Improve Your Business With Key Performance Indicators

By Author: Mark Gwilliam
Total Articles: 10
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Key performance indicators, also known as KPI's, are financial and non-financial measurements that help a business understand how much progress it has made in achieving its goals. Before KPI's are established, however, a business must clearly establish its mission, goals, and stakeholders.

Key performance indicators will vary from organisation to organisation and will depend on what the overall goals of the organisation are. For example, a call centre whose goal is to provide the best possible customer service to its clients may use the number of inbound calls that are answered in less than 30 seconds as a KPI to measure progress towards that particular goal. A college whose goal is to produce highly-qualified graduates may use the number of students who find a corporate job within 1 month after graduation as a KPI. A business whose goal is to achieve a high level of customer satisfaction with their product may use the percentage of sales that are generated by return customers as a KPI.

For key performance indicators to be effective indicators of an organisation's progress, they must be specific, quantifiable, ...
... and achievable. KPI's such as To be the most well-liked company are useless because there is no concrete way to measure that. Likewise, a KPI such as gaining new customers is too vague because there is no way to differentiate between old and new customers. It really is a classic case of what you can't measure, you can't manage.

Because key performance indicators are measurements that are used over a longer term, the way in which they are measured should not be changed too often, if at all. They have to be measured in the same way over their life span. In addition, very precise targets for the KPI's must be set that can be easily understood by all parties involved in its achievement.

If the appropriate KPI's are established in the correct manner, they can help a business track its overall health and growth meticulously. They can help to identify problems and inefficiencies quickly and will allow you to zoom in on the underlying causes with a greater clarity. For small businesses, KPI's would be ideal in tracking net profit, sales revenue, production efficiencies, and market positions. Even if you think you have a pretty good overview of your small business, the use of KPI's could further enhance the understanding you have of it.

If you're interested in the subject of analysing a business's overall health, have a look at my article called The Top 5 Warning Sings that Your Business is Declining.