KPIs and use of bonus KPIs

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Many companies and organizations are increasingly using key performance indicators (KPIs) to track various aspects of organizational performance. One particular application involves bonus KPIs, which are the key performance indicators that determine whether or not an individual employee is eligible for a bonus.

However, what exactly are these so-called key performance indicators in the first place? Just because of the term itself, these KPIs are selected measures that serve to indicate performance levels. To be more precise, key performance indicators are financial and nonfinancial metrics used to define and measure progress toward organizational goals. By their very nature, these key performance indicators can vary widely across various organizations and disciplines, but there are also several that are applicable to a wide range of organizations.

Key performance indicators are part of a well-defined measurable objective, which consists of a direction, an indicator, a benchmark, a target and a time frame. As such, they are vital parts of any strategic management approach, as a concrete idea of ​​which indicators to monitor is necessary.

Managers don’t pull these KPIs out of thin air. For these indicators to be of any use, they must be based on a predefined business process. That is, the organization must be clear about how it operates both internally and externally. Not only that, but the organization must also have goals and objectives in place, or at least have an idea of ​​what these goals are. And finally, the organization must be aware of and capable of taking the measurements that a key performance indicator would require. These three criteria govern the selection and efficient implementation of key performance indicators in general, for any organization.

To give a concrete example, consider selecting a KPI on which a help desk agent’s bonus will be based. First, the business process or set of interrelated tasks that the agent performs must be determined. This could include responding to customer inquiries through various means, conducting research, and creating documentation. Once this has been clarified, the goals and objectives of the organization must be set, for example efficiency and reduced handling or processing times. Lastly, the organization must establish the different measurement processes that a KPI would require, such as timers or recorders.

In light of these considerations, good KPIs for a tech agent bonus might be answering hit rate, average handle time, or customer satisfaction rate. In this example you can see the flexibility of the KPI approach. These indicators can be used to measure the performance of individual employees just as effectively as they are used to measure the performance of the organization as a whole.

Bonus KPIs like these form just one sample application of the key performance indicator paradigm. Different organizations with different strategic goals and business processes may employ different types of KPIs. Proper selection and tracking of these KPIs will definitely help managers to continually align organizational processes with organizational goals.

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