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Overcoming Challenges When Implementing KPIs
Posted on 17th August 2017 in The Forecast
Written by Freya Hughes
We know that running a business can feel like an uphill battle, so we’re here to help you get back to a level playing field. We’re on a mission to fill our blog with everything you could possible want or need to know about KPIs. In this instalment, we’re looking into the challenges of these metrics: more specifically the hows and whys of choosing, implementing and measuring the core metrics of your business.
A Key Performance Indicator is a quantifiable measure a company uses to determine how well it meets the set operational and strategic goals. Think of them as a breakdown of your overall business 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, as looking at the business as a whole can be overwhelming. Use KPIs to your advantage – you can allocate them to each department of your business and have your managers monitor them. They can be financial or non-financial, so every variable can be looked at.
Need a little more help? Check out our KPI Library to get you started, and have a look at our industry-specific examples of crucial KPIs to measure here.
KPI Challenge 1: Choosing Key Performance Indicators
It can be tricky knowing which factors you should measure. The key aspect, as we’ve learnt, is to choose metrics which directly affect your customers. It’s an important thing to consider when you’re selecting your KPIs, as customer satisfaction is such a crucial element to get right. If customers leave unhappy with your products/services, you can bet your last dollar on the fact they won’t return. And word spreads: you’ll have a big job doing damage control if you don’t ensure your business is catering for your customers.
So look at the KPIs that affect your customers, but also look at KPIs that you can implement per department, and/or per person. A great example of this is of a sales team; track the sales vs time spent of each sales person, then as a department. You can use these results to identify if this is a strong or weak part of your business. Once you understand how they’re performing, you can then make changes to boost your sales, which in turn will produce more revenue for your business.
KPI Challenge 2: Implementing Key Performance Indicators
You can use KPIs as a way to bridge the gap between you and your team. Sit down as equals and share your goals, insights and pain – your staff will understand that, in fact, you are actually human (not just their boss). Once you’re on the same page, you’ll notice you start working more harmoniously. There’s even evidence of staff that know what’s expected of them being more engaged and more willing to go above and beyond for their job.
KPI Challenge 3: Measuring Key Performance Indicators
Once you’ve chosen what to measure, it’s time for the longest part of the entire process: tracking and measuring your results. Now, there are a fair few businesses out there, of various sizes, which will implement Key Performance Indicators in their company but fail to ever evaluate the data they push out. This is surprising, as it’s such as waste of time and effort to not use the information.
The biggest benefit of measuring your KPI results is the ability to prevent financial disaster, rather than attempt to fix it down the line. Because these metrics are in real-time, you can log in to your forecasting software and get a great idea of how you’re performing at a glance. There are also alerts you can set up to let you know if you’re reaching a low level in your bank account. Prevention is always better than cure.
KPI Challenge 4: Consistency with Key Performance Indicators
You need to get each person on your team to be consistent. Every KPI must be measured in the same way by managers, otherwise your data will be prone to errors. Imagine a month spent measuring each transaction, only to find you need to question the authenticity of the data. Even worse, you may not realise and be working from incorrect data.