key performance indicator
key performance indicator
Any of a number of parameters—e.g., staff turnover, equal opportunity, staff satisfaction, waiting time targets—on which an NHS trust or service feels it can improve and assesses its performance against other trusts or services to identify improvement, treading water or backsliding.KPI is a widely used and misused business term which is particularly popular in the NHS. In theory it provides a series of measures against which internal managers and external investors can judge the business and how it is likely to perform over the medium and long term; however, it has increasingly become confused with metrics—that is, if we can measure it, it is a KPI.
KPI should be seen as:
• Key—only when it is of fundamental importance in gaining competitive advantage and is a make-or-break component in the success or failure of the enterprise. For example, the level of labour turnover is an important operating ratio, but rarely one that is a make-or-break element in the success and failure of the organisation. Many are able to operate well below benchmark labour turnover levels and still return satisfactory or above satisfactory results.
• Relating to Performance—only when it can be clearly measured, quantified and easily influenced by the organisation. For example, weather influences many tourist related operations, but the organisation cannot influence the weather. Sales growth may be an important performance criteria, but targets must be set that can be measured.
• An Indicator—only if it provides leading information on future performance. A considerable amount of data within the organisation only has value for historical purposes—for example debtor and creditor length. By contrast, rates of new product development provide excellent leading-edge information.