Essential KPI’s for Your Business In 2020
KPI’s (Key Performance Indicators) are very important for any business. This is critical for evaluating your business's financial performance and it can also be used for monitoring customer satisfaction and other company objectives necessary for the growth and development of the business.
Too often we see business owners be unsuccessful in fully understanding how their business operates; and because they fail in logging in any existing departmental metrics of their company operations all throughout the year, these entrepreneurs often end up with an idling business pondering where the problems lay.
What are business KPI's?
Key Performance Indicators are a significant part of measuring or evaluating the successes and failures of any business. KPI is a measurable value that shows how successfully a company is achieving key objectives for the business. Various business organizations use KPI’s to assess their success at reaching targets that is why selecting the right KPI’s will depend on the industry the business belongs to and which part of the business the company is planning to track.
Also known as a dashboard or flash report, KPI’s enables business owners and department heads to get a summary of how the business or individual departments are performing at any given moment throughout the year. A KPI evaluates the objectives of the business against the concrete, tangible data over a specified period.
But not every key performance indicator measures the overall performance of the business. This depends usually on the size of the business. Bigger corporations with multiple departments often have multiple KPI’s assigned to each department. Different departments have different operations and scope of work so the KPI must be specifically patterned to this. But even with having multiple KPI’s, each report must be tied together into a single flash for the business as a whole.
Key performance indicators can vary over multiple businesses. For example, the KPI for a distribution company will differ from a manufacturing company, and so on and so forth. Even similar companies within the same industry can have different KPI’s since not all businesses have the same goals and metrics. These key indicators are existent and monitored in most businesses for different reasons. In a flash report, these are evaluated meticulously and put under a magnifying glass so they can inspect it with a fine-toothed comb. When accomplished weekly, a flash report will show business owners the important areas of the business in which the company is underperforming and provides time for correction.
Why KPI’s Are Important
KPI’s are essential to all business objectives because they enable these goals to be at the forefront of every decision making. It is important that business objectives are properly communicated across the company because when people understand and are responsible for their KPI’s, it will make sure that the business objectives are on top of their minds. Simply put, you cannot manage anything what you cannot measure.
A KPI is as versatile as it is strong. From evaluating your finances to measuring the productivity of your employees based on the status of a job in progress, KPI’s are put in place to help an organization be guided in achieving their goals. Depending on what objectives you plan to achieve, your KPI may shift or vary depending on your goals, current project and timelines.
For example, by knowing on a weekly basis just how much money is coming in and going out, it provides you just enough time to correct the course when something is wrong. Instead of fixing the problem twenty days after the end of the month, you can now make necessary modifications throughout the week based on KPI management tools.
For measuring employee productivity, you will see things such as the number of hours an employee worked on including overtime, revenue generated and the status of a current job that is up for completion. When evaluating the work hours of an employee against performance, this can provide you with a general idea of the number of overtime needed to complete a specific project and help you see if you paid overtime for a much lesser productive work. For bigger companies, using KPI for employee’s productivity can also be used to measure performance for every department.
Implementing KPI’s for Your Business
KPI’s serves as your guide to recognizing every moving part in your business, and may possibly just be the most essential part of management. This is why it is equally important to choose the right KPI’s to implement for your business. To do so, you need to know the process of selecting the right KPI for your company such as:
- Choose KPI’s that are exactly related to your business objectives.
- Focus on a several important metrics instead on loads of data points.
- Evaluate your company's stage of growth and include it in the data you need to consider.
- Distinguish and pinpoint both lagging and leading performance indicators.
- You must know that KPI’s are different vary for every industry and business model.
The KPI’s that you choose to implement for your business will be greatly influenced by your company’s existing business model and the industry that your business belongs to. For instance, a B2B software service company may opt to focus on customer acquisition and mix, while a retail company with a brick and mortar operation may focus on sales per square foot or average customer payout.
It is highly recommended to use KPI's template, to help you track your business performance and progress.
Click below to download your Free Business KPI’s Template:
As an endnote, always makes sure that your KPI’s will specifically measure your progress towards overarching company objectives. Less is more so you have to understand that choosing between 4 to 10 KPI’s to focus will be more beneficial for your organization. The significance of certain metrics will definitely vary as the priorities of your organization changes so you have to carefully consider the stage of growth of your company. And while you may reference industry KPI’s, always remember that you need to choose the KPI’s that are most relevant and applicable for your specific situation and organization. This will ensure that you are being guided towards something attainable which will result to the success of your goals.