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Definition : KPI

Performance indicators, also known as KPIs (Key Performance Indicators), are essential tools for measuring and analyzing the effectiveness of various aspects of a company.

1. KPI's

A KPI is an indicator that measures the performance of a specific activity or set of activities within a company. It is used to quantify the effectiveness of the processes put in place to achieve a given objective (e.g.: increase sales, improve customer satisfaction). In this way, KPIs provide reliable, fact-based information on a company's operations and productivity.

2. Types of KPI

There are several types of KPI, which vary according to activity, objective and measurement scale:

• Financial KPIs: These indicators quantify the company's economic performance, such as sales, margins, costs, etc.
• Operational KPIs: These provide information on the quality and efficiency of internal processes (e.g. time required to complete certain tasks, incident resolution rate).
• Satisfaction KPIs: These measure the level of satisfaction of customers, employees or other stakeholders.
• Strategic KPIs: These indicators relate to the company's long-term objectives and general direction (e.g. market penetration, growth rate).

3. Why use KPIs?

KPIs are essential for measuring a company's progress towards its objectives, and for identifying the areas in which it needs to improve its performance. By providing quantified performance data, they also enable management to make more informed decisions, and to better communicate results to all stakeholders, both internal and external.

4. How to choose the right KPIs?

A good performance indicator must meet several criteria:

• Be linked to a clear and specific objective
• Rely on reliable and available data
• Provide relevant and understandable information
• Enable regular monitoring and adjustments if necessary

It's important to choose the right KPIs for your business, according to your needs and constraints. Ideally, you should have a limited number of indicators, to avoid dispersion of information and facilitate management.

5. Main mistakes to avoid when defining KPIs

There are several common mistakes to be made when setting up performance indicators:

• Focusing on too many indicators: It's better to focus on quality rather than quantity, and to concentrate on the KPIs that are truly essential to achieving objectives.
• Measuring only easily quantifiable elements: Some important aspects of performance do not necessarily translate into figures, such as certain dimensions of well-being at work or creativity.
• Neglecting "lagging" and "leading" indicators: lagging KPIs (past results) must be taken into account alongside leading KPIs (factors influencing future performance), to get a complete picture of the situation.
• Forget the time scale: time analysis is essential to measure performance trends and adapt strategies if necessary.

6. How to monitor KPIs effectively?

To make KPI tracking useful and relevant, you need to :

• Share figures regularly with relevant teams and stakeholders
• Compare results with targets and past performance
• Understand the causes of discrepancies and the factors influencing them
• Analyze trends over a given period and adapt actions if necessary

7. Tools for optimal KPI management

Various software packages are available to facilitate the collection, processing, analysis and reporting of performance indicator data:

• Enterprise Resource Planning (ERP) systems: these programs centralize the management of company resources and processes, providing fast, reliable access to all necessary data.
• Business Intelligence (BI) tools: Specific solutions provide a global view of a company's performance, by analyzing and graphically representing information from various data sources.
• Dashboards: for quick and easy visualization of results, in the form of graphs and tables, often customizable.

8. Setting up KPIs according to business sector

KPIs obviously vary according to the sector of activity and the specificities of each company. For example:

• Industry: overall rate of return, mean time between breakdowns, delivery times...
• E-commerce: conversion rate, average basket, order abandonment rate...
• Services: customer satisfaction rate, problem resolution rate, response time to requests, etc.
• Human resources: turnover, absenteeism, employee training rates, etc.

9. The evolution of KPIs with new technologies

With digitization and the rise of Big Data, companies now have increasing quantities of data to exploit to assess their performance. This opens up new opportunities for fine-tuning business management:

• Implement more precise indicators on specific aspects of the business
• Predictive performance analysis thanks to artificial intelligence
• Benchmarking with other companies or sectors to identify best practices

10. KPIs in an international context

For companies operating internationally, it is necessary to adapt the definition and measurement to different local and cultural realities:

• Take into account legal, economic and socio-cultural differences between countries
• Compare intra- and inter-company performance at national and international levels
• Foster a collaborative approach to identifying and sharing best practices between subsidiaries.