Question 2
What is a key performance indicator?
Click the button next to the correct answer choice. After you have read the feedback, explore the other choices. Note: Your first selection will be used to tally your score.
A measure indicating an individual manager's ability to effectively lead his or her group
Not the best choice. Rather than focusing on individual managers' leadership abilities, key performance indicators (KPIs) are measures reflecting how an organization is doing in specific aspects of its performance. Organizations may have key performance indicators for all their areas of operation, or they may focus their KPIs on only one aspect of their operations. For example, a social service nonprofit might focus its KPIs on the amount of aid granted to different entities that it serves.
Many organizations use three types of KPIs: Process KPIs measure the efficiency or productivity of a business process (such as "Product-repair cycle time"). Input KPIs measure assets invested to generate business results (such as "Dollars spent on research and development"). Output KPIs measure the results of business activities (such as "Revenues").
A measure reflecting how an organization is doing in a specific aspect of its performance
Correct choice. A key performance indicator (KPI) is a representation of a critical success factor—the key determinant of success in achieving a strategic objective that a company or unit has defined. Organizations may have key performance indicators for all their areas of operation, or they may focus their KPIs on only one aspect of their operations. For example, a social service nonprofit might focus its KPIs on the amount of aid granted to different entities that it serves.
Many organizations use three types of KPIs: Process KPIs measure the efficiency or productivity of a business process (such as "Product-repair cycle time"). Input KPIs measure assets invested to generate business results (such as "Dollars spent on research and development"). Output KPIs measure the results of business activities (such as "Revenues").
A measure representing a company's overall standing in its industry compared to rivals
Not the best choice. Though a company may have a key performance indicator (KPI) to represent where it stands in terms of revenue or some other criterion compared to rivals, most organizations have a set of KPIs measuring various aspects of their performance. Organizations may have key performance indicators for all their areas of operation, or they may focus their KPIs on only one aspect of their operations. For example, a social service nonprofit might focus its KPIs on the amount of aid granted to different entities that it serves.
Many organizations use three types of KPIs: Process KPIs measure the efficiency or productivity of a business process (such as "Product-repair cycle time"). Input KPIs measure assets invested to generate business results (such as "Dollars spent on research and development"). Output KPIs measure the results of business activities (such as "Revenues").