Understanding the Key Productivity Indicators (KPIs)

For any organization to succeed it is important to firststeps would be involved: Establishing the vision;
understand what factors define its success.determining strategic goals; analysis of each goal to
Organization's goals and objectives, factors thatunderstand what factors influence them; assigning one
contribute towards its success, everything needs to bemeasure per factor KPI; assigning a target value.
clearly outlined before a measure of its success isKPIs are measurement tools in the effort for improved
defined. An organization's success is identified by howperformance, but organizations fail to implement them.
fast it grows, in other words, its productivity. AnOnly 52 percent of organizations are using KPIs in their
organization's productivity in turn depends on thedaily operations according to a survey. Among the list
productivity of its employees. Hence, it is vital toof indicators that are measured are throughput and
measure employee productivity to understand theproductivity, inventory levels, raw material costs, and
direction of growth of an organization.labor costs.
How to implement it? Numerous methods have beenBusiness performance management is all about
devised to measure employee productivity dependingdrawing out the productivity measurement pyramid
on its parent industry or domain. Methods to measurewith the following levels: vision, strategies, objectives,
employee productivity are called Productivity Metrics.critical factors and finally key performance indicators.
To be able to measure productivity using productivityA technique called the fishbone diagram helps identify
metrics, you need to answer why you want tothe metrics for KPIs. Following steps are involved in the
measure, how you plan to measure and aftercreation of an effective fishbone diagram: Selecting
measuring what will be your action areas. Why youthe critical factors, Categorizing individual causal
want to measure answers the goals and objectivesfactors, identifying causal driving factors, analyzing the
that your organization wants to achieve. How you planfishbone diagram. The fishbone diagram provides
to measure will be your productivity metrics. And,framework for identifying the impact of all potential
course of action suggests the actions you will take todrivers on productivity and identifying individual metrics
realize defined goals and objectives.for increasing to the KPIs.
A number of factors contribute towards realization ofSelecting incorrect metrics for KPIs can severely harm
your goals and objective. Factors that are critical toany performance management effort. Its tough to
the growth of an organization in the desired directiondecide which metric qualifies as a KPI metric. We
are called Critical Success Factors (CSFs). There arecould consider using KPI groups such as productivity,
four types of CSFs - industry, strategy, environmentaltimeliness, process efficiency, cycle-time and resource
and temporal. There should not be too many CSFs asutilization. The candidate KPI metrics could include:
it would only result in confusion and focus being lost.Response-Time Metric , Visibility Metric, Productivity
These factors will also have some quantifiableMetric, Shrinkage Metric. Although innumerable
elements that would be measured against a thresholdadditional metrics can be developed, these are enough
that would exactly specify the current status of ato depict the vital attributes of KPI metrics. All we need
factor. This quantifiable element is what we call Keyto understand is that the KPIs have to be measurable,
Performance Indicator (KPI). Hence each objective thatunderstandable, relevant, and based on valid data.
is stated by an organization will have a critical successFrom an organizational point of view, the KPIs should
factor, a KPI and a target.be cascadable and allow the users to take positive
The measurement tool. In the process of measuringactions.
productivity using the CSFs and KPIs the following