Key Performance Indicators (KPIs)
KPIs are simply a way of measuring how your business is doing in the areas that are important to it. They can be financial, operational, sales or service related. Most companies have 5 to 10 KPIs with a mix of business and customer related ones.
It doesn’t matter how many you have – what matters is that they are all important to you and that you track and review them regularly. If you have staff, make sure you communicate your KPIs and progress to them as well.
Many businesses have company, department and employee KPIs. The important thing is that they are all aligned to your goals and objectives as a business. Avoid using any industry standard KPIs as they may not be relevant to your business. Make sure you review and change your KPIs as your business changes and grows.
Some example KPIs are:
If a company’s goal is to increase turnover, it will want to measure KPIs such as sales growth, profit margins and operating costs.
If a company goal is to improve the effectiveness of their online marketing their KPIs will measure the number of clicks on their ads, conversion rate and cost per conversion.
Before deciding on KPIs review your short and long-term objectives and the plans in place for achieving them.
When writing your KPIs, try to make them SMART:
Specific - It has to be clear what the KPI measures. There should be one widely-accepted definition of the KPI. This will make sure different users interpret it the same and come to the same conclusions.
Measurable - The KPI has to be measurable to define a standard - time, cost, quantity etc. This will make it possible to measure the actual value and to make it comparable to the targeted value.
Achievable - Nothing is more discouraging than striving for a goal that you will never obtain.
Relevant - The KPI must give further insight into the performance of the company in order to achieve its strategy. If a KPI is not measuring a part of the strategy, acting on it is irrelevant.
Timely - It is important to state the value of the KPI in time. Every KPI only has meaning if you know the time frame in which it has to be achieved.
KPI best practice
1. Define the strategic objective with cause and effect links – make sure everyone understands how it is linked to the ultimate objectives of the company
2. Align KPIs with a specific objective – if you have a KPI that is not linked to any objective then you do not need it.
3. Add an action plan – You have your goal and your progress towards this goal however nothing will happen unless you have a plan. Add an action plan to your KPI.
KPIs for benchmarking
Using KPIs for benchmarking is a methodical and logical way of measuring company performance against others in your industry. They can also be ideal for internal benchmarking against offices, peers or even individual projects.
KPIs - targets and scorecards
Adding a target to a KPI will give you a way of measuring success against that KPI. Visualising your KPI against a target will allow you to easily spot trends and take action based on performance.