Companies produce a lot of data, from the number of sales to cost of goods sold to the percentage of email sign-ups to the number of customer complaints! All of it is good to know and can be improved upon, but what metrics really matter? Which ones have the potential to make or break your company? By identifying your key performance indicators, you can begin to make informed adjustments to your processes and become more closely aligned with your overall business strategy, helping your bottom line and increasing profit.
What are Key Performance Indicators?
Key Performance Indicators, or KPIs, are a great way to work towards your strategic goals. But what are they? KPIs are metrics that you choose to give special attention to because they directly correlate to your success. It is not simply about the percentage of profit, but instead KPIs look at the steps before this – what metrics directly affect your profit? It could be a statistic you want to increase, such as the number of leads you receive through your website’s sign-up form or it could be a statistic you want to decrease, like the number of customer complaints you receive. By keeping an eye on specific metrics, rather than trying to manage every random unit of data your company produces, you can create an actionable scorecard of KPIs for your company.
Identifying the correct drivers and KPIs for your company
If you are looking to grow your company, perhaps from €1 million in turnover to €5 million, KPIs are a great way to get there. However, there is no point in copying the KPIs of just any other company. Instead, you need to identify what metrics are specifically important to your company. Ask yourself, what is it that is driving the numbers? Perhaps your customer satisfaction number is what gets you referrals. To increase this number, you may need to invest in customer satisfaction training for your employees. The upshot is that this investment could directly increase referrals which translates into sales and so your company grows! The key to identifying your KPIs is getting behind the profits and finding out what metrics influence that number.
Design your KPI scorecard
Once you have identified your KPIs, you need a way to record them. This should be a system to correctly monitor and record KPIs on a daily, weekly and monthly basis. At Beyond, we find that visual reporting (data dashboards) is very helpful. When it comes to measuring data, simplicity is key. Some companies make the mistake of having very busy dashboards full of numbers that end up being just reams and reams of meaningless statistics. The point of having KPIs is to highlight what is important. Therefore, it makes sense to keep your dashboard clean. We would advise having one or two KPIs to start off with. This really is a case of less is more. Remember, your KPIs don’t have to stay the same forever. For one quarter, you could focus on one KPI and then, once you’re satisfied that it is ticking along healthily, change to another KPI.
Now it’s time to influence the numbers
This can’t be just about measuring your KPIs. You need to figure out how you can influence those numbers, so your company can grow. Your management team should be focused on making improvements to these KPIs and include a KPI review in your daily, weekly and monthly meetings. Based on your findings, a discussion can then be had about the adjustments that should be made to push the numbers in the right direction. Many companies don’t effectively manage their KPIs because it is not as easy as it sounds. After all, there is no point in measuring metrics and making comparisons between them if your company is not flexible enough to adjust to the insights the data provides. KPIs only work if you are agile and willing to upskill your employees when necessary. Many companies, even those with the best intentions, are simply not able to make that kind of commitment.
Investors will love your KPIs
If you’re a growing company, then chances are you are going to need to engage with investors and banks. A good pitch will have some inspiring finesse involved, but nothing talks to investors better than cold, hard analytics. They will want to be able to clearly measure how healthy your company is and see proof of growth over time. Your KPI dashboard is a good way to ease their concerns by demonstrating exactly what actions you are taking all the time to improve your business and prove that you are serious about scaling. If you are engaged with your KPIs, you will become intimately aware of the important numbers that drive your company’s growth, and you’ll be ready for any question an investor throws at you.