Hello, this is Hayashi from the Marketing Department.
The New Year holidays are over, I am writing this article at the beginning of the work year 2023, and I am sure that many of you have set your New Year’s resolutions and goals at the beginning of the year.
Because of my profession, I tend to be physically inactive, so I often set goals related to health management and exercise, and not just for the New Year. However, it is quite difficult to achieve them, and often all I do is end up setting goals without actually achieving them. Perhaps this is because my goals are vague: to overcome my lack of exercise…
Now, the «KGI» and «KPI» discussed in this article are both indicators used in the business. However, they are also useful in achieving the daily goals mentioned above.
This article explains the meaning of the terms, the importance of defining KGIs and KPIs in business operations, and the relationship between BPM tools and these indicators.
KGI is the Ultimate Goal
KGI (Key Goal Indicator) is a numerical measure of the final goal that a company or other organization wants to achieve in a business or project.
The key to setting KGIs is to express goals quantitatively. Vague goals, such as the one I set for exercise, cannot be considered KGIs. For example, in the case of a company, it is necessary to set concrete figures such as the percentage increase in sales or the number of orders.
This is to make it easier to share the company’s goals with all parties concerned and to measure the degree of achievement. By setting a KGI, the degree of progress toward the target is clarified, and it becomes easier to consider the direction of improvement and efforts to achieve it.
In the case of my exercise goals, health is hard to quantify, but it would be easier to understand if the KGI were, for example, to reduce weight by X kilograms or body fat by a certain percentage.
As a side note, when I used to go to the gym there was once a young man with a superbly toned body who came into the gym’s sauna. The other guests were all older men who were in less-than-perfect shape. All these men were asking the young man, who looked like an underwear model, in unison, «What percentage of body fat do you have?» It was amusing to see them all asking the same question. I guess body fat is an easy-to-understand indicator for physical fitness.
I digress, but I think that KGIs must be qualified and quantified in such a way that everyone can easily understand them.
KPIs are steps to reach KGIs
Key Performance Indicators (KPIs), on the other hand, refer to intermediate goals as steps toward reaching a final goal.
For example, if you set a KGI of losing 10 kg in one year, the KPI would set a target weight three months or six months from now to reach that goal. Of course, it is important that KPIs be as specific and quantified as KGIs. This is easy to understand if you think of a company’s sales targets.
Now, KGIs basically set one major goal, whereas KPIs are characterized by multiple cut-off points.
For example, if a company has set a KGI of increasing sales by X% in one year, sales targets for the next three months or six months would be the first KPI to emerge. In order to achieve the sales goal, various KPIs can be set, such as increasing the number of orders by X%, reducing production costs by X%, and improving the closing rate in sales by X%, and specific actions can be derived from these KPIs.
Diagram of the relationship between KGIs, KPIs, and actions
Thus, KPIs are intermediate indicators, as well as goals that are subdivided into smaller goals relative to KGIs.
Why do we need to set KGIs and KPIs?
There are many reasons for setting KGIs, but the most important one is to understand where you are headed and to make it easier to share that information.
Whether it is work or daily exercise, it is difficult to stay motivated without purpose. This is where KGIs and KPIs, which are clear, quantified goals, come into play.
These indicators are also important when judging whether business performance is favorable or unfavorable and whether a project is successful or not. To take an extreme example, if you are presented with monthly or annual sales figures while you have no idea whether these figures are good or bad, it would be impossible to run a company. If KGI and KPI are set, the criteria for such judgments will become clear.
This is like getting on the scale and seeing the number X kilos, but not knowing what it means to you. By knowing your best weight for your health and using it as an indicator, you will know whether the number on the scale is good or not, which will lead you to your next action.
In this way, KGI and KPI setting is indispensable for understanding the current situation, motivating employees, and determining results.
Points to Consider in Setting KGI/KPI
While it is important for a company to set KGIs and KPIs, if they are not done correctly they will not only be meaningless, they may even be counterproductive.
The three key points in setting KGIs and KPIs are:
- They must be clear
- They must be achievable
- Deadlines must be set
As I mentioned at the beginning of this article, exercising more is vague as a goal, isn’t it? In setting KGIs and KPIs, goals must be qualified and quantified, such as how many kilos to weigh, what percentage of body fat to reduce, and so on. This is an important element in objectively judging the results of operations.
However, no matter how quantifiable the goal may be, if you set an unreasonable goal such as losing 10 kg in two weeks, you are bound to fail, and if you try to achieve the goal by force, you will damage your body. The same is true for setting KGI and KPI in a company. It is important to consider the current status of resources and costs, and set goals that can be achieved by streamlining and improving operations.
It is also necessary to set clear deadlines for KGIs and KPIs, such as one year, six months, or three months from now. Only when such deadlines are set will it be possible to determine whether business performance is favorable or unfavorable at that point in time and whether or not the goal has been achieved.
Questetra BPM Suite is a BPM tool that provides powerful support for setting KGI/KPIs, determining the progress of goal achievement, and subsequent business improvement activities.
When operations are managed by Questetra BPM Suite, various data related to the operations are recorded. By accumulating such data, for example, the time taken to process a task or the number of tasks processed in a certain period of time can be easily referenced. These features of Questetra BPM Suite are very useful for understanding the current situation, setting goals, and measuring the degree of achievement.
Why don’t you take this opportunity to visualize your business processes and results with Questetra BPM Suite, which is a cloud-based service that can be used immediately after application, and a free trial is also available.