The 2 Faces of KPIs: People and Organizational Performance on providentcpas.com

The 2 Faces of KPIs: People and Organizational Performance

KPI can refer to key performance indicator or key person identification. Both of them are important for business growth and performance

The success of a business depends on a multitude of factors, from marketing to growth strategy to operational efficiency. But people really drive performance, and learning how to identify and measure weak links is a crucial step in the path to growth.

The term KPI is largely used in two different business contexts. Key performance indicator is a well-known term in the marketing world, as well as within operations management and analytical decision-making. And key person identification is also vital for many business strategies.

Though these definitions of KPI represent different concepts, they’re related. Knowing how to capitalize on both of them can make all the difference to performance.

Key performance indicator

Key performance indicators (KPIs) help a business track its progress toward specific goals and growth. A KPI is some kind of measure that tracks performance, allowing businesses to understand whether or not goals are being reached. KPIs help team members focus on a specific part of the business to measure success and help them create and evolve strategies and tactics based on data.

These kinds of KPIs require target setting and progress tracking, as well as indicator improvements and updates throughout the process. KPIs that improve business performance must show evidence of progress, must accurately measure the targets that have been set, and must be able to track important factors of operations including quality, timeliness, and efficiency.

KPIs can be related to varying aspects of the business including:

  • Financials
  • Customer metrics
  • People or employee metrics
  • Process and operations
  • Strategic measures
  • Project tracking

Key person identification

Now let’s look at the other definition of KPI: key person identification. This concept involves identifying who should be considered key personnel within the organization—those who perform essential functions for the business. Because the most important business operations and decisions are made by individuals, this knowledge is a crucial part of establishing a high-performing organization.

In the event of a disaster, for instance, you must know what tasks must be completed and by whom. This version of KPI asks: Who is performing vital functions?

Identifying these individuals first requires businesses to create a list of vital functions, and then recognize the personnel who perform them. It’s an important part of any company’s emergency preparedness plan. The contact information of these people should be saved with the plan, as well as a second list of individuals who could perform these functions if the key personnel aren’t available for some reason.

This is not limited to having redundant skills or retaining individuals to deal with emergencies, however. Placing the right key individuals in the proper roles—and, ideally, duplicating their skills in others—is vital to both consistent operation and scalable growth. Many businesses are limited by the centralized talents of certain employees or the fact that they put the wrong individuals in the wrong positions.

Key personnel have usually been with the organization for a long period, they have performed well in their role, they are trustworthy, they know where important business information resides, and they have a lot of knowledge about their given department and the business as a whole.

KPI helps businesses avoid the risks of key-person dependency (KPD), which include losing valuable knowledge and even revenue if a key person is lost. KPD risk occurs when a business could see losses in productivity, profits, or even reputation if a key person leaves.

These risks can be combated with back-up plans, having multiple key people learn and do the same tasks, and instituting a succession plan. Another strategy is purchasing key person insurance, which helps a business pay its bills and function while it finds a replacement after the loss of a vital employee.

The 2 faces of KPI are related

Business performance depends on both types of KPI. If measures can be identified and used for decision making, and if a plan for key personnel is put into place, your business can see big impacts on performance and steady growth. Tracking key performance indicators helps you to identify key personnel, so one informs the other.

The EOS (Entrepreneurial Operating System) is a solution that helps your business identify key people and key performance indicators.

You can create and share your vision so that everyone is aligned across teams, ensure that the vision is being executed, and help leaders become and stay effective. Quarterly rocks, annual goals, and three-year goals, as well as many other benchmarks, are assessed, in part, by defining key performance indicators.

The People Component of the EOS focuses on the individuals who drive performance. It provides an accountability chart that delineates the structure, roles, and responsibilities of employees to help keep you on track to growth. Also included is the People Analyzer, which helps you identify whether or not your people are right for the business, a specific role, and your vision. It evaluates an employee’s GWC: whether a person Gets it, Wants it, and has the Capacity to do the job.

Provident CPA & Business Advisors helps entrepreneurs utilize the EOS to get the most out of their business, helping them evaluate their people and performance components to ensure they have the tools for success. Contact us today to learn more.

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