I’m often asked by business owners, how they should decide which Key Performance Indicators (aka KPIs) to measure and which aren’t worth considering.
Asking this, as a business owner, is good! It’s all too-easy to blindly adopt a set of standard indicators, just to ‘tick that box’ off the to-do list. But in order to record and manage KPIs effectively it’s useful to go back to the basics.
Firstly, let’s remember what a KPI is for… Each should contribute and be informative on how well a company is achieving its business objectives. Therefore, any chosen KPIs should tie in with the business objectives.
Key Performance Indicators can be considered as either high or low-level, with the high level KPIs acting to show the overall pulse of a business. Measuring these ensures that short-term objectives are being met and that long-term objectives are on track to being achieved. Whereas, those low-level KPIs are likely to be more applicable to individual departments within the business. Delegation of these low-level KPIs to department managers, will free you, as business owner, to focus on the important high-level and overall business indicators.
In a sense your choice of KPIs reflect how you communicate your business strategy to others. If you have vague or inconsistent goals and objectives, and confusion over which department is responsible for what tasks, your KPIs will also be unclear and probably irrelevant. We should also decide how these KPIs can be influenced and who is responsible for this.
When you become clear about what outcomes you are looking for and why, the relevant KPIs will be easier to isolate. Therefore, KPIs should follow the well-known SMART acronym; they should be specific in measuring one clear performance area, they should be measurable against a company standard or scale, all KPIs should be attainable, relevant to the company or specific department, and time-limited with regular break and review stages. Finally, it is important that periodic reviews of the KPIs being used are completed to ensure they remain relevant as the business develops. Defining and redefining relevant business KPIs is critical in improving operational efficiency and success.
If you would like more information, or help with KPIs and operational efficiency in general, speak to our process mapping specialist.