Key Performance Indicators (KPIs) allow organizations to periodically assess overall performance or the performance of its divisions, departments, and employees by defining a set of values to measure against. They are typically defined in a way that's easy to understand.
The raw values that are collected are called indicators. They are summarized into the following sub-categories:
- Quantitative indicators that can be presented as a number.
- Practical indicators that interface with existing company processes.
- Directional indicators specifying whether an organization is getting better or not.
- Actionable indicators sufficiently in an organization's control to effect change.
- Financial indicators used in performance measurement.
Once these are set, KPIs are targeted objectives that will add the most value to the business. They are set against a benchmark to determine if they are meeting expectations or not.
Some key performance indicator examples used in manufacturing could include: defect rate, 10/10 customer satisfaction cycle time, rejection rate, utilization, availability ratio, mean time to repair, etc.