APPRAISING EFFECTIVENESS OF KEY PERFORMANCE INDICATORS
Performance indicators or Key Performance Indicators (KPIs) are an industry jargon for a type of performance measurement. (Formoso and Lantelme E., 2000). An organization may use KPIs to evaluate its success, or to evaluate the success of a particular activity in which it is engaged. KPIs are tools that may be used by an organization to define, measure, monitor, and track its performance over time toward the attainment of its stated organizational goals. Accordingly, choosing the right KPIs relies upon a good understanding of what is important to the organization. 'What is important' often depends on the department measuring the performance (Love, P.and Holt, G., 2000). Key performance indicators help an organization defined and measure progress towards organizational goals. In addition, Wikipedia explains that KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged (Egan, J., 1998).
Prior to 1980s project
performance was narrowly defined as meeting the cost and time objectives and
adhering to product specifications (Ikediashi, 2012). But research during 1980s
and 1990s leads to a common agreement that project success is multidimensional
and that different people measure project success or performance in different
ways and at different times (Ante, G., Facchini, F., Mossa, G., Digiesi S., 2018)
A Key Performance Indicator KPI
is a quantifiable measure that is used to gauge or compare performance in terms
of meeting strategic and operational goals. Therefore, KPIs must be aligned
with the objectives. An appropriate approach to secure such alignment would be
through the critical success factors CSFs (Parmenter, 2010). measurement of the
efficiency of activity by employing KPI helps the management make strategic
decisions which are crucially beneficial to the enterprise Peterson (2006).
Four main reasons for developing KPIs: - (Popa, 2015)
- Checking if the ways of action adopted are in accordance with the objectives
Gathering the information necessary to improve the activity
Controlling and monitoring the activities and the people performing them
Providing support for the reports going to external stakeholders (external reporting indicator)
Sir John Egan challenge
industries to measure its performance over a range of its activities and to
meet a set of ambitious targets and identifies a number of drivers for change
and set a number of ambitious targets against which this improvement should be
measured, which we still recognized today as “Headline” performance
measurement. (Egan, 1998)
Key Performance Indicators (KPIs) help organizations understand how well they are performing in relation to their strategic goals and objectives. In the broadest sense, a KPI can be defined as providing the most important performance information that enables organizations or their stakeholders to understand whether the organization is on track or not (Bernard, 2014). According, Key performance indicators are compilation of data measure used to access the performance of a construction operation. KPIs when properly developed should provide all staff with clear goals and objective couple with the understanding of how the relates to the overall success of an organization. (Cox, 2003).
Using the SMART (i.e., Specific, Measurable, Achievable, Relevant, Timely) acronym structure for the composition of the appropriate KPI as the five listed characteristics define the required characteristics. This suggests that KPI should be oriented towards the objectives of an activity, expressed in quantified values, well-grounded, be interrelated and related with the performed work, and be tracked during the indicated time (Lo-Iacono-Ferreira, Capuz-Rizo and Torregrosa-Lopez, 2018). Measurement of the efficiency of an activity by using KPI helps the management take strategic decisions beneficial for the management. Such decisions bear significant impact on the overall performance of the enterprise; they are related with future planning and long-term effect (Barbuio, 2017).
KPIs in general are good indicators of the performance of construction projects and provide a useful framework for measuring and comparing project performance (Smith, and Heijden, 2017). Most enterprises are using too much KPIs, this can weaken the focus on aims; a large list of KPIs that does not have clear connections to business objectives may be a sign of a bigger problem; a shortage of strategic focus on selecting KPIs is a difficult process; lack of understanding of the KPIs lead to a failure in monitoring and reporting of measures (Eckerson, 2011). There is no significant difference in the rankings of time performance, Turnover, Rework and Quality of work, while there was significant difference in the rankings of cost per/unit, job cost reporting, and health and safety (Ikediashi, 2012).
References:
Good post Derrick. In addition, (David, 2007) successful development and utilization of KPIs in the workplace is determined by the presence or absence of four foundation stones. They are, 1. Partnership with the staff, unions, key suppliers, and key customers, 2. Transfer of power to the front line, 3. Integration of measurement, reporting, and improvement of performance, 4. Linkage of performance measures to strategy.
ReplyDeleteA fundamental element of our framework is concerned with the identification of KPIs and their connection with the Critical Success Factor (CSFs), where there is a lack of evidence in the context of simulation project success. A KPI is a quantifiable measure that is used to gauge or compare performance in terms of meeting strategic and operational goals. Therefore, KPIs must be aligned with the objectives. An appropriate approach to secure such alignment would be through the CSFs (Parmenter, 2010).
DeleteGreat blog Derrick, Panagiotakopoulos (2013) concluded that factors affecting staff motivation at a period where the financial rewards are kept to the least leads to stimulate employee performance. So, management personnel's responsibility to motivate their employees to work as per the expectation to enhance the organization's performance. Similarly Dysvik and Kuvaas (2010) concluded that intrinsic motivation was the strongest predictor of turnover intention and relationship between mastery-approach goals and turnover intention WA Managers need to understand the flow of motivation from an organizational perspective, it helps them create a culture where employees always get motivated to do better [2].
ReplyDeleteHi Isuri, Seems that there is no relevance to your comments with regard to my blog page content. However if I'm to reply to your comment, the case for using job design techniques is based on the premise that effective performance and genuine satisfaction in work follow mainly from the intrinsic content of the job. This is related to the fundamental concept that people are motivated when they are provided with the means to achieve their goals. Work provides the means to earn money, which as an extrinsic reward satisfies basic needs and is instrumental in providing ways of satisfying higher-level needs. But work also provides intrinsic rewards related to achievement, responsibility and the opportunity to use and develop skills that are more under the control of the worker. (Armstrong 2009)
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