October 6, 2021
Key Performance Indicators
Well-designed KPIs and dashboards drive financial success, strategic planning, employee retention and efficiency
What gets measured gets managed. It’s a common saying, and for good reason. Data is crucial in today’s business world—the key to everything from growing sales and profits to implementing a business strategy, retaining employees and increasing operational efficiency.
But many businesses fail to use suitable key performance indicators (KPIs) and monitor them properly with dashboards. This can leave companies at risk—in the dark about critical problems and unable to respond to challenges or set goals.
- What is the purpose of KPIs?
KPIs serve three major purposes:
- Gauging and improving performance—KPIs let the business owner, efficiency supervisors
and other employees understand the company’s performance and productivity. You can compare data to industry benchmarks, analyze it to identify gaps and opportunities to improve, and monitor trends and progress toward objectives, such as those in your strategic plan or action plan.
- Ensuring stable operations—A second major purpose is to ensure systems, processes and
teams are operating at a stable rate.
- Incentivizing your team—KPIs also let you incentivize and reward your team in a fair,
non-emotional way that eliminates favoritism and moves the business toward its objectives.
2. Set appropriate KPIs
Now you’re ready to choose KPIs for various areas of the business and the company as a whole.
Three elements that make up good KPIs
KPIs should be:
- Targeted Set different KPIs at various levels of the business that drive employees toward
your broader objectives. If you want to increase the company’s overall sales, the sales team needs KPIs that support that bigger number. KPIs should also be related to activities that employees can influence. Be aware of how KPIs may incentivize activities that affect other functions. For example, if you incentivize your sales team to sell more, make sure your production department can handle increased orders.
- Practical Collecting the data should be easy and quick. Ideally, it should be automated. You don’t want to have to crawl under a machine every hour and collect 17 different numbers, then multiply them in a complex formula.
- Sufficient You need enough indicators at each level of the business, but not too many. A common mistake when businesses start doing KPIs is they try to do too many.
3. Display KPIs to your team
With the right KPIs in hand, it’s important for your team to see them and regularly talk about them. Dashboards are key for this. You can create personalized dashboards that each employee can see on their company portal showing relevant KPIs. You can also put dashboards on monitors or digital displays around the business that show metrics applicable to different departments and the overall company.
Dashboards should be:
- Updated often so they stay relevant.
- Clear and simple so your team can see the KPIs at a glance and easily understand the data and trends.
- Reviewed regularly to ensure they incentivize the activities you want.
Used as a focal point to inspire and guide conversations at meetings and team huddles. You can also include the data in regular KPI reports.