What is the importance of KPI (Key Performance Indicator's) in today's working environment?

establish and monitor progress toward a variety of goals

Goal Measurement

Most businesses set strategic goals they desire to achieve. One way to measure an organization’s progress toward achieving these goals is to use key performance indicators. For example, a company has a goal to reduce defects on its production line from5 percent to1 percent. In order to know whether it’s achieving its goal, the company establishes a KPI called defect rate. The defect rate KPI measures the number of defects produced before and after implementing any process improvements. Without implementing the KPI, the company would not have precise data to know if it has achieved its goal.

Vital Information

KPIs provide small business owners with an immediate snapshot of the overall performance of their business. In today’s competitive business environment, it becomes highly important for the owner to have real-time data concerning the health of his business. The small business owner should measure and track the key performance indicators crucial to the success of his organization. These important KPIs provide vital decision-making information.

Education

The act of measuring KPI promotes an atmosphere of learning in an organization. According to Root Cause, the data generated from measuring key performance indicators fosters critical conversations. These critical conversations between an organization’s personnel typically include what the KPI measures, if the KPI is an effective measurement and achievement of the specific goal tied to the KPI. These discussions educate all personnel involved.

Continuity

Because KPIs promote long-term strategic goals it, becomes important to keep the measurements consistent over time. Although a company can change its goals, the measurement of the KPI should remain consistent. For this reason, KPIs become strategic to the company’s plan and vision.

Considerations

KPIs have a certain level of importance in an organization, but only if the KPI leads to actionable steps to achieve a goal. For example, a company that establishes a KPI to increase customer retention does not have a chance of reaching this goal. The goal does not have a measurable component that results in actionable steps. If the company revises the KPI to increase customer retention by10 percent, it now has a measurable, quantifiable goal. The company must convert the measured, quantified data into actionable items to meet its goal.

Thank you all for the Answers :-)

KPI: A Key Performance Indicator is a quantifiable measure a company uses to determine how well it meets the set operational and strategic goals. This means different businesses have different KPI's depending on their respective performance criteria or priorities. At the same time, the indicators are usually follow industry-wide standards.

KPI’s are an actionable scorecard that keeps your strategy on track. They enable you to manage, control and achieve desired business results.

An Ideal KPI should contain following characteristics so as to Quantify, measure & Control:-

• Quantitative: They can be presented in form of numbers.
• Practical: They integrate well with present company processes.
• Directional: They help to determine if a company is getting better.
• Actionable: They can be put into practice to effect desired change

Key performance indicators are important to a business because they help it focus on common goals and ensure those goals stay aligned within the organization.

This focus will help a business to stay on task and work on meaningful projects that will assist in reaching objectives faster.

Key performance indicators (KPIs) are a vital means by which firms can judge how well they are performing. They allow businesses to identify some of their most important metrics, and provide a standardised way of determining whether or not they are meeting their goals, targets and objectives.

KPIs can be used to measure virtually anything. In many business types, success will not be judged by numbers. Instead, you might use graphics, words, or almost anything else to communicate your performance.

To learn and improve

To report externally and demonstrate compliance

To control and monitor people

Setting standards is the order of the day.  In all organizations it would be appropriate to set the standards as the key factor to achieve, whether it is marketing, or in Hr, or the quality of production, or the environmental factors....everything under prescribed standard level and upgrading from time to time so that passage of time makes everything perfect and achieve to the greatest level of expectations.  KPI for HR also like this--set the standards on the basis of various important parameters- measure them--evaluate them--correct the deviations.

Agree with the answer provided by Mr. Saiful Islam Hiron.

Well answered.

Well beside many other aspects of its importance as mentioned in different answers above, the KPIs help you establish SMART (specific, measurable, achievable, realistic/relevant & time bound) goals not only for your employees but also for your organizational development. KPIs act as a monitoring tool for your performance, that present a clear indication of expected/stated vs achieved performance. 

To measure, manage, and monitor performance of the employees. Key Performance Indicators are a highly valuable tool in ensuring that your firm focuses on those areas that are most in need of improvement.

1. To determine the goals and objectives.

2. To set the actual performance of the employees.

3. To measure the actual performance of employees.

4. To reduce the work stress.

5. To accountable to the job responsibilities.

Organisations use this metric to measure, manage and monitor performances. it informs employees and employers what they need to do in order to enhance their organisation.