If your company hasn’t developed Key Performance Indicators (KPIs) previously, or has KPIs but you’re not finding them particularly effective, here’s some information you can use …
KPIs are a very powerful tool to drive the results you seek.
KPIs are the most valuable metrics tracked to gauge a company’s current and future health. If monitored regularly (as they should be) KPIs can help identify a problem that can be responded to before it creates a negative impact.
It’s critical for KPIs to be developed correctly in order to be effective.
1. What will you measure?
How do you gauge if your company had a good week or a bad week? Think about what critical numbers you would want to review in order to determine your company’s performance each week. The first step to creating effective KPIs is to figure out what to measure.
2. What does success look like?
Next, you want to spend time determining how you will define success for each KPI. Since KPIs should be measurable, you need to figure out what numbers indicate you achieved your goal or are in danger of missing it entirely.
Also important is to consider what number indicates there’s trouble and something needs addressing quickly. Outlining the metrics you wish to achieve makes it easier to clearly communicate expectations with the team.
3. How will data be reported?
It’s important that you set data standards to make sure you’re reporting the information in the same way. Most KPIs should be reviewed weekly. Be sure when you define each KPI, you also specify the reporting expectations, i.e. weekly, monthly or quarterly. Also designate who is responsible for gathering the data and when it should be posted for all to see.
4. Review KPIs
Each quarter, it’s important to review the KPIs you established to verify they are still relevant. There should be a good balance between leading and lagging indicators as well as KPIs that address the four key operational areas: employees, customers, processes and revenue. Did a different problem pop up last quarter that requires your attention and should be added as a strategic KPI?
Each member of your team should have one to two key performance indicators to help them focus on key priorities each day. This includes KPIs for the “head of the company.”
Every team should have an ongoing KPI or two that enables them to quantifiably answer the question, “Did we have a productive day or week?”
In an organisation, there are typically four to nine processes that drive the business, such as the processes for developing and launching a new product or for billing and collecting. KPIs should be used to track the health of these processes – especially the length of time between start to finish for each process.
The challenge for any organisation is to choose metrics that matter. Use metrics that measure what’s important to customers as well as provide sufficient insight to help both the leadership team (and all employees) see problems and opportunities in time to react.
Other blogs on KPIs you may find of interest:
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I hope you have enjoyed these insights. Have a great week and stay growth-focused!