Reasons for measuring performance
Organizations measure performance for three main reasons:
- Learn and improve performance
- Provide external reporting (for shareholders and compliance requirements)
- Monitor and control internally within the organization
Only what gets measured gets done. Unless something is measured, it cannot be managed and controlled
Measure: Is a unit or standard of measurement, which consists of a number and a unit.
Metric: Is used in business performance and has a goal or performance associated with it.
KPI: Type of measurement used to gauge or compare performance. Metric that is tied to a target.
- Are used extensively, especially to learn and improve.
- Provide information to users for making informed and, hence, better decisions so that performance can be improved
- KPIs are routinely used to monitor and control performance and behavior of employees at all levels of the corporate hierarchy.
- KPIs are used to set performance goals and monitored to ensure that they have been met.
- Objective of using a KPI is to determine if the performance is on or off target.