Growing your business in today’s rapidly evolving marketplace can be challenging. How effectively you meet your company’s objectives can make the difference between success and failure. Key Performance Indicators (KPIs) offer a series of metrics you can use to gauge progress and performance, whether company-wide or within a specific department.
Let’s take a more detailed look at KPIs and how you can put them to work in your business.
What is a KPI?
How do you measure success in your business—increased conversions, reduced lead-generation costs, increased growth spending and investment? Whatever your objective, you’ll need a reliable way to measure your company’s progress and performance. Here’s where KPIs come in. They provide measurable values that allow you to better set and meet corporate objectives. High-level KPIs evaluate business-wide performance metrics, while more specific KPIs can focus on improving performance in a single department or team.
Before choosing what indicators are most meaningful for your business, you’ll need to take a moment to evaluate your objectives, both for the short and long term. Make an inventory of your company’s objectives. Only by understanding your company’s needs can you select the most meaningful metrics to gauge your progress. Remember too that KPIs are a form of communication, and that one size does not fit all. Industry standard KPIs may work well for you but if the fit isn’t perfect, then look at the elements of your business that make it unique.
What Goes into a Good KPI?
A useful KPI is both a performance indicator and a reflection of your company’s story. So you’ll want to keep your goals and indicators simple. For example, you may seek a 15% increase in overall sales, or a 10% increase in conversion rates within a single department or campaign. The important thing is to keep things simple, clear, and concise.
Set your objective:
A KPI should reflect the strategic goals and capabilities of your business.
Share with stakeholders:
An organization functions best when all members work together, so you should share your objectives with workers. This can help promote a cooperative, goal-focused environment where each team member feels committed to the process.
Review & update KPIs when necessary:
The business landscape is constantly changing. To stay competitive and on target, you may need to update and tweak your KPIs. Don’t be afraid to make adjustments. Remember that responsiveness is a key to success.
Address actionable concerns:
A KPI is designed to help measure performance and to highlight areas in need of improvement. By keeping your KPI focused on practical concerns and achievable goals, you can make meaningful changes to your workflow and processes to improve performance.
How Robust is Your KPI?
The most effective KPIs have several characteristics in common:
- They are specific
- They measure progress
- They focus on attainable goals
- They use benchmarks relevant to your business success
- They possess a designated time frame.
Checking that your KPI possesses these 5 essentials is one way to increase your odds of success.
Why KPIs Matter
KPIs can help you learn a lot about the way your company functions. Are all teams coordinating as well as they could? Is every division of the company working toward a common goal? A solid KPI will show employees how their individual contributions affect the company’s overarching goals.
Another benefit of KPIs is that they provide an essential link between your company’s goals and its culture. They help give workers a sense of purpose and strengthen teams as they work to achieve benchmarks.
And finally, an effective KPI can assist in performance management of individual workers or teams. By knowing which dynamics work (and which don’t), you can make informed decisions to remove barriers to peak performance.
We hope you find this advice helpful. At Moskowitz LLP, we’ve built our reputation helping businesses like yours meet their objectives. This post is part of an ongoing series relating to business consulting and advisory services. Look for future posts as we breakdown and share the KPIs common to various industries. Do you have questions or need advice on setting up your own KPIs? Our tax attorneys, business advisors, seasoned tax specialists, CPAs and enrolled agents are ready and eager to help you take the next step to growing your business.