Wednesday 6 March 2013

Keeping an eye on key performance indicators (KPIs)

'Our KPIs measure how we are doing across the Group in terms of both operational and financial performance in the context of the key elements of our strategy'. - Tesco 2012 Annual Report

Key performance indicators (KPIs) are specific measures that a company like Tesco uses to determine whether its marketing strategy is moving the organisation toward its short- and long-term goals. In the case of Tesco, KPIs include certain measures of profitability, growth in store sales, market share and customer satisfaction.

Royal Mail Group analyses results based on KPIs in four areas: people, performance, financial and customers. 'People' KPIs such as safety and customer focus relate to what Royal Mail's employees do on the job. 'Performance' KPIs such as revenue show how the organisation is progressing toward overall performance objectives. 'Financial' KPIs such as profit and costs measure financial outcomes that are vital to Royal Mail's long-term viability. 'Customer' KPIs, including satisfaction and complaints, bring the customer's perspective into an assessment of whether Royal Mail is successful.

BT monitors KPIs according to specific areas of focus, including: customers (such as customer satisfaction and average revenue per customer household), employees (employee engagement index), suppliers (ethical trading), improving society (investments in social responsibility), environment (reducing carbon footprint) and integrity (ethics/anti-corruption).

The choice of KPIs depends on the organisation's mission, goals, strategic choices and implementation. Because no organisation has unlimited resources, KPIs keep management focused on making a difference in vital areas--and help management pinpoint possibilities for improvement when actual KPI measurements don't match expectations.