Key Performance Factors and Indicators

 

Introduction

1 Organisations divide up their work (their objectives). They group together various pieces of work (objectives) and call them positions (= jobs). They give a position to a person (a Position Holder).

2 Thus, each Position Holder (PH) does different pieces of work i.e. tries to achieve different objectives.

3 Assumption. Some work (objectives) which a Position Holder does (or should do) rates as more important than other work.

4 In other words, if a PH (Position Holder) does not do some work well (achieve some wise objectives), it will mean that their Section or Division or the Organisation cannot perform well.

Key Performance Factors

5 These notes use the term “Key Performance Factors”* to describe such important pieces of work (= important areas of a position).

 

6 Position Holders (PHs) should watch carefully (= monitor) their results on their KPFs (Key Performance Factors). PHs who do not monitor these factors will have less chance of performing well in their position.

A Definition of KPF

7 These notes use the following definition of a KPF - any activity or element where the activity or element rates as critical for achieving the important objectives of a position. #

Performing Well In A Position

8 Those who want to perform their position well must perform well with respect to the position’s KPFs.

9 It follows that a Position Holder should

(a) Identify the Key Performance Factors of their Position.

(b) Measure their verformance on these factors.

(c) Have a wise standard for each factor.

(d) Compare their performance with the related standard.

* Also called Critical Success Areas, Critical Success Factors, or Key Performance Areas. Probably other terms also exist.

# See the  notes on the definition of a KPF for a detailed analysis of possible approaches to defining this term.

(e) Take appropriate action to move performance closer to the stand­ard – or decide they should change the related standard.

10 These notes use the term “Key Performance Indicator” (KPI) to indicate a result on a Key Performance Factor. The result serves as the standard.

11 If the PH’s performance does not achieve the standard set, the PH will not perform their position well – at least, not for this area of their position.

A DEFINITION OF KPI

12 These notes use the following definition of a KPI – A PAST OR PRESENT RESULT ON A KEY PERFORMANCE FACTOR WHERE THE RESULT RATES AS CRITICAL FOR ACHIEVING AN OBJECTIVE.#

13 A PH can give attention to right areas/factors in the position held. But the idea of KPI shows that an effective PH must do more. PHs must obtain the right* result (point or band) on the scale which measures a KPF.

KPFs AND KPIs FOR SUBORDINATES

14 Some positions involve the managing of the Position Holders of other positions (Subordinates).

15 Managers should monitor the performance of their Subordinates on the Subordinate’s Key Performance Factors and compare it with the position’s KPIs.

16 Note – The Subordinate’s KPF’s should relate to the KPF’s of their Manager.

17 It would prove desirable if both Manager and Subordinate agreed on the standard (the KPI) for each of the positions KPFs.

ANOTHER APPROACH TO THINKING ABOUT KPFs

18 Anyone who has an Organisation or a Section of an Organisation to manage could imagine the Organisation or the Section as a car. The car will have a dashboard (= instrument panel).

19 In such a case, the Manager concerned should try to answer the follow­ing question – What instruments should the car have on its dashboard or instrument panel?

20 In other words, what information does the Manager want to have readily available so that the Manager can drive the car (manage the Organisation/ Section) well?

# See the Cullen Morton notes on the definition of a KPI for a detailed analysis of possible approaches to defining this term.

* However debate will exist on what result rates as “right”.

KPFs and KPIs            3

APPENDIX A

WHAT SHOULD AN INDICATOR SHOW?

1 An indicator could show ‑

(a) A measurement of something; i.e. a result.

(b) A standard

(c) A measurement and a standard.

(d) A measurement of something over different periods of time.

(e) A signal (eg. a sight or a sound) which indicated that some action should occur.

(f) A measurement of something to show that the something operates. (Example. A light on a switchboard shows the current has reached the board.)

2 Note: A light could show something as operating. Such an indicator light shows that a measurement has occurred.

3 Example. Does a circuit rate as a complete? I will measure if the current rates as complete by joining a gap in the current (turn switch to “on”) and seeing if the lamp lights up. I want the circuit to rate as completed (= the standard).

4 In some situations, the indicator refers to a measurement which only has two units on a scale. (Examples. (a) on or off; (b) joined or not joined.)

SOME DESIGN FACTORS TO CONSIDER Type of Display

5 Should some dials light up only when something happens? Thus the light could show when some factor shows a measurement above (or below) a particu­lar point. (REPORTING BY EXCEPTION)

Accuracy of the Measure

6 How accurately should someone measure a particular performance?

7 How much will it cost to gain a particular accuracy? (COST/BENEFIT ANALYSIS)

Frequency of Measure

8 How often should someone make the measurement? The dial could work intermittently. At particular times it would light up and show a perform­ance result; at other times it would show nothing.

* A dial could show a standard without any measurement showing on the dial. However it seems unlikely that anyone would design or want such a dial. Example. The petrol gauge shows an area where the driver should obtain more petrol; but the pointer has broken and therefore no measurement can show on the dial.

KPFs and KPIs            4

APPENDIX B

A PARTICULAR KPI – ACHIEVE ACCREDITATION

1 The objective – “Achieve Accreditation” means – Achieve a given stand­ard.

2 Some person or persons (Accreditors) measure the performance of an organisation on a number of different factors. If the performance reaches or exceeds a stated standard, the Accreditors ”accredit” the organisation. In other words, they say its performance reaches or exceeds the required standard on a number of different factors.

3 It follows that “Maintain a specific performance” (the performance which retains the accreditation) rates as a Specific Objective.

4 The maintenance of a specific performance involves achieving a given performance on a number of different Key Performance Factors (KPFs).

5 Some accreditations would rate as a Key Performance Factor. Such a situation would occur where the Organisation would not prove acceptable as a Supplier to one or more major Customers if it did not have such accredi­tation.

6 Thus a Position Holder would want one or more indicators which would indicate that the Organisation probably would lose accreditation unless it took some action.

CH13*

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