A Key Performance Indicator (KPI) is a quantifiable metric that lets decision-makers define and measure progress toward a specified goal . The Inventory makes it easy to find appropriate measures by compiling over 250 indicators currently being used by organisations to capture aspects of SME performance. The KPIs are organised by three performance areas:
- Economic - covering financial, productivity, processes, customer and innovation indicators
- Labour Conditions – covering indicators related to the working environment
- Human Resource Management – covering indicators related to the terms of employment
The KPI Inventory is a living document. Help grow the practitioner knowledge-base by submitting indicators that you use to measure SME performance!
To ensure the KPIs drive performance improvement – not just progress reporting – each indicator has been screened to ensure they are ‘actionable’ and can feed into continuous improvement activities (see below box). That is, they:
- Can gauge the degree of performance change over time. ‘Yes-No’ (binary) indicators are excluded unless the indicator refers to the existence of a policy or document.
- Allow measurement of work in progress, not just achievements. Emphasis is placed on leading indicators that can be used to predict future performance, rather than just lagging indicators that describe past performance.
- Focus attention on what matters most to SME success. The inventory contains over 250 metrics, so projects need to carefully select which indicators to use to ensure scarce resources are directed to measure what is meaningful and strategic. Many indicators therefore come with guidance to improve their usability.
- Provide a clear and common language to communicate performance. While aspects of performance measurement vary by context, key jargon is explained, and standard definitions are provided.
- Are feasible to collect in a developing economy SME context, without over-burdening the enterprise in terms of time and cost investment.
From compliance to continuous improvement SMEs play a major role in global supply chains, often making up the bulk of second and third tier - and sometimes even first tier - suppliers. Supplier audits are widely used in corporate responsibility and commercial sourcing. They check compliance with a set of minimum standards to mitigate risk and reduce harm for the buyer, mostly in terms of avoiding reputational damage and regulatory violations. In recent years, however, audits have been complemented by a range of ‘beyond compliance’ mechanisms to also help suppliers improve and overcome any performance issues. This often requires building longer-term suppliers relationships, supporting capacity development, and exploring ‘shared value’ solutions: See, for example, the Danone Ecosystem Fund that improved both farming practices and the social conditions of strawberry pickers in Morocco.
- Voluntary sustainability standards
- International agreements
- Sustainable Business frameworks
- Development aid projects
- Development finance institutions and impact investors
- Business management literature