Key Performance Measures
- A key performance measure is a kind of measurable value that
helps explain and quantify a key performance indicator. A key
performance measure might be one of several that support a key
performance indicator. For example, key performance measures for a
school might be students' national assessment test performance in
reading, mathematics and science. The measure would include a goal,
such as that a set percentage of students should perform at or above
proficient standards.
Key Performance Indicators
- Key performance indicators, or KPIs, help organizations focus
on progress. The progress is defined as improvements in reaching the
firm's strategic goals, achieving goal objectives, working toward a
company vision and enforcing values. Key performance indicators
track information that reveals problems and gives quantifiable
feedback. Tracking KPIs and using the resulting knowledge helps
companies improve customer satisfaction and morale among employees
and enforces effective financial tracking and management. KPIs are
used in schools as well, such as tracking enrollment by grade level,
ethnicity and each school within a certain district. Schools also
use KPIs to assess program effectiveness, such as how well
special-needs students perform, how well the school manages their
needs, and how well the school works with special-needs support
agencies.
Differences
- Key performance measures are the actual data values that
support the key performance indicators. Key performance indicators
are critical performance metrics that are explained by the activity
of the key performance measures. The terminology is interchangeable,
and firms may use each term to represent the same type of metrics
and performance information.
Uses
- The process of formulating KPIs or key performance measures
starts with collecting an initial set of performance data to set a
baseline for future comparisons. The information serves as a
benchmark, or point of reference, to judge the organization's
performance in future periods. Each company has core processes that
are critical and fundamental to its success, and failure to perform
them well causes the company's performance to deteriorate. These
form the basis of the KPIs and key performance measures. The KPIs or
key performance measures may be reported to external parties; either
a group or an individual. These parties would use the outputs of the
benchmarking process to analyze the company and make decisions.
External parties could be bank lenders, stockholders or investment
analysts.
