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Why KPIs are Important?
Confucius once said; “Study the past if you would define the future.” He could have been referring to Key Performance Indicators (KPIs) and how we select and use them. KPIs can show you when you are performing effectively and also when you are not doing well. Evaluated correctly, with the appropriate action, indicators can provide a plan for success.
What Makes Business Performance Indicators - Key?
Evaluate carefully which metrics you define as Key. Different sets of metrics are important for different businesses. Targeting on the influential metrics can alert you to problems or confirm you are on the right track. Here are some considerations to use in choosing your KPI’s- Where are you in your business cycle?
- Include both short and long term goals
- What are your industry’s key benchmarks?
- What is your competition doing?
- Align indicators with strategic goals
- The size and location of the business
- Select indicators you have control over
- Use both quantitative and qualitative metrics
- Keep them simple and relevant
- Start with the end result in mind
Develop an Action Plan and Share, Share, Share
Dale Carnegie said “knowledge isn’t power until it is applied”. It may seem a little obvious, but a lot of companies incur the expense of designing metrics and buying expensive tools, and then do nothing with the results. There are many reasons why this information is not utilized. One of the most common is too many metrics have been set. Keep the number of KPIs to a manageable amount so everyone can focus on what is important for the improvement of the company. Your car is outfitted with dashboard displays that show KPIs about your journey and the function of the vehicle. But if you pass a sign saying “last fuel for 100 miles” and you’re paying attention to your speedometer instead of your fuel gauge, you’re not going to get the results that you expected.
The main purpose of a KPI is to assist the business in the improvement process. To fully implement this, make sure you develop a comprehensive action plan in conjunction with the KPIs and your strategic plan. Once the action plan is designed, incorporate your entire team into the strategy, so that everyone is focused and clear on the direction the company needs to move.
KPIs are Not Static
The one constant in business is that it is ever changing. KPIs that were highly relevant six months ago, may not have the same relevance today. Set up a timely review of these indicators and make any necessary changes as the company evolves.
Not Having KPIs is Not an Option
We’ve all heard the saying -- you can’t manage what you can’t measure? This is true for companies of every size and in every field. Without the right metrics you won’t know if the decisions and initiatives you’ve initiated are having the desired effect. According to a recent survey 77% of businesses are incorporating KPIs into their business model. That means more than likely your competition is using them, so today would be a good day for you to start too.
“You cannot change your destination overnight, but you can change your direction overnight.” ~ Jim Rohn
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Scott Stickel is the CEO of Profit Street. Mark Stickel is the CAO. Profit Street is an online software analytics company specifically designed for franchises. They are focused on automating business informational processing via predictive analytics and prescriptive solutions to help increase franchisee profit margins. They can be reached at scott.stickel@profitstreet.com or 1-888-930-5655.
