HRM501

Mohan Thapa
 What is a KPI?
► A Key Performance Indicator (KPI) is a type of measure that is used to
evaluate the performance of an organization against its strategic
objectives. KPIs help to cut the complexity associated with performance
tracking by reducing a large amount of measures into a practical number of
'key' indicators.
► KPIs can be used to track the operational performance of departments,
projects or individuals against targets or goals. They can provide a
management tool for gaining insight and decision making.
What do KPIs look like?
► Unlike simple Metrics that are used to monitor and present values, such as the number
of visitors to a website. KPIs may incorporate one or many different metrics to track a
business objective. For example, a KPI aligned to a strategic marketing objective may
look like this:
► Objective: Increase the website conversion rate to 20%.
► Description: The current conversion rate has stalled at 12%. To be competitive the
conversion rate needs to increase in line with our competitors.
► Completion: By the End of the year.
► Reporting Frequency: Monthly.
► Visual:
► Data Source: Number of Trials / Number of conversions.
► Owner: Product Manager
A well-constructed KPI helps organizations translate
visions into strategies, and tracks the impact of
initiatives. Companies benefit from a host of
advantages, such as greater insight and real time
information to make informed decisions.
How to create KPIs in 5 simple steps
► Developing meaningful KPIs that track, and clearly visualize performance takes some
planning. Each KPI needs to address a specific business objective, and provide timely,
accurate information to assess progress towards goals.
► Essentially, creating successful KPIs comes down to understanding the aspirations of
the business using a clear, structured process for crafting KPIs.
 How to create KPIs in 5 simple steps
► Here's how to create a KPI:
► Establish a clear objective.
If a goal of the business is to be the 'market leader', then a KPI objective maybe to
'increase revenue by 10% this financial year' or 'Expand our product lines to 20'. State
clearly, and in simple terms the purpose of the KPI. This provides guidance for anyone
viewing the KPI to interpret the data in the correct context.
► Outline the criteria for success.
What will the target be? Is it attainable? when should it be accomplished? and how will
progress be monitored? Targets should be realistic, changes to business processes take
time to implement. In the initial stages of KPI monitoring it's best to focus on long-term
targets with midterm monitoring.
► Collect the data.
Investigate the availability and accuracy of the data. Data may be available automatically
from existing systems or hidden in reports and databases. This data will all need to be
pulled together at regular intervals for reporting in one central place.
How to create KPIs in 5 simple steps

► Build the KPI formula.

Some KPIs contain but a single metric or measure. However most rely on a combination
brought together under a single calculated formula. For example, a KPI that measures
productivity in revenue by machine would look like this: Total Revenue divided by the total
number of machines. Build formulas and create calculations with test data to see if the
results are what you would expect.
► Present your KPIs.
To efficiently communicate your KPIs you'll need to translate the data into understandable
visuals such as graphs and charts. Dashboards for Operational KPIs, or Reports for
Strategic KPIs offer a convenient way to create, track and distribute your KPIs.
► Additionally, as business objectives change, it will be necessary to revisit your KPIs
periodically to tweak, adjust or replace as needed
What are Leading and Lagging KPIs
► When you're looking to implement KPIs to improve a business process, you
will often hear the terms “leading” or “lagging” indicators. But what do these
terms mean? – and how can you implement them as part of your strategy?

► Lagging KPIs
► Lagging KPIs are used to determine the result of past performance, such as
production, volume or a result. They are easy to measure as they are
typically a simple value that is used to understand how well a process is
performing.
► For example, the 'number of units produced' in a manufacturing process or
'revenue this month' are lagging KPIs.
What are Leading and Lagging KPIs

► Leading KPIs
► Leading KPIs are used to predict or influence future performance. They
are more difficult to set up as they rely more on external actions to
impact outcomes, such as changes in process or investments in
infrastructure.
► For example, increasing the number of 'routine maintenance checks' in a
production line may highlight faults that were causing defects. This
would then lead to a higher overall unit production rate.
 What are Organizational and Operational
KPIs?
Across different business functions KPIs have a wide range of practical applications.
From daily indicators that provide real time management information to more long-term
organization objectives.
Typically, KPIs fall into two main categories:
►Operational KPIs
Operational KPIs clearly articulate detailed and timely information that is used to
make day to day decisions, or take corrective actions on performance or a
process. These KPIs are usually complex in nature as they use formulas with data from
multiple sources.
►Strategic KPIs
Strategic KPIs are focused on long term objectives derived from an organizations
goals. They help identify if a strategy is working and if it is on target. As such these KPIs
are sometimes referred to as High Level KPIs.
KPI Examples and Definitions
► A selection of 11 financially focused KPIs. This template is designed to track financial KPIs such as
Disputed Invoices, Net Profit Margin, EBIT, Revenue and working capital. This template offers a base
set of financial metrics and KPIs commonly used in organizations to help with the bottom line and drive
sales growth.
► Cost of goods / Services
► Disputed Invoices
► EBIT
► Gross Profit Margin
► Net Profit
► Net Profit Margin
► Number of Employees
► Overdue Invoices
► Revenue
► Revenue per employee
KPI Examples and Definitions
► Human Resources Template
► 16 Human Resource focused KPIs designed to assist with various aspects of managing employees such
as Cost per hire, Health Care Costs and HR Expenses.
► Absence Rate
► Agency Fees
► Average number of employees this month.
► Days taken to hire
► HR Advertising Costs
► HR Expense Factor
► HR Expenses
► Number of days absent in a month
► Number of Hires
► Number of Workdays
 KPI Dashboard Example-Marketing
Target
KRA KPI Target %age/Frequency Weightage
Category
No. of marketing activities 8 per month monthly Fixed 20%
Compliance with the budget ± 5% monthly Fixed 10%
Mapping of Market Benchmarking against competitive
Fixed
Intelligence products monthly 10%
Marketing
Engagement activities with
Activities Fixed
customers 2 per month monthly 10%
Timely development of sales 100% availability of all the sales
Fixed
collateral collateral at branches monthly 5%
Knowledge sharing At least educate 3 branches monthly Fixed 5%
Receipt of vendors bills Within 30 days monthly Fixed 5%
Vendor claims
Timely bills payment after
Management Within 15 days monthly Fixed 5%
the receipt date
% Compliance with System
Compliances Controls (Marketing Processes 100% 12 Fixed 10%
of principal co.)
Conduct External survey for
brand consideration & brand In beween Baishak-Ashad 2 Fixed 5%
Brand
awareness
Awareness
Conduct Inhouse survey for
Survey
brand consideration & brand In between Bhadra-Kartik   Fixed 5%
awareness
Content marketing of the
2 contents per month 12 Fixed 5%
Digital product
Marketing No. of sales lead from the
10 Leads per month 12 Fixed 5%
social media
Actual Score         100%
Final Score  
 KPI Dashboard Example-Finance
%age/ Target
KRA KPI Target Weightage
Frequency Category

% Accuracy of transactions/payments made

100% 100% Fixed 5%
Branch Management - Accounting, Legal through all the branches
Compliance Journal voucher checking of branches 0% errors 100% Fixed 10%
VAT Register compiled report of branch Within 7th of Next Month 12 Fixed 10%
MR Management - Branches 100% Records of MR issued & Used 100% 100% Fixed 5%

No of branches visited As per Plan 12 Fixed 10%

Branch Operation (Visit, Issues Mgt., Interdepartmental within

Resolution of queries, Issues and
Support) 48 hours
reconciliation of open items and their
Staffs within 24 hours 365 Fixed 15%
escalation Including preparation of all the
Issues Logs circulation -
issues & their circulation to CFO
weekly basis
Branch operation bank account
By next week (Every
reconciliation - weekly with Zero Open Bank 12 Fixed 10%
Sunday)
Entries
Branch Report Compiled Daily Cash In Hand, Cash Status On daily basis - by 6:00 PM
365 Fixed 15%
Report, Petty Cash, Cheque in Hand without any entry left
On daily basis - by 6:00 PM
Compiled Sales summary report 365 Fixed 5%
without any entry left
29th day of previous month
Budget Prepation & % of variance between
Branch monthly Budget for next month, 0% 12 Fixed 10%
Branch Monthly Budget and Actual expenses.
variance
Budgetary & Cost Control, Ageing - All
Reduce Overheads expenses of branches 1,000,000 NPR 12 Fixed 5%
Branches
Actual Score         100%
Final Score          
Key Performance Indicator Best Practice
What makes Key Performance Indicators so effective? What sets them apart from just
plain old data measurements. Here are 5 factors that can be the difference between
mediocre data recording and a truly effective business improvement exercise:
►Keep Aligned. KPIs should track the performance of a specific business objective to help
achieve the larger goals of the company. Being closely aligned to key measurements will
ultimately help you focus on influencing factors to reach these goals. If a KPI is neither aligned
or specific, is it really needed?
►Less is more. In a world full of data is far too easy to track the too much and too often. It's a
common mistake to measure everything connected to the business. Starting with a small number
of specific KPIs will not only be easier to implement, but will help with the adoption of KPIs
with the organization.
 Key Performance Indicator Best Practice
► Actionable and accountable. KPIs without clear and relevant targets are simply
measurements that are limited in how you can influence their performance. Short and
long-term targets should be set for KPIs, along with owners who are responsible and able
to influence business processes.
► Attainable. Can we realistically achieve this objective? Do we have the capacity to
change or amend processes that will influence the performance? KPIs should be realistic
and proportionate to the resource of a business. Nothing will stop a well-intentioned
performance improvement process that an over ambitious and unattainable objective.
► Review and tweak. As with any business process, KPIs also need timely scrutiny or
maintenance to keep them performing at their best. Setting regular review periods will
keep them relevant and providing optimum benefit.
Group Formation and Exercises