‘sell more of xx product’.

 

2. They Must Align with the Organisations Goals

KPI alignment is critical for a successful strategy execution and performance improvement. All KPIs should relate to one another and support the overall goals of the organisation. For example, some companies choose to focus on new clients while others choose to focus more on existing ones.

 

3. They Must be Relevant

Relevance ensures the right decision makers are responsible for creating specific KPIs. Making sure the relevant stakeholders create KPIs increases the likelihood of a successful outcome. For example, KPIs for the marketing team should be made by the marketing manager.

 

4. They Must be Measurable

Since the whole point is to evaluate operations, KPIs must be measurable. That doesn‘t mean they have to be quantitative though, they can be qualitative as well. A quantitative measurement, for instance, could focus on the number of products sold within a timeframe, while a qualitative KPI would focus more on customer satisfaction.

 

5. They Must be Achievable

The more realistic a KPI is, the more likely employees will achieve it. The best way to make goals achievable is to set small rather than large goals. For example, instead of setting yearly or quarterly goals, set monthly or weekly ones that will challenge employees but not overwhelmed them.

 

Developing effective KPIs isn’t easy. But by taking the time to select and determine the best KPIs for success, everyone, including the organisation, will achieve their goals more effectively.

 


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