[PRO Tips] What is KPI? How to develop effective KPI?

SMART principles for developing effective KPIs

Developing effective KPIs is crucial for companies to achieve their goals. A bad KPI not only fails to provide guidance, but may also cause confusion and resistance among employees. To help managers develop effective KPIs, the SMART principles can be used:
●Specific: KPIs must be clear and unambiguous, and must be consistent with specific work goals. For example, instead of setting a vague goal like "establishing a good relationship with customers", it is better to set a specific goal like "visiting 100 manufacturing customers".
●Measurable: KPIs must be measurable and verifiable. Continuing with the above example, we can further set "the conversion rate of 100 manufacturing customers must reach 5%" or "the number of orders must reach 5%".
●Attainable: KPI should be challenging yet achievable. Setting too high a goal will cause employees to lose confidence, and setting too low a goal will make it difficult to stimulate employees' potential. KPI should be a "goal that can only be achieved by standing on tiptoe".
●Relevant: KPI must be related to the company's ultimate goal. For example, if the company's goal is to increase the market share of Japanese tourist routes, then the department's KPI should be centered around Japanese tourist routes, not South Korea or Thailand.
●Time-bound: KPI must have a clear time limit. For example, "advertising conversion must reach 500,000" should clearly state whether it is "achieved within a week" or "achieved within a month".

Comparison of KPI and OKR

In addition to KPI, OKR (Objectives and Key Results) is also a common performance management tool. The difference between KPI and OKR is:
●KPI is an "imperial edict", which is a command made from top to bottom; OKR is a "Roman Baths", which is the result of a joint discussion by the team.
●KPI focuses on results, not processes; OKR focuses on the ways and methods of achieving goals.
●KPI usually has a reward and punishment mechanism; OKR focuses more on motivation and growth.
There is no good or bad difference between KPI and OKR. Enterprises can choose the appropriate tool according to their own situation, or use the two in combination.
How to formulate departmental KPI and personal KPI?
When formulating departmental KPI and personal KPI, it is necessary to decompose the company's goals layer by layer according to the SMART principle.
●Formulation of departmental KPI: Taking the marketing department as an example, if the company's goal is to achieve 10 million performance next year, the marketing department needs to consider how to decompose this 10 million goal into various channels, such as: conversion from SEO, conversion from the community, conversion from activities, conversion from KOL, etc.
●Personal KPI formulation: For example, if the goal of community operation is to increase the conversion rate by 5%, the goal can be broken down into the number of fans per week, the number of interactions per week, the number of conversion orders per week, etc.
While setting KPIs, companies and supervisors should also formulate corresponding reward mechanisms to motivate employees to achieve their goals.
 

Personal growth KPI

In addition to work-related KPIs, individuals can also set some growth goals for themselves, such as:
●Get off work on time every day
●Exercise twice a week
●Read a book every month
●Develop 1-2 good habits
●Learn a hobby
●Travel once a quarter
●Leave 10 minutes alone every day

Summary

KPI is an important tool for companies to achieve goal management. Formulating effective KPIs requires following the SMART principle and combining the actual situation of the company and employees. I hope this article can help you better understand and apply KPIs to achieve the common growth of individuals and companies.