What are Key Performance Indicators?
Key Performance Indicators (KPIs) are quantifiable measures that can be used to determine how well company goals are being met.
KPIs will be different for each business depending on their goals, business size and the industry they are in; however, they are important for every business to implement.
What are the types of KPIs?
Some common types of KPIs are:
- Quantitative KPI – based on numbers
- Qualitative KPI – based on opinions
- Leading KPI – predicts future outcomes
- Lagging KPI – measures success or failure of past actions
- Input KPI – measures resources for a specific goal
- Process KPI – based on efficiency and performance
Why are setting KPIs important for your business?
- Accountability for the business and employees – As KPIs often measure performance, you will gain information about whether employees and the business are performing well or poorly. As a result, you can pinpoint where the issues are with proof from KPI data.
- Employee morale increases – KPIs give employees the opportunity to work towards a goal and receive feedback. In turn, they will be motivated to complete their job to the best of their ability with a sense of purpose.
- Track business progress – The main goal of a KPI is to measure how much progress has been made towards achieving business goals. KPIS give you the opportunity to track your progress for long term goals and strategy and keep you on track for success.
- Easier to make changes – KPIs allow your business to predict future outcomes and see whether you’re on track to complete a goal, and therefore adjust operations or processes before it is too late.
- Resolve problems and gain opportunities – Setting up KPIs gives insight into the problems your business may be facing now and, in the future, as well as opportunities that may arise. By knowing ahead of time, you can resolve problems more effectively before they become worse.
- Outline the steps needed to achieve goals – KPIs make achieving goals easier as they’re shorter targets to reach before your main goal.
- Increase productivity – KPIs can help you recognise poor performance so that you can act appropriately, give constructive feedback, and get the best out of your employees.
- Benchmark against competitors – KPIs give you the opportunity to look at how you’re tracking against similar businesses that may attract the same kinds of clients as you. This can help you to identify your strengths and weaknesses and pinpoint the unique value you can provide to your clients.
As an employer, how do I decide what KPIs to implement?
First and foremost, KPIs are designed to help businesses achieve their goals. So, when choosing KPIs, make sure they align well with your business goals and strategy. This ensures that you make progress towards your goals and achieve what you set out to do. Without a set strategy and goals, you shouldn’t begin to implement KPIs for your business.
At this stage, it is important to only choose a few KPIs. If you choose too many per goal, you will lose focus of your priority, which is to achieve your goals. Less is more!
You may also consider implementing Key Performance Indicators that show both past and future figures. It is vital that you know what has been done well and poorly in the past, as well as predict future outcomes to inform your goals.
Once you’ve decided what KPIs to implement, you may want to use the SMART criteria to make sure they will be effective. Each component should be considered to implement a KPI:
Specific: Your KPI should be well defined and specific to your business needs
Measurable: The KPI must be measurable so that you can gain results and data.
Attainable: It should be approachable and appropriate in the circumstances given.
Relevant: The measure should be suitable to your business goals and strategy.
Timeframe: Without a timeframe, there will be no indication of how long and when to achieve it.
Ultimately, Key Performance Indicators are one of the most important tools for a business, no matter the size or industry! All businesses need to measure their performance, growth and progress towards their goals and the best way to do so is through KPIs.
If you’re looking for strategic business advice or need support setting and reaching your business goals – contact us today!
