What does kpi mean?

Key performance indicators (KPI) are objective quantitative management indicators to measure process performance by setting, sampling, calculating and analyzing key parameters of internal process input and output. They are tools to decompose the strategic objectives of enterprises into operational objectives, and they are the basis of enterprise performance management. KPI can be used by the department head to clarify the main responsibilities of the department, and on this basis, to clarify the performance measurement indicators of the department personnel. Establishing a clear and feasible KPI system is the key to do a good job in performance management. Key performance indicators (KPI) are quantitative indicators used to measure employees' performance and an important part of performance plan.

KPI method conforms to an important management principle-"28 principle". In the process of enterprise value creation, there is an "80/20" law, that is, 20% of the backbone personnel create 80% of the enterprise value; Moreover, the "28 principle" also applies to every employee, that is, 80% of work tasks are completed by 20% of key behaviors. Therefore, we must grasp 20% key behaviors, analyze and measure them, so as to grasp the key points of performance evaluation.

KPA(KeyProcessArea) is the key process area, which points out that enterprises need to concentrate on improving and solving problems. At the same time, these key process areas point out the specific problems that need to be solved in order to reach the capability maturity level. Each KPA clearly lists one or more objectives and points out a set of related key practices. Implementing these key practices can achieve the goal of this key process area, thus achieving the effect of increasing process capability. Kra (key results areas) is the key achievement area, which is indispensable to achieve the overall goal of the enterprise and must achieve satisfactory results, and is the gathering place of key success factors of the enterprise.

Principle 28 is an economic principle put forward by Italian economist Pareto, that is, in the process of value creation, 80% of the tasks of each department and employee are completed by 20% of key behaviors. Grasping 20% of the key points means grasping the main body.

The principle of "28" points out the direction for performance appraisal, that is, the main energy of appraisal work should focus on key results and key processes. Therefore, the so-called performance appraisal must be placed on key performance indicators, and the appraisal work must be carried out around key performance indicators.

Hypothetical premise

Assume that people will take all positive actions to achieve the predetermined goals, assume that people will not take the initiative to achieve the goals, assume that people are not sure what actions should be taken to achieve the goals, and assume that the formulation and implementation of strategies have nothing to do with ordinary employees.

Purpose of evaluation

The design and application of index system take strategy as the center and serve the realization of organizational strategic objectives. Taking control as the center, the design and application of index system comes from the intention of control, and also aims to control individual behavior more effectively.

Index generation

Within the organization, strategic objectives are broken down from top to bottom. It is usually produced from the bottom up according to individual's past performance and goals.

Indicator source

The value-added work output based on organizational strategic objectives and competitive requirements comes from a specific procedure, that is, the revision of past behavior and performance.

Exponential composition

Focus on short-term benefits through the combination of financial and non-financial indicators. The principle of giving consideration to long-term development; Indicators themselves not only convey results. It also conveys the process of producing results. Mainly based on financial indicators, supplemented by non-financial indicators. Pay attention to the evaluation of past performance, and the starting point of guiding performance improvement is the problems existing in past performance, and performance improvement actions need to be decoupled from strategy.

Decomposition of corporate strategic objectives

First of all, it means that as an indicator to measure the performance of each position, the content of key performance indicators ultimately depends on the strategic objectives of the company. When key performance indicators constitute an effective part or support system of the company's strategic objectives, the positions they measure will take the relevant parts of the company's strategic objectives as their main responsibilities; If KPI is divorced from the company's strategic goal, the direction of the position it measures will be different from the realization of the company's strategic goal.

KPI comes from the decomposition of the company's strategic objectives, and its second meaning is that KPI is the further refinement and development of the company's strategic objectives. The company's strategic objectives are long-term, instructive and general, and the key performance indicators of each position are rich in content, which are set for this position and focus on assessing the work performance of the year, which can be measured. Therefore, the key performance indicators are the excavation of the specific factors that really drive the realization of the company's strategic objectives, and are the concrete embodiment of the company's strategy's performance requirements for each position.

The last layer means that the key performance indicators are adjusted with the development and evolution of the company's strategic objectives. When the company's strategic focus shifts, the key performance indicators must be revised to reflect the new content of the company's strategy.

Measurement of controllable part of performance

The effect of enterprise management activities is the result of the comprehensive action of internal and external factors, in which the internal factors are the part that employees in various positions can control and influence, and also the part measured by key performance indicators. Key performance indicators should try to reflect the directly controllable effect of employees' work and exclude other influences caused by others or the environment. For example, sales volume and market share are both standards to measure the market development ability of sales departments, and sales volume is the result of multiplying the total market size and market share, in which the total market size is an uncontrollable variable. In this case, compared with the two, market share reflects the core content of work performance and is more suitable as a key performance indicator.