How Do You Develop Key Performance Indicators?


Quick Answer

Develop key performance indicators by examining the company or department to identify the areas that matter most, then matching those aspects to quantifiable numbers or metrics. Determine the ideal goal value for each area along with the most reasonable time frame in which to achieve it to create the indicator.

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Full Answer

The purpose of key performance indicators is to allow a business to track and measure its success across different areas and determine how effectively it is reaching its goals. The process to developing a key performance indicator begins with a thorough analysis of the most important aspects of the business, as the indicator is only valuable if it helps the company gauge progress and success. The nature of the indicator varies between companies and depending on the personal preferences of managers and leaders. For example, a high-end independent retailer may place a great deal of importance on sales each month, whereas as a call center might focus on the length customer calls.

After identifying the important factors, match them to a number value that you can measure. This ensures that the indicator is actionable and that determining whether or not the company meets the goals is a straightforward process with little to no guesswork. The indicator value also needs to be realistically achievable, taking into account the current state of the company and other relevant factors to avoid making the indicator useless.

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