KPI evaluate the success of an organization or of a certain activity. For instance, activities like projects, programs, products and other initiatives in which it engages. A company can achieve 100% customer satisfaction at counter service. The assessments or evaluation often lead to the identification of potential improvements in order to achieve the target or goal.
It is to quantify their business target or goal in order to achieve their performance and determine where they are successful and where they need to improve. Performance indicators are the centre of the performance measurement system for making management decisions. The performance measurement system is a fundamental of total quality management. Typical categories of performance measurement including process and outcome measure but Total quality management is an integrated approach which consist of principles and practices to improve the quality of products and services in SME in most competitive ways.
Key Performance Indicators is to measures the critical success factors of an SME. These methods used to periodically assess the performances of any SME, business units and their divisions, departments and employees in an organisation. KPI have focused mainly on financial measures like sales growth, profit, cash flow and return on investment to analyse performance, but not linked with strategies that can conflict with target or goal. Several researchers found out the significant relationship between staff motivation, job satisfaction and organizational commitment as a measure of employees’ performance. SME should take a few steps before choosing the best KPI which consist of Having clearly and precise defined business processes;Setting requirements or selection for the processes; Having qualitative and quantitative measurement of results;Determining variances and adjusting processes to meet their target . To set performance indicators, performance factor analysis should be carried out, which helps map out the performance case-and-effect. The leader’s decision is vital for successfully implementing performance measures and the involvement of all of the employees in selection.
KPI is not good that only managers were involved in the action but customer feedback helps an SME identify the performance issues quickly. Communication is very important for a good teamwork. Each performance objective can be measured by several key performance indicators. According James Harrington “Measurement is the first step that leads to control and eventually to improvement.” In selecting KPI, it is crucial to limit them to those factors that are essential to the SME reaching its goals.
It is important to keep the number of KPI small but focused on achieving the same KPI. If the key performance indicator is “increased customer satisfaction”, that KPI must be focused differently in different departments. The Manufacturing Department has a KPI of “number of units rejected by quality inspection”, while the Sales Department has a KPI of “minutes a customer is on hold before a sales rep answers”. Success by the Sales and Manufacturing Departments in meeting their respective departmental KPI will help the SME meet its overall target achievement. For instance, The Customer Service Department will need to measure how many calls it receives and how long it takes to answer each call.
The Customer Manager can calculate the percentage of customer call answered in the first three minutes and manage toward improving that KPI. We can measure the number of calls by having each Customer Service representative count their own calls and tell their supervisor or managers at the end of the day. We could have an operator count the number of calls transferred to the Customer Service department.
KPI is an item of information collected at regular intervals to track performance of an SME or system at any level that produces output products or service using resources of different types. KPI can be used to compare the performance of alternative technologies or manufacturing systems and the trade-off with quantities and costs on the relevant resource usageThe performances are usually measured and evaluated through key performance indicator (KPI), key success factor (KSF) and key performance factor (KPF) across the partner organization’s borders. All these performance factors should provide a overview of the collaboration’s performance. The generic performance measurement commonly used by different stakeholders in the Business Community is KPI.
This is a variable that measures a performance factor quantitatively. KPI is considered as the selected factor that represents the overall performance of an organization. (Ferreira et al., 2011).