(KPI) are financial and non-financial metrics used to
quantify objectives to reflect strategic performance of an
organization. KPIs are used in Business Intelligence to assess
the present state of the business and to prescribe a course of
action. The act of monitoring KPIs in real-time is known as
business activity monitoring. KPIs are frequently used to
"value" difficult to measure activities such as the
benefits of leadership development, engagement, service, and
satisfaction. KPIs are typically tied to an organization's
strategy (as exemplified through techniques such as the Balanced
KPIs differ depending on the nature of the organization and the
organization's strategy. They help an organization to measure
progress towards their organizational goals, especially toward
difficult to quantify knowledge-based processes.
KPI is a key part of a measurable objective, which is made up of
a direction, KPI, benchmark, target and time frame. For example:
"Increase Average Revenue per Customer from $10 to$15 by
EOY 2008". In this case, 'Average Revenue Per Customer'
is the KPI.
should not be confused with a Critical Success Factor. For the
example above, a critical success factor would be something that
needs to be in place to achieve that objective; for example, a
indicators differ with business drivers and aims (or goals). A
school might consider the failure rate of its students as a Key
Performance Indicator which might help the school understand its
position in the educational community, whereas a business might
consider the percentage of income from return customers as a
it is necessary for an organization to at least identify its
KPI's. The key environments for identifying KPI’s are:
a pre-defined business process.
clear goals/performance requirements for the business
a quantitative/qualitative measurement of the results and
comparison with set goals.
variances and tweaking processes or resources to achieve
When identifying KPI's the acronym
SMART is often applied. KPI's need to be:
to be analyzed
the areas top management analyzes are:
of existing customers
generated by segments of the customers - these could be
balances held by segments of customers and terms of payment
- these could be demographic filters.
of bad debts within customer relationships.
analysis of individuals (potential customers) applying to
become customers, and the levels of approval, rejections and
analysis of customers behind on payments.
of customers by demographic segments and segmentation of
customers by profitability.
of these aforementioned customer KPIs are developed and improved
with customer relationship management. This is more an inclusive
list than an exclusive one. The above more or less describe what
a bank would do, but could also refer to a telephone company or
similar service sector company.
is important is:
data which is consistent and correct.
availability of KPI related Data.
availability of data is beginning to become a concern for more
and more organizations. Delays of a month or two were
commonplace. Of late, several banks have tried to move from
availability of data at shorter intervals and less delays. For
example, in businesses which have higher operational/credit risk
loading (that involve credit cards, wealth management), Citibank
has moved onto a weekly availability of KPI related data or
sometimes a daily analysis of numbers. This means that data is
usually be available within 24 hours as a result of automation
and the use of IT.
Performance Indicators define a set of values used to measure
against. These raw sets of values fed to systems to summarize
information against are called indicators. Indicators
identifiable as possible candidates for KPIs can be summarized
into the following sub-categories:
which can be presented as a number.
that interface with existing company processes.
specifying whether an organization is getting better or not.
are sufficiently in an organization's control to effect