Key Performance Indicator

KEY PERFORMANCE INDICATORS IN STRATEGIC PLANNING

The setting of Key Performance Indicators (KPI) is an important aspect of the strategic planning process and plays a major role in the measurement of progress of the organization towards the attainment of its planned goals. This measurement of progress is an essential feature of the strategic plan implementation (i.e. formulating plans are one thing, but making things actually happen is quite another).
Organization management must periodically assess progress and take corrective action if progress is not being achieved. Without periodic assessment of progress, strategic plans are likely most likely to fail.

The terms "Performance Measures" and "Performance Indicators" mean the same and the use of the word "Key" as in Key Performance Indicators merely means the Performance Measures that are deemed to be most important. 

Key performance indicators should be clear-cut, that is they are either achieved or not achieved. Using key performance indicators, the management process will compare what was desired with what actually happened.

Organizations regularly uses KPIs, to track the performance and project the future success of the business. No standard list of KPIs exists that the business world recognizes and adheres to as a way to track these. Instead, KPIs can vary from industry to industry and even from business to business within the same industry.

KPIs are sometimes misunderstood, so much so that many have come to associate a KPI with anything measurable within a business. The fact that so many businesses differ on what they consider the most important KPIs, makes it that much more difficult to define what they are. In short, a KPI is a measure imposed on important financial and non-financial business information that provides an indication of either success or failure for the business.

The role of KPIs in the strategic planning process stems from the belief that KPIs provide a measurable and objective standard by which organizations can track progress and implement change. Businesses use KPIs in the strategic planning process to provide benchmark by which they can measure current performance. Businesses rely upon these KPIs to help them make more objective and scientific planning decisions, thus reducing the chance of human error. A business tracks KPIs over time to determine what progress the business is making and what changes it needs to implement if positive change does not occur.

Business managers and executives can sometimes run the risk of being tied to their KPI paradigm so much that it becomes the only way they measure success. Also problematic is the tendency to measure anything and everything as if all quantifiable data were useful in some way. This can result in a tendency for a business to collect massive amounts of data, only to be overwhelmed by it and not able to use it in any real or meaningful way.

RAMLI BARDIN | KEY PERFORMANCE INDICATORS | 1ST JANUARY 2017

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