The measure of performance that an enterprise achieves is a vital element for forecasting its future. In challenging times, as seen during the COVID-19 pandemic, only companies that had a strong framework for measuring success were able to draw up business continuity plans that minimized disruptive effects on operations. For a long, the concept of performance measurement has followed a standard approach. The top management of the company formulates a vision for where they want the organization to reach in the future, and employees in subsequent organizational hierarchy are given goals and objectives that help in contributing to the overall realization of the organizational vision. Success is often equated to achieving goals set by an organization but in several cases, leaders mistakenly equate goals with their Key Performance Indicators (KPI).
Goals and KPIs are both an integral part of business process management. Successful execution of a business process happens when it can seamlessly integrate goals, processes, people, and systems to achieve tangible value as returns. To evaluate or measure the level of achieving these returns, KPIs are brought into the picture.
Goals are high-level ambitions that a business strives to achieve, and they may be highly diversified.
A business may set goals for targets such as employee productivity, manufacturing output, revenue forecast, resource utilization, cost-efficiency, and much more. They may even set non-business or non-monetary goals such as achieving carbon-neutral operations, gender and diversity representation amongst the workforce, and channeling a fixed portion of their profits for community service. Each goal can be broken down into a series of intra-organizational steps and business processes which have their own rule books and operational guidelines.
KPIs, on the other hand, represent the quantifiable indicators that a business can leverage to assess its performance and track progress against the completion of goals already defined. Leaders need to assign targets for every business process or step that has been formulated from each organizational goal. KPIs allow them to track progress on metrics that represent the actual growth of every component within a business process that contributes to its success or failure.
KPIs, on the other hand, represent the quantifiable indicators that a business can leverage to assess its performance and track progress against the completion of goals already defined. Leaders need to assign targets for every business process or step that has been formulated from each organizational goal. KPIs allow them to track progress on metrics that represent the actual growth of every component within a business process that contributes to its success or failure.
Goal Vs KPI
The primary objective of goals is to ensure that the business promotes practices and standards that help in nurturing a culture that values customer experience and quality of service. KPIs are the building blocks that stack up to the final achievement of goals. While they are different in context and purpose, Goals and KPIs are often interchangeably used in an enterprise setting. What business leaders need to ensure is that they are able to meaningfully design a quality business process optimization strategy that defines KPIs for achieving strategic goals.
Here are a few tips to get your KPIs right and ensure business goals are met prudently:
While ambitious goals are often seen as a driver of growth, it is important to take into consideration the amount of effort that individual teams and their constituent members need to put in. So, the first step of building the right KPIs is to define realistic goals that the business should achieve. Then work downwards into each department and set KPIs that align their operations to the realistic target or goal. A short tip here is to follow the SMART rule for targets i.e., Specific, Measurable, Attainable, Relevant, and Time-Bound.
While KPIs show the health or progress of your initiatives upon assessment, it is important to have the right metrics included for assessment to ensure the best results. It should be specific and more aligned to the goal that is to be achieved rather than a generic metric. For example, if the goal was to achieve a production output of 800 engines from a vehicle manufacturing assembly line every week, the metric that the HR department needs to track productivity as part of their KPI should be based on the number of employees who need to be assigned into the specific engine division rather than the number of staff assigned to the entire vehicle manufacturing facility. Once the right metrics are identified, the next step is to prioritize them depending on how they contribute to the organizational goals.
A KPI is just another data point if it has no supporting action plan that has been carefully drafted to ensure sustainable progress. This will foster regular discussions, progress reviews and will instill awareness of goals and objectives amongst the staff so that everyone stays on track.
KPIs need to be assessed periodically and not at the beginning and end of an initiative. Regularly weaving new business processes and strategies to match the progressive achievement of individual business KPIs is the right formula for success. Making changes with respect to KPI progress ensures that your business is investing and customizing the customer experience in the right direction. When KPIs are not progressing as per the plan, companies need to take measures to pull back the performance on track. Since most activities involved in this measure to pull back may be cross-functional and spread across departments, it is important to ensure that the steps taken are tracked and transparently reported to all stakeholders.
A successful business is one that can achieve its realistic goals in the intended time frame. However, they also need to ensure that the progress made towards goal achievement is also in a sustainable healthy manner. KPIs help tracks this health every day and serve as an important tool in decision-making as well. While creating a business strategy, it is important to not only differentiate between goals and KPIs but also create a seamless roadmap for KPIs to transition into goals over time