Understanding Company KPI, Types and Objectives

Lutfi

Company KPI Definition Types and Objectives
Company KPI Definition Types and Objectives

Rancakmedia.com – The following is the meaning of kpi company To run a company efficiently, management control and assessment processes must ensure that the company's work plans run effectively so that company goals can be achieved.

An effective performance management system is needed to carry out control and assessment tasks effectively. A well-designed performance management system is a system that can define the business operations that occur within the organization.

KPIs can be used to measure the performance management system (Key Performance Indicator). Each area of ​​the company, including business units, functions and other strategic objectives, is represented by one or more KPIs (key performance indicators) in the performance management system.

Performance management systems are used by many companies, but they include “KPI lists” that do not explore the interrelationships between indicators. To meet complex organizational needs, several performance management systems have been created to handle the interrelationships between indicators. The relationship between indicators in the BSC is only shown qualitatively.

Using performance measurement models, more specifically to apply more specific criteria, such as calculating how relationships affect overall performance to leveraging past results to plan future strategies and behavior.

Definition of KPI

KPIs are tools that tell whether a company is achieving its business goals and explain a company's effectiveness. For businesses, KPIs are used to measure whether they are successfully achieving their goals or not.

understanding company KPI

Some KPI features include:

  • Size is not a consideration finance
  • Most frequently used sizes (Common measurements)
  • Measures known to management
  • All members of the organization understand and comprehend KPIs.
  • Commitment to the team and partners
  • Has a tremendous impact
  • Produces good results

Key performance indicators are measured in three time intervals: daily, weekly and monthly. KPIs are an important concept for success, and management always pays attention to them. If someone deviates from the KPIs, management can then reconcile with the individual to help them correct the problem.

Definition of Key Performance Indicators (Key Performance Indicators) The study reveals

  • Iveta (2012) has shown that Key Performance Indicators (KPI) are long-term and tangible measures that rely on various company views and make the company a database, and are used to start developing plans and goals.
  • Warren (2011) argues that Key Performance Indicators (KPI) are tools that help measure how an organization performs against its strategic goals. This relates to how the organization's strategy interacts with the overall company strategy.
  • Parmenter (2007), what is most essential for organizational success in current and future circumstances is the Key Performance Indicator (KPI).
  • Banerjee and Buoti (2012) say that Key Performance Indicator (KPI) is a measurement method used to track performance and measure it in a way that allows people to "chase goals". KPIs help in identifying trends and support decision making, and furthermore, they help in setting measurable goals.

Various types of Key Performance Indicators

KPIs can be broken down into two different groups: financial and non-financial KPIs.

KPIs in finance

Related to money are financial KPIs. The following is an example of a financial KPI, a measure of the remaining money after deducting the cost of goods sold, which is a KPI called Gross Profit (COGS).

  1. This KPI, Net Profit, is used to evaluate a company's overall net profit by subtracting various costs and taking into account interest and tax payments.
  2. Gross Profit Margin KPI, which calculates the percentage value of Gross Profit divided by Revenue.
  3. KPI which measures the percentage value obtained by dividing net profit by revenue and defines it as KPI Net Profit Margin (Net Profit Margin)
  4. This KPI, Current Ratio, is a financial performance indicator that uses the current assets/current liabilities (balance) ratio to measure liquidity.

If a company has this indicator, you can guess whether it will be able to face an unexpected crisis.

Non-Financial KPIs

Non-financial KPIs are KPIs that have no impact on company finances. For example, Non-Financial KPIs include examples such as:

  1. High employee turnover (Manpower Turnover)
  2. Measuring customer happiness
  3. Repeat customer or new customer ratio (Ratio of repeat Customers to New Customers)
  4. Total sales (Market Share)

Factors that Influence KPI Effectiveness

If you adopt KPIs that other companies in your industry use, they might help. However, if you don't implement your KPIs, they are essentially useless. I'm curious why the company's performance is not visible in the KPI.

You must first think about your organization's goals, the methods used to achieve them, and who will take on certain tasks as a result. After doing this, your team should create a strategy to set KPIs.

Analysts, department heads, and managers should be involved throughout this process. Finally, you'll learn how KPIs measure your business processes and who can act on them.

SMART criteria can be used to generate KPIs that apply to any organization. This term means having a measurable goal with a specific deadline. For more information on this issue, you can consult the following.

  • What are the company's specific time-frame goals?
  • Is it possible to measure the results of such goals?
  • Is it achievable to achieve the goal?
  • Is the goal connected to the company?
  • When will you achieve this goal?

Develop and Launch Key Performance Indicators

The following four criteria must be followed before an organization can claim that it has successfully introduced KPIs into its operational processes. the necessary requirements are:

Factors Affecting KPI Effectiveness

  • Employee, team, supplier and customer participation
  • Alignment of management from top to bottom
  • Actions, reports and actions are interconnected
  • KPIs and strategies related to KPIs

To make KPIs work, there must be a systems-wide approach that connects every aspect of the company to each other, including staff, managers, shareholders, and customers and suppliers. Reports must also be generated quickly, accurately, and be able to identify where improvements can be made in the decision-making process.

When setting up KPIs, it is important to know what the results and goals of each KPI are. In implementing KPIs, it is possible to create goals that combine several criteria using a term called SMART (Specific, Measurable, Achievable, Realistic and Time Sensitive).

Objectives

A goal must be well defined, and “broad” goals are unattainable. When it's clear what to do, it's easy to recognize when you've achieved your goal.

measurable

It must be measurable to measure the goal in terms of quantity or quality results. This can be compared to baseline performance or how well something should function. It should be written as a challenge, which will motivate the organization to work towards achieving something.

Realistic goals must be the result of applying results-oriented concepts. All goals and outcomes have hard deadlines to complete. To determine whether there is an improvement in a goal or outcome, it is simpler to measure whether the outcome or outcome is subject to time constraints.

Developing KPIs requires companies to devote time and resources. Key Performance Indicators (KPI) are indicators that are measured in accordance with company demands by placing strategies on short-term goals and long-term strategies. Our company's KPIs are Net Profit Margin and Gross Profit Margin.

If our company's sales are increasing, but our company's profitability is not good enough to finance business development, this is our KPI. One can obtain this by looking at the accounting records for the company with which the company is registered.

When comparing financial and non-financial KPIs, it is possible to examine KPIs for workforce turnover, KPIs for customer happiness, or the ratio of repeat customers to new customers, all of which provide additional information beyond revenue.

Understanding Company KPI

Conclusion

An effective performance management system is needed to carry out control and assessment tasks effectively. KPIs are tools that tell whether a company is achieving its business goals and explain a company's effectiveness. For businesses, KPIs are used to measure whether they are successfully achieving their goals or not.

Key Performance Indicator (KPI) is a measurement method used to track performance and measure it in a way that allows people to “chase goals.” KPIs help in identifying trends and support decision making, and furthermore, they help in setting measurable goals. KPIs can be broken down into two different groups: financial and non-financial KPIs.

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Lutfi

Hi, let me introduce myself, Lutfi Hulasoh, I am a writer and techno blogger. I started creating a personal blog writing informative articles about the latest trends and developments in technology. My writing covers a wide range of topics, from mobile applications to artificial intelligence, and I can also provide easy-to-understand explanations to help readers understand complex concepts.