Key performance indicators (KPIs) have been increasingly used by many companies and organizations to track various aspects of organizational performance. One particular app includes bonus KPIs, which are the key performance indicators that determine whether or not an individual employee is eligible for a bonus.
However, what exactly are these KPIs in the first place? By the term itself alone, these KPIs are selected measures that serve to indicate performance levels. To be more precise, KPIs are financial and non-financial metrics that are used to define and measure progress toward organizational goals. By their very nature, these KPIs can vary widely across various organizations and disciplines, but there are also several that are applicable to a wide range of organizations.
Key performance indicators are part of a well-defined measurable objective, which consists of a direction, an indicator, a benchmark, a goal, and a time frame. As such, they are vital parts of any strategic management approach, requiring a concrete idea of what indicators need to be kept up to date.
Managers don’t come up with these KPIs out of nowhere. For these metrics to be of any use, they must be based on a predefined business process. That is, the organization must be clear about how it operates both internally and externally. Not only that, but the organization must also have set goals and objectives, or at least have some idea of what these goals are. And finally, the organization must be aware of and able to perform the measurements that a key performance indicator would require. These three criteria govern the selection and efficient implementation of key performance indicators generally for any organization.
To give a concrete example, consider selecting a KPI on which a support agent’s bonus will be based. First, the business process or set of interrelated tasks that the agent performs must be determined. This could consist of answering customer inquiries through various means, conducting research work, and creating documentation. Once this is clarified, the goals and objectives of the organization should be established, for example efficiency and reduced handling or processing times. Finally, the organization must establish the different measurement processes that a KPI would require, such as timers or recorders.
In light of these considerations, good KPIs for a technical agent bonus may be the percentage of inquiries answered successfully, average handling time, or customer satisfaction rate. In this example you can see the flexibility of the KPI approach. These indicators can be used to measure the performance of individual employees just as effectively as they are used to measure organizational performance as a whole.
Bonus KPIs like these are just a sample application of the KPI paradigm. Different organizations with different strategic objectives and business processes may employ different types of key performance indicators. Proper selection and monitoring of these KPIs will definitely help managers to continually align organizational processes with organizational goals.