The Core Of The Business Performance Evaluation System

945 Words Feb 21st, 2016 4 Pages
As the core of the business performance evaluation system, Key Performance Indicators (KPI) is a scientific and effective method to manage and evaluate its performance, based on extracting the key performance indicators within the organization. It is a process of the top-down decomposition on indicators from the organization to individual. The essence is to break down the business strategic goal into a series of operational targets. It is a basic work in business management.
The theory base was derived from the 20/80 principle in economics proposed by Italian economist named Pareto. According to the principle, as long as the 20% critical indicators are seized, the evaluation main body is grasped, and the value and profit of a business is created. However, organizations and businesses should pay special attention to aspects in the course of implementing, such as giving consideration to result and process, communicating and so on.
Reason of Applying Key Performance Indicator
Good KPI can improve the actual performance of the organization, but what is more important is the strategic management thought reflected in these indicators. KPI plays a key role in determining the strategic focus, finding the gap and optimizing the resource allocation within the organization in the process of realizing the strategic target. By developing, allotting and promoting these indicators in each level, the organization make each section and each employee have a clear and same understanding with…
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