A Key Performance Indicator helps a company or organization in measuring their performance. The goal is to achieve key business objectives. With the help of key performance indicators, a business would be able to set up an objective and measure whether the company is on the right track to achieve their goals or not. Different businesses use different KPIs to evaluate their success. However, there are some high-level and some low-level KPIs, both are equally important. High-level KPIs focus on the overall performance of the organization. Low-level KPIs focus on processes/areas like marketing, call center, sales and more.
How To Set Up Key Performance Indicators
Setting up KPIs for your business can be tricky. It is important to keep in mind that there are financial and non-financial KPIs that almost all businesses have. In order to develop strong KPIs, first, you have to make sure to understand what your company’s objective is and how you plan to achieve it. This process involves feedback from all board members and department heads. Once you have a better understanding of the company’s objective, your next step is to find out which process/areas need to be measured with key performance indicators. Keep a few questions in mind when deciding on the KPIs:
- What is your company’s desired outcome?
- How to measure company’s progress?
- Who is accountable for the outcome?
- How to influence a positive outcome?
Different processes or departments need different KPIs. For example, let us say the goal is to increase sales revenue this year; it will be known as the Sales Revenue key performance indicator. The question is how are you going to define this KPI?
- Increase sales revenue by 25%
- Hire an accountant for bookkeeping
- Motivate customers to buy new products
- Sales officer is responsible to review KPI, which will be reviewed on a monthly basis
- Achieving the target will be beneficial for the business
The most important factor in any business is bookkeeping. Keeping a track of the business accounts could be challenging, however, if you already have a good track of your funds, it will be easier for you to come up with KPIs.
Do Key Performance Indicators Define Success?
Whether it is a small business or a huge organization, both need KPIs to set up their objectives. In order to follow their objectives, they need a strong strategy that will help them in achieving their goals.
Many business owners believe that KPI practice is old-fashioned; however, they do not realize that it is only effective when it is an inspired action. Some businesses just adopt KPIs without even practicing them and then wonder why it did not reflect any positive outcome for their business.
Key Performance Indicators are a form of communication. For example, when you are planning for a new project, you discuss the pros and cons with the team. Next, you come up with the strategies that will help you obtain success; the communication that you and your team hold is similar to setting up key performance indicators. You have to communicate with your team and different departments in your organization to achieve the successful outcome; the more clear and relevant the information is, the more easily it is acted upon.
The fact is that KPIs are effective when you make them valuable, as it requires time and effort. Best-selling author Bernard Marr wrote in his article, “What the heck is a KPI?” This topic sparked an interesting conversation among the audience. However, conclusions remained the same – that KPIs value remains in favor of those that use them.
Keep in mind that every action in the business counts. Your business strategies should be strong and must be followed to produce a positive outcome for your business. Your key performance indicators could be a door to success if you understand their value and find a way to implement them.