Video:What Are Key Performance Indicators?

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Transcript:What Are Key Performance Indicators?

Hi I'm Jen D'Amore for About.com, and this video is all about KPI's or Key Performance Indicators. What are they?According to About.com's management site guide, F. John Reh, Key performance indicators help an organization define and measure progress toward it's goals.

Key Performance Indicators are Based on Numbers

Once an organization has established it's goals, it needs a way to measure progress towards them, and that is where KPI's enter the picture. KPIs are agreed upon ahead of time, so that everyone within an organization is consciously working towards increasing the same numbers.

Key Performance Indicators Vary Among Organizations

KPIs reflect the "critical success factors" of an organization, so they'll be different for each organization. For example, a KPI for a business may focus on the number of units sold.A theater may focus on the percentage of subscription renewal. A school may focus on graduation rates or national test score ranking. Whatever KPI's are selected, they must reflect the organization's goals, be "key's" to their success, and be quantifiable. KPIs are intended to be used over the long term.

Many Key Performance Indicators are Used to Measure Success

There will often be more than one KPI used in a larger organization, and variations of a similar KPI between departments. If the overall KPI of the company is to increase profits by 5% each year, the sales department's KPI may focus on increasing new customers by 5%, while the maintenance department's KPI may be to decrease repair costs by 5%. Each department will work towards the overall goal in it's own way, and specific KPIs help measure their contribution.

KPI's can also be used on a much smaller scale, like within a particular project. Agreeing ahead of time on key performance indicators with a consultant hired for a project will provide an accurate measure of that project's progress. As you can see KPI's are valuable tools for measuring progress towards goals, setting everyone up for success.Thanks for watching, to learn more visit us on the web at About.com.