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KPIs should
Be simple (almost effortless) to compile. Be clear and easy to understand. Be numeric and tangible. Encourage behaviors that have a positive effect on the business. Be owned by those that influence their outcome. Be something to be proud of that focuses the team on a common goal.
Be tough to compile, taking valuable resources away from other activities. Be used as a weapon for political ends. Be confusing or ambiguous. Cause people to find "a way around" to make the number look good
Post the KPIs for everyone in the company to see, and be motivated by. Knowing the target and their progress will encourage employees to meet and exceed their goals. Their success will fuel even greater progress. Check in to make sure everyone is focused on meeting or exceeding the KPIs. Post the KPIs everywhere: in the lunchroom, on the walls of every conference room, on the company intranet, even on the company web site for some of them.
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Title of KPI: Increase Sales Defined: Change in Sales volume from month to month Measured: Total of Sales By Region for all region Target: Increase each month
What is missing? Does this measure increases in sales volume by dollars or units? If by dollars, does it measure list price or sales price? Are returns considered and if so do the appear as an adjustment to the KPI for the month of the sale or are they counted in the month the return happens? How do we make sure each sales office's volume numbers are counted in one region, i.e. that none are skipped or double counted? How much, by percentage, dollars, or units, do we want to increase sales volumes each month? (Note: Some of these questions may be answered by standard company procedures.) Good:
Title of KPI: Employee Turnover Defined: The total of the number of employees who resign for whatever reason, plus the number of employees terminated for performance reasons, and that total divided by the number of employees at the beginning of the year. Employees lost due to Reductions in Force (RIF) will not be included in this calculation. Measured: The HRIS contains records of each employee. The separation section lists reason and date of separation for each employee. Monthly or when requested by the SVP, the HRIS group will query the database and provide Department Heads with Turnover Reports. HRIS will post graphs of each report on the Intranet. Target: Reduce Employee Turnover by 5% per year.
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