Nowadays it is not conceivable a company that does not constantly monitor performance through indicators that allow identifying key information to detect opportunities, analyze productivity, define new objectives or evaluate compliance with them.
First, we must know what indicators are, why it is important to define them correctly, their benefits, the application process and what types exist. Next, we will try to answer these questions.
What is an indicator?
An indicator is a unit of measurement that allow assessing the performance of processes, as well as productivity, profitability or determining if the objectives set by company are being met. Moreover, indicators allow to measure the specific or general performance of both people and areas of the company.
Once the concept of an indicator has been defined, we must keep in mind and understand that there are many different indicators, Therefore it is important that we select those that really add value and are aligned with the business objectives. Therefore, we will define these key indicators as Key Performance Indicators (KPI). It is precisely these to which we must devote our greatest attention.
Importance of correctly defining indicators and its benefits
Over time, the measurements made through the indicators provide the company with very valuable information for decision making. Therefore, it is very important to measure what will really add value to the company. In addition, accurate measurements executed at the right time help and facilitate decision making.
It should also be noted that the implementation of indicators helps us to handle operations effectively, that is, if it can be measured, it can be controlled, and if it can be controlled it can be managed and improved. The measurement and implementation of valid indicators can be useful for the reduction or redistribution of costs, as well as the development and evaluation of projects, both in the short and long term. The indicators allow to have a broad vision on the productivity of the resources and assist to identify aspects of improvement associated with the load or distribution of the work.
The indicators also serve as a source of support when defining or modifying the objectives (which must be SMART), since they show us a broad vision of what is happening. The correct implementation of the indicators also allows analyzing the general performance of the company and helps to propose and execute corrective actions that serve as improvement.
When defining the indicators that we are going to use, we must consider what we seek to measure with its implementation. Therefore, each of the chosen indicators must have a series of characteristics necessary for its correct measurement.
The most important characteristics when defining an indicator should be the following:
- Availability: the basic data for the elaboration of the indicator must be easy to obtain without any restrictions.
- Simplicity: the indicator should be easy to elaborate and interpret.
- Specificity: you must always measure what you really want to measure, otherwise the value of the indicator will be lower.
- Reliability: the data used for the development of the indicator must be reliable (sources of information with reliable data).
Many companies do not consider the main qualities and often make mistakes when defining the indicators that will be part of the scorecard.