Control and evaluation is an important function in management to ensure the organization’s work plan can walk so well that the ultimate goal of the organization can be achieved. To be able to perform the functions of control and evaluation with a better system is needed a good performance management. A performance management system that is good should be able to describe the business processes that occur in the organization as a whole. Performance management systems can be measured using KPI (Key Performance Indicator) in order to have a measure of success as well.
Performance management system load size-the size of the KPI (key performance indicator) which represent the performance of throughout the organization and the interrelationships that exist between these parts. A lot of companies that already have a performance management system but only contains a ”list of KPIs” and ignore the linkages between indicators. In the last decade developing a performance management system such as the Balanced Scorecard (BSC) that attempt to accommodate the relationship between the indicators. In BSC, the relationship between indicators only expressed qualitatively. If the relationship of this relation can be expressed quantitatively, then the performance measurement model bia used for the purpose of more definitive and specific, for example improvement efforts more specific, or to predict the behavior of the system in the future.
Get to know the KPIS of the Company
KPI (Key Performance Indicator) is a measure that describes the effectiveness of the company in achieving its business goals. Companies use KPIS to measure the success of achieving them. As for some of the characteristics of a KPI that is :
- The Size Of The Non-Financial
- Sizes are often used (Regular measurements)
- The size of which is known by the management
- Everyone in an organization has to understand and understand the KPI
- The responsibility to the individual and the team
- Have a very significant effect
- Have a positive effect
Key performance indicator measured in the period of daily, weekly and monthly. Good KPI is an important thing and continuous attention of the management. When someone deviates from the KPI, the management can take a decision and call the people responsible.
Understanding Key Performance Indicators According To Experts
- According to Iveta (2012), a Key Performance Indicator (KPI) is a measure of the quantitative and gradually for the company as well as has a variety of perspectives and based on concrete data, and became the starting point for the determination of the purpose and strategy of the organization.
- According to Warren (2011), a Key Performance Indicator (KPI) is a measurement that assesses how an organization executes the vision and strategic. Strategic vision is meant to refer to how the strategy of the organization as an interactive integrated in the strategy of the organization as a whole.
- According to Parmenter (2007), defining the Key Performance Indicator (KPI) as the most critical to the success of the organization on the conditions now and in the future.
- According to Banerjee and Buoti (2012), a Key Performance Indicator (KPI) is a measure of large-scale and quantitative used to evaluate the performance of the organization in achieving goals of the target organization. KPIS are also used to determine the objectively measurable, view trends, and support decision making.
The type of Key Performance Indicator
Basically, the Key Performance Indicators or KPIS can be divided into two types, namely KPI Financial and KPI Non-Financial.
- Key Performance Indicators Financial
KPI Financial is the key performance indicators related to finance. Example KPI Financial these are as follows :
- KPI Gross Profit (Gross Profit), which is a KPI that measures the amount of money left over from revenues after deducting cost of goods sold (COGS).
- KPI Net Income (Net Profit), which is a KPI that measures the amount of money left over from revenues after deducting cost of Sales and the costs of other businesses such as interest expense and taxes.
- KPI Gross Profit Margin (Gross Profit Margin), which is a KPI that measures the percentage of the value obtained by dividing the Gross Profit by the Revenue.
- KPI Net Profit Margin (Net Profit Margin), which is a KPI that measures the percentage of the value obtained by dividing net income by revenue.
- KPI Current Ratio (Current Ratio), which is a KPI that measures the performance of the financial balance sheet liquidity with a share of current assets (current assets) current Liabilities (current liabilities).
This indicator is an estimate of how well a business will survive if the decreased suddenly.
- Key Performance Indicators Non-Financial
KPI Non-Financial KPI that does not directly affect a company’s financial. Some examples of KPIS are Non-Financial in question such as :
- The Turnover Of Labor (Manpower Turnover)
- Matrix customer satisfaction (Customer Satisfaction metrics)
- Ratio of Recurring Customer for New Customers (Repeat Customer to the New Customer Ratio)
- Market Share (Market Share)
The factors that Affect the Effectiveness of KPIS
KPI will only be useful if there is a follow up on KPI itself, often times the company adopted KPIS that are popular used in an industry. But after that wonder why that KPI doesn’t reflect the performance of the company. In developing a strategy to formulate KPIS, Your team should start from looking at what is the purpose of Your organization, how do You plan to achieve it and who can take action based on this information. This should be an iterative process that involves feedback from analysts, the head part and the manager. After that You will get a better understanding of how KPIS to measure business processes of Your company and who can follow up the business process.
One way to create a KPI that is relevant is with the criteria of the SMART. The word it stands for specific, measurable, attainable, relevant, time-bound. For an explanation of these things, as follows.
- What is the purpose of the company specific.
- Can You measure the achievement of these goals.
- Whether the goal can be achieved.
- Whether these goals are related to the company.
- How long a period of time to achieve that goal.
Develop KPI requires time and resources of the company. Key Performance Indicator that is measured is an Indicator that reflects the needs of the company taking into account the strategy and short-term goals of the company. For example, if sales of our company increased by satisfying but the profitability of the company are not sufficient to provide funds for business growth, then the KPI is almost certainly for our company is a KPI Net Profit Margin and Gross Profit Margin.