In business administration, the term key performance indicator (KPI) refers to key performance indicators that can be used to measure and/or determine the progress or degree of fulfillment with regard to important objectives or critical success factors within an organization. The term is also used in telecommunications/network technology for better preparation of basic performance management data. A key performance indicator can be used to meet the following objectives:
- Evaluation;
- Diagnosis;
- Communication;
- Information;
- Motivation;
- Continuous progress.
Key performance indicators are used in the presentation of management dashboards, they must be regularly updated. Key performance indicators also find their place in balanced scorecards because they generally assess the achievement of a strategic objective or an element that contributes to it.
For some years now, it has been widely discussed publicly that a high proportion of the optimization of production processes lies in the concrete organizational processes for the use of the means of production. This is because the usual planning processes, which are usually based in Enterprise Resource Planning (ERP), usually do not take into account disruptive events such as machine or supplier failures. Here, the so-called Manufacturing Execution Systems (MES) are now establishing themselves as a link between ERP and the concrete execution of production (worker deployment and automation).
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With the increasing spread of the Internet, the generation of profits via the online channel became more important. Web analytics tools help optimize marketing campaigns and websites. For the measurement of success and failure, KPIs are also consulted for web analysis. Important KPIs for an online shop are, for example, the average order value or the abandonment rate in the ordering process. Content websites offer editorial content and are financed by advertising. For these, the number of contacts (page views) and the proportion of returning visitors count above all. For B2B websites, an important KPI is the number of contact forms completed. Another key KPI is the number of PDF downloads on support websites, which help visitors answer questions on their own, thus reducing call center costs.
Implementation of KPIs
As part of the implementation of KPIs, it is first determined which business processes are to be investigated. The identified processes are then broken down into building blocks within the process chain. The individual building blocks can now be viewed as isolated work steps within the process chain. This makes it possible to carry out measurements for each individual work step.
The dimensions in which the measurements are carried out are already defined when the work steps are identified. It is on them that the Definition of KPIs. Correlating variables are of great importance here, as they can be used to uncover crucial dependencies in the process chain.
Once suitable benchmarks have been defined for the individual KPIs, a monitoring tool is implemented in a final step. This is intended to provide a complete overview of all processes.
Key performance indicators are often the aggregate of data from the information system. The tools for managing them can be grouped into extractor tools for implementing rules that define the key indicator and modes of access to data and presenter tools that aim to present them in the form of a dashboard or cockpit and their use in a cycle of continuous improvement. In the first group we can position the many ETL (extract-transform-load) of the market.
Criticism
Not everything is measurable by indicator, including fundamental aspects such as cooperation, frustration or motivation. Indicators are only approximations that are often quite far from the reality they are supposed to represent. Indicators are generally quite easily falsifiable.
