A beginner’s guide to key performance indicators
Key performance indicators show you the inner workings of your business and give you a snapshot of where your business stands. You’ve got a business plan, and KPIs are what you use to measure the success factors that drive your plan. For many, they’re the metrics that determine success, so are a crucial part of running their business.
A key performance indicator is a quantifiable measure a company uses to determine how well it meets set operational and strategic goals. Choose which aspects to measure, and keep tabs on the direction your business is taking. Breaking down your targets into KPIs makes them far more manageable. They can be financial or non-financial, so every variable can be looked at.
Drill down into each part of your business
Departmental KPIs will allow you to keep control of every aspect of your business. You’ll be able to manage your team based on factual data, so you (or your managers) can start to guide employees effectively, identifying where they might need more training.
Now you need to manage the activity and effectiveness that drive those results. For example, you’ve got your non-financial data and need to calculate how effective this data is to push your business forward.
Speaking to Skunkworks Surf Co, we discovered how crucial to their operations measuring KPIs is. Office Manager and Bookkeeper, Samantha Quinn, told us:
“Keeping on top of your KPIs is a solid way of ensuring you’re on the right path. When you’ve identified the relevant ones, make sure that they are measured within Futrli as it makes it all a lot easier.”
Owner Ricky has a surf school too, so running two businesses simultaneously would be impossible without KPIs. Manufacturing companies must track KPIs like their reject/scrap materials, staff training time, their backorders percentage and labour costs. Any additional KPIs would be specific to that company.
Get your whole team working towards the same overall goals
Keeping your team onside and working as a unit is fundamental. The educational impact of monitoring KPIs is great – your staff will learn a lot about your business, and thoroughly understand why their work is so important to your company.
The data being generated by KPI management often leads to constructive conversations within the team, who will start asking how they can meet targets quicker, or even beat them.
Use the information to manage employee progress and provide feedback and the workforce will improve their productivity.
Celebrate your uniqueness
Every business is different, therefore every business will have different goals – even if they are your most direct competitor.
The real-time data that KPI measurements provide allows you to make adjustments to your operation throughout the year. This is a huge benefit, as you’ll be able to identify issues as they happen – sometimes even before they happen.
When it comes to your P&L at the end of the quarter or year, you’ll feel more connected to the figures. Measuring KPIs will prepare you for the eventuality of dealing with your P&L, saving you time, pressure and stress and the end of the given fiscal period.
If you need some inspiration, have a look at our KPI Library which is fully-stocked with different industry-specific examples and how to calculate them. We’ve also elaborated on these with our compact lists of KPIs for different industries.