Key Performance Indicator (KPI)

Key Performance Indicators
KPIs (Key performance indicators)

Definition: KPI are quantifiable measurements, agreed to beforehand, that reflect the critical success factors (of the company, department, project.)

Also Known As: Key Performance Indicators, Key Success Factors, KSIExamples: One of the Sales Department's KPIs is number of new customers and the goal for the second quarter is 5 per salesperson.

A KPI defines itself, to a large extent, by its name; it is a performance indicator, i.e. the performance of the process it is measuring should be clearly indicated by the KPI.In fact, among all the tools available to executives to change the organization and move it in a new direction, KPIs are perhaps the most powerful.

KPIs focus employees' attention on the tasks and processes that executives deem most critical to the success of the business. KPIs are like levers that executives can pull to move the organization in new and different directions. Without KPI an organization will not perform to its maximum.

There are two major types of KPIs: leading and lagging indicators. Leading indicators measure activities that have a significant effect on future performance, whereas lagging indicators, such as most financial KPIs, measure the output of past activity.To do this, leading indicators either measure activity in its current state (i.e., number of sales meetings today) or in a future state (i.e., number of sales meetings scheduled for the next two weeks), the latter being more powerful because it gives individuals and their managers more time to influence the outcome.

Characterstics of a good KPI

KPI is always connected with the corporate goals
A KPI is decided by the management
It belongs to an individual who is accountable for its outcome
They are leading indicators of performance desired by the organization
Easy to understand
A KPI leads to action
Few in number
It should be balanced not undermine each other
Users can gauge their progress overtime
KPI’s loses its value overtime so they must be periodically reviewed and refreshed

A KPI is associated with a specific process and is generally represented by a numeric value.

A KPI may have a target and allowable margins, or lower and upper limits, forming a range of performance that the process should achieve. A KPI can be thought of as a metric with a target. An example of a simple KPI is: Average time for response to a customer inquiry is less than two days.

As more detailed example, say that an organization sets the following business objectives:

*Orders must be processed within three days compared to the current average of five days

*Average amount of an order must increase by 10%

*Average order amount KPI: For the Customer Order process, track the average amount of each order

KPIs can be made up of one or more metrics. The calculated results of the metrics during process monitoring are used to determine whether the target of the KPI has been met. For example, tracking the average time to shipment might include the following metrics:

*Elapsed time for order completion
*Elapsed time for order approval
*Number of orders received
*Working duration of each task in the process
*Percentage of orders automatically approved

What is Job Analysis

Job Analys is breaking down the complexity of a person's job into logical parts such as duties and tasks. It identifies and organizes the knowledge, skills, and attitudes required to perform the job correctly. This is accomplished by gathering task activities and requirements by observation, interviews, or other recording systems.

Job analysis produces the following information about a job:

* Overall purpose ‑ why the job exists and, in essence, what the job holder is expected to contribute.

* Content ‑ the nature and scope of the job in terms of the tasks and operations to be performed and the activities to be carried out ‑ ie the processes of converting inputs (knowledge, skills and abilities) into outputs (results).

*Key result areas ‑ the results or outcomes for which the job holder is accountable.

*Performance criteria ‑ the criteria, measures or indicators that enable an assessment to be carried out to ascertain the degree to which the job is being performed satisfactorily.

Responsibilities ‑ the level of responsibility the job holder has to exerciseby reference to the scope and input of the job; the amount of discretion allowed to makedecisions; the difficulty, scale, variety and complexity of the problems to be solved; the quantity and value of the resources controlled; and the type and importance of interpersonal relations.

* Organizational factors ‑ the reporting relationships of the job holder, ie to whom heor she reports either directly (the line manager) or functionally (on'matters concerning specialist areas, such as finance or personnel management); the people reporting directly or indirectly to the job holder;and the extent to which the job holder is involved in teamwork.

Environmental factors ‑ working conditions, physical, mental and emotional demands, health and safety considerations, unsocial hours,mobility, and ergonomic factors relating to the design and use of equipment or work stations.

Methods of Job Analysis

Several methods exist that may be used individually or in combination. These include:

• review of job classification systems

• incumbent interviews

• supervisor interviews

• expert panels

• structured questionnaires

• task inventories

• check lists

• open‑ended questionnaires

• observation

• incumbent work logs

A typical method of Job Analysis would be to give the incumbent a simple questionnaire to identify job duties, responsibilities, equipment used, work relationships, and work environment. The completed questionnaire would then be used to assist the Job Analyst who would then conduct an interview of the incumbent(s). A draft of the identified job duties, responsibilities, equipment, relationships, and work environment would be reviewed with the supervisor for accuracy. The Job Analyst would then prepare a job description and/or job specifications.The method that you may use in Job Analysis will depend on practical concerns such as type of job, number of jobs, number of incumbents, and location of jobs.

Job Analysis should collect information on the following areas*

• Duties and Tasks The basic unit of a job is the performance of specific tasks and duties. Information to be collected about these items may include‑ frequency, duration, effort, skill, complexity, equipment, standards, etc.

• Environment This may have a significant impact on the physical requirements to be able to perform a job. The work environment may include unpleasant conditions such as offensive odors and temperature extremes. There may also be definite risks to the incumbent such as noxious fumes, radioactive substances, hostile and aggressive people, and dangerous explosives.

• Tools and Equipment Some duties and tasks are performed using specific equipment and tools. Equipment may include protective clothing. These items need to be specified in a Job Analysis.

• Relationships Supervision given and received. Relationships with internal or external people.

• Requirements The knowledges, skills, and abilities (KSA's) required to perform the job. While an incumbent may have higher KSA's than those required for the job, a Job Analysis typically only states the minimum requirements to perform the job.

Key Result Area (KRA)

KRA (Key Result Area) is the set of activities on which our performances are rated.actives which have impact on the bottom line of business.

Key Result Area in simple Terms may be defined as Primary responsibilities of an Individual. The core area which each person is accountable. KRA's varies from Individual to Individual. Employees are predominantly appraised on their mutually agreed KRA's.

KRA' are always developed after the definition of "Job Purpose". Job purpose is understanding the requirement for the job.

To elucidate some eg. of KRA's for some Generic roles- KRA's of a HR manager may be - Staffing.Training and Development.Compensation Planning and Administration.Statutory Compliance. etc...

KRAs ===Key Result Areas “Key Result Areas” or KRAs refer to general areas of outcomes or outputs for which a role is responsible. A typical role targets three to five KRAs.

Value

Identifying KRAs helps individuals: · Clarify their roles · Align their roles to the organisation’s business or strategic plan · Focus on results rather than activities · Communicate their role’s purposes to others · Set goals and objectives · Prioritize their activities, and therefore improve their time/work management · Make value-added decisions

Description

Key result areas (KRAs) capture about 80% of a work role. The remainder of the role is usually devoted to areas of shared responsibility (e.g., helping team members, participating in activities for the good of the organisation).

KRA provides the management with a tool and a process to measure the performance of people practices and the HR function from multiple perspectives:

1. Strategic Perspective — the results of strategic initiatives managed by the HR group. The strategic perspective focuses on the measurement of the effectiveness of major strategy-linked people goals. For instance, the business strategy called for major organizational change programs as the business faced major restructuring and multiple mergers and acquisitions. In this context, the organization’s change management capability will be a key factor in the success or failure of its execution. Therefore, measuring the ability of the business to manage change effectively is the core measure of the effectiveness of HR and will be a key strategic contribution to the future success of the business.

2.Operational Perspective — the operational tasks at which HR must excel. This piece of the Balanced Scorecard provides answers to queries about the effectiveness and efficiency in running HR processes that are vital to the organization. Examples include measuring HR processes in terms of cost, quality and cycle time such as time to fill vacancies.

3.Financial Perspective — this perspective tries to answer questions relating to the financial measures that demonstrate how people and the HR function add value to the organization. This might include arriving at the value of the human assets and total people expenses for the company. HR

4.Customer Perspective — this focuses on the effectiveness of HR from the internal customer viewpoint. Are the customers of HR satisfied with their service; are service level agreements met; do the customers think they can get better service elsewhere? Conducting an HR customer survey might typically arrive at this.