WORLD ACADEMY OF INFORMATICS AND MANAGEMENT SCIENCES
ISSN : 2278-1315
ii.
Securitization allows the company to borrow at
Now more than ever, businesses need a way to assess where
rates that are commensurate with the rating of the
they are and whether they are on or off course against their
asset. A company with a credit rating of BB might
strategy. They need to be able to correct quickly and adapt to
hold an asset rated at AA. If it securitizes the asset
the changing conditions of the market. If you want to succeed
it gains access to AA borrowing rates.
in a fiercely competitive market you need a way to measure
progress (or otherwise) in real time, not just after the fact, and
adapt your actions according to what the KPIs are telling you.
Prepared by
Orshi Terhemba Ephraim AAT, ACILRM, ACA
KPIs as key decision-making tools
KEY PERFORMANCE INDICATORS (KPIs)
Effective decision makers understand that they need
If you were to eavesdrop on just about any executive
information on the key dimensions of performance, and that
meeting, strategy session or performance review in any
this can be achieved by distilling them into the vital KPIs,
business, chances are you would hear the term ‘KPI’
similar to the way a doctor would go about trying to
mentioned many times. Most people in those discussions
understand someone’s health. Instead of measuring random
would know that the acronym stands for Key Performance
things, a doctor would focus on key health measures first, for
Indicators, but if you pressed each person to explain what a
example, taking your blood pressure, and measuring your
KPI actually is, it’s likely that you would hear many
cholesterol levels, heart rate and body mass index as key
different definitions.
indicators of your health.
Therein lies the issue: KPIs are ubiquitous in modern
business and yet the term is often overused and
misunderstood. This means that, although KPIs are very
common, businesses that are actually using KPIs effectively
are not quite so common. And that’s a real shame because,
used properly, KPIs can make a huge difference to the
success of a business. To remedy the situation, I want to
clarify what KPIs are and set out the main ways businesses
should be using them.
What exactly are KPIs?
In simple terms, KPIs provide a way to measure how well
companies, business units, projects or individuals are
performing in relation to their strategic goals and objectives.
In their broadest sense, KPIs provide the most important
performance information that enables organizations (or their
stakeholders) to understand whether or not the organization
is on track toward its stated objectives. In this way, well-
designed KPIs are vital navigational instruments, giving a
clear picture of current levels of performance and whether
the business is where it needs to be. KPIs are also useful
decision-making tools. Because they help reduce the
complex nature of organizational performance to a small,
manageable number of key indicators, KPIs can, in turn,
assist decision making and, ultimately, help improve
performance.
Using KPIs as navigational tools
On an ocean-liner, the captain and crew use navigation data
to understand where they are relative to their planned sailing
route. Indicators like GPS location data, speed, fuel levels,
or weather information allow those in charge to understand
where exactly they currently are to make decisions about
where to steer next.
This is exactly the same for companies. Here, KPIs are the
navigation tools that managers use to understand whether
the business is on a successful voyage or whether it is
veering off the prosperous path. The right set of KPIs will
shine a light on the key aspects of performance and
highlight areas that may need attention.
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In our organizations, the most effective KPIs are closely tied
to strategic objectives and help to
answer the most critical business questions. A good starting
point is therefore to identify the questions that the decision
makers, managers or external stakeholders need to have
answers to. One or two so-called Key Performance Questions
(KPQs) should be identified for each strategic objective.
Once the most important business questions have been
identified, you can select or develop the right KPIs that best
help answer those questions. That way, all KPIs will be
strategic, relevant and meaningful.
The importance of selecting the right KPIs
There are thousands of KPIs to choose from and most
companies find it hard to select the right ones for their
business and instead end up measuring and reporting a vast
amount of information on everything that is easy to measure.
This is just one of several KPI pitfalls that organizations fall
victim to. Or, sometimes they simply pick the KPIs everyone
else seems to be using, regardless of whether or not those are
useful for their business. This is why it is so important to
develop the right KPIs for your organization.
In today’s challenging and competitive business landscape it
is more important than ever that business leaders and senior
executives are able to make better informed decisions,
improve performance, and seek out new and novel ways to
gain the edge over their competition. KPIs, when properly
understood and used effectively, provide a powerful tool in
achieving just that. Without them, organizations are simply
sailing blind.
THE 25 KPIS EVERY MANAGER MUST KNOW
Your Key Performance Indicators (KPIs) should be the
essential metrics that allow you to track performance and
navigate your way to success and growth. Unfortunately,
many companies get their KPIs completely wrong, measuring
either everything that walks and moves but nothing that
matters, or simply copying the metrics others are using. It is
important that companies put in the groundwork before
measuring anything. It is so important to start with your
strategy and figure out the strategic performance questions
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