KPIs (Key Performance Indicators) are quantifiable metrics that measure a targeted business objective which can vary based on your optimization approach. These are especially crucial when you’re using Lean Six Sigma to improve efficiency in business workflows.
What Are the Different Kinds of KPIs?
KPIs are not merely numbers; they’re critical insights into business functioning and help businesses make better decisions. The best metrics will offer actionable insights which help identify improvement areas.
We can broadly classify KPIs into several types. Financial performance indices will track sales, return on equity capital, return on investment, and profit by shares.
Economic indices measure the effectiveness of markets and the scope for new product introductions in specific segments.
It’s also possible to track operational efficiency, productivity, and product quality and value.
Identify Your Targets and Chase Them the Right Way
When you’re focused on business process optimization, it is crucial to first identify your targets. Without an understanding of what it is you’re trying to really optimize, the optimization exercise has little chance of success.
Remember that it’s very important to select the right metrics and KPIs based on your target business requirements. Not every KPI will be of use to every business as each business is unique and so are the challenges it faces.
Your financial and sales teams will ideally be tracking different KPIs as what’s important for the financial team will not be as concerning to the sales team.
You should first study the current state of your business before you set out to select the KPis that will matter the most. Make sure the baseline information on which you base your selection process is not lacking in any way and is as complete as possible. This will help you to reduce risks later.
Avoid Tracking Too Many KPIs When You Begin
You should try to limit the number of KPIs when you start as it can quickly get overwhelming if you’re trying to track multiple KPIs all at the same time. Chances are, you’ll not give each individual KPI the attention it deserves which will impact the overall success of the organization.
Build a small pool of the most significant KPIs at the moment and work with them. Once you’re comfortable tracking and monitoring them, gradually expand the pool by adding in more relevant KPIs.
KPIs are indicators of specific parameters and business outcomes that are used to measure performance levels. Metrics significantly differ and you should select the ones that matter the most for your line of business and the target you have in mind when it comes to optimizing processes.
Indicators such as employee satisfaction, productivity, financial indices, and economic metrics all have specific, well-defined purposes and would appeal to specialized business departments. The ultimate goal is to reduce defects, improve quality, and bolster productivity to meet customer expectations.
In the end, it’s an iterative process and you’ll find yourself choosing and rechoosing new KPIs as you venture ahead. Remember to start one step at a time rather than aiming to fix all metrics in one single iteration.
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