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Process Management

Power of KPIs in Process Performance Monitoring

Posted on February 7, 2023 by Sara Kremsar
1083 | 7 Feb 2023
Power of KPIs in Process Performance Monitoring

A company's success depends heavily on its ability to provide exceptional customer experience. As such, organizations are increasingly adopting customer-driven approaches to their operations, aiming not only to meet but exceed their customers' expectations. However, to ensure the effectiveness of these customer-driven processes, it is crucial to monitor and measure their impact on the business. This is where establishing indicators for monitoring the effectiveness of customer-driven processes implementation comes in.



OVERVIEW

KPIs are used to measure progress towards important business goals. While high-level KPIs measure overall business performance, low-level KPIs focus on specific tasks and projects managed by individual teams. It is crucial that KPIs are well-defined and established so that teams and individuals know what they are trying to achieve and when they are trying to achieve it.

To ensure KPIs are well defined, businesses often follow the SMART criteria. This means KPIs should be Specific, Measurable, Achievable, Realistic, and Timely

  • Specific goals should be precise enough that everyone knows what needs to be done. 
  • Measurable goals should be able to be quantified. 
  • Achievable goals should be assigned to at least one individual or group. 
  • Realistic goals should be realistically achievable. 
  • Timely goals should have a specific time frame for achieving the set target.


KPIs are only useful when they are properly defined and scaled appropriately.


It is important that KPIs for customer-driven processes are customer-centric. This means that they should measure the performance of a customer-centric business. Businesses can establish their own steps within the performance monitoring process based on their own needs and objectives. However, it is important to follow a strategy for monitoring KPIs effectively.

Digital transformation has made it easier to monitor, promote, and upgrade the KPI system. KPIs are a powerful tool that can help businesses achieve their goals. However, businesses must also have access to a large amount of data to make them useful. 



General about KPIs

KPIs are quantifiable measurements used to evaluate the performance of an organization, individuals, or processes. KPIs are used to track progress towards achieving goals and objectives and are often used to identify areas for improvement. KPIs can be used in a variety of industries, including finance, marketing, operations, human resources, and more.


a) Types of KPIs

There are many types of KPIs and ways to use them. It is important for the organization to select those that will provide the most benefit as it is important to understand the organization's vision and strategy. . KPIs must be measurable over a longer period of time, but they can change, if organizations change their directions and goals. A combination of resources, systems, organizational culture, and management support is needed for the implementation of KPIs to be successful.

There are several types of KPIs that organizations can use to measure their performance, including:

  • Financial KPIs are used to measure the financial health of an organization. They include metrics such as revenue, profit margin, return on investment (ROI), and cash flow.
  • Customer KPIs are used to measure the satisfaction of customers. They include metrics such as customer retention rate, customer satisfaction score (CSAT), Net Promoter Score (NPS), and customer lifetime value (CLV).
  • Operational KPIs are used to measure the efficiency and effectiveness of an organization's operations. They include metrics such as cycle time, lead time, productivity, and quality.
  • Employee KPIs are used to measure the performance of individual employees or teams. They include metrics such as employee satisfaction, employee turnover rate, and performance goals.


b) Benefits of KPIs

KPIs offer several benefits to organizations, including:

  • Clear performance goals - KPIs provide clear and measurable goals for individuals, teams, and organizations. They help to ensure that everyone is working towards the same objectives.
  • Improved decision-making - KPIs provide insights into the performance of an organization, allowing for informed decision-making. By tracking KPIs, organizations can identify areas that require improvement and make changes to their strategies accordingly.
  • Increased motivation and engagement - KPIs can motivate employees by providing clear performance expectations and goals. When employees understand what is expected of them, they are more likely to be engaged and motivated to achieve their goals.


c) Challenges of KPIs

While KPIs offer many benefits, there are also some challenges that organizations need to consider, including:

  • Choosing the right KPIs - Choosing the right KPIs is crucial for success. Organizations need to identify the most important metrics that align with their goals and objectives. Selecting the wrong KPIs can lead to a misalignment of goals and objectives.
  • Collecting and analyzing data - KPIs rely on data, and organizations need to collect and analyze data accurately to measure their performance effectively. Poor data quality or inaccurate analysis can lead to incorrect conclusions.
  • Overreliance on KPIs - Organizations should not rely solely on KPIs to measure their performance. KPIs should be used in conjunction with other metrics and qualitative data to provide a more comprehensive view of an organization's performance.



KPIs for Determining the Efficiency of Process Implementation

The efficiency of the implementation of business processes is an extremely important factor that affects the success of a company's operations.  Both structural and operational indicators can be used to measure efficiency, but different indicators require different monitoring methods.


Structural indicators for the efficiency of process execution

Structural efficiency indicators are divided into four basic groups based on the facilities or symbols that are part of the EPC business model processes. These indicators are based on:

  1. key indicators of process progress,
  2. key indicators for connectivity,
  3. key indicators for process operators or organizational structures and
  4. key indicators for products or supporting facilities.

Monitoring the effectiveness of implementation using structural indicators shows the level of complexity of the currently implemented business processes, which is a good starting point for addressing issues related to the implementation of processes according to market requirements.


Operational indicators for process implementation efficiency

Operational indicators allow business systems to better understand processes in internal and external comparison with best practices. They can be broadly categorized into four groups:

  1. indicators related to response time,
  2. indicators related to products,
  3. productivity indicators and
  4. indicators relating to the reduction or increase in profitability.

Monitoring the effectiveness of implementation is more demanding for operational indicators and requires much more thorough preparation than for structural indicators. In order to use these indicators, a comprehensive information system must already be established in the enterprise system, which is upgraded with a suitable software tool that allows managing data on the implementation of business processes. Monitoring of operational indicators for KPI implementation allows for immediate verification of the effectiveness of the activity or process compared to previous iterations.



CONCLUSION

In conclusion, establishing key performance indicators is crucial for monitoring the effectiveness of customer-driven processes implementation. SMART criteria should be followed to ensure KPIs are well-defined. KPIs should be customer-centric to measure the performance of a customer-centric business. It is important to have a strategy for monitoring KPIs effectively, and digital transformation has made it easier to do so. By establishing and monitoring KPIs, businesses can ensure they are meeting their goals and providing the best customer experience possible.



QUESTION:

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