Importance of Setting SMART KPIs
June 22, 2015
Organizations succeed or fail based on their capability to set, track, and enforce key performance indicators (KPIs). KPIs are widely considered as measures by which businesses evaluate whether their actual performance is in line with their strategic business goals. However, if an organization’s KPIs can’t be easily tracked, quantified, and tied to an organization’s bottom line, then it will not deliver the intended result. Therefore, how should businesses establish performance measures that provide a consistent method of tracking an organizations’ goals, targets, and objectives? By setting SMART KPIs:
- Specific – Clearly explain why a certain KPI is used and what it measures. Moreover, the KPI should be specific to the individual department/job itself with focus on the exact behaviour.
- Measurable – KPIs have to be measurable and based on clearly defined behaviour. It should be evaluated to provide feedback to the organization’s employees on their performance and help to compare the actual outcome with the set target.
- Achievable – KPIs should be realistic. All employees within the organization must have an aligned belief that the set targets are fair and can be readily attained.
- Relevant – KPIs must be essential to a department’s function and be tied to the company’s bottom line. If a change in KPI does not impact an organization’s profitability/bottom line, that KPI is inadequate.
- Timely – KPIs should be measured and adjusted within an appropriate time frame. Organization’s goals and objectives tend to vary over time; thus, KPIs must be adjusted accordingly to drive success.
By: Valery Iukin