Key Performance Indicators: Setting And Measuring KPIs

• Key Performance Indicators (KPIs) are the main metrics that a business uses to track its progress.
• Use KPIs that match your company's strengths, weaknesses, and market conditions.
• Managers need to understand how to collect and analyze KPI data.
• This article is for small business owners who are interested in using KPIs in their organization.

Imagine that your business trip is a journey. Along the way, you have goals you want to reach and milestones you want to reach. These details define your efforts, ensuring that you remember why you started and where you hope to end. Key performance indicators, also known as KPIs, are how companies track their progress over the years. Defining and measuring KPIs allows business owners to see how their organization is performing—where the company is failing, where it is succeeding, and what needs to change.

What are the key performance indicators?

Every business should have a brand goal and management decisions should be directed towards improving performance in this area. These goals are key performance indicators and point your business in the right direction. KPIs complement your company's goals and help you mark stops while traveling.

An example of a KPI is the goal to increase your profits for our biodegradable tissue paper line by 20% in the fourth quarter. For this reason, business activity in the coming months should be related to everything necessary to meet these KPIs. At the end of the quarter, you will evaluate whether you have achieved the KPI. Your success or failure should determine the next KPI you set.

Why are KPIs important?

Every business needs money to survive, but revenue is generally not a key performance indicator. KPI is another data point that shows if a company is growing financially and if it is on the right track. Choosing the right KPIs and tracking them right can add value to a business in many ways.

Determine the direction of the company.

Even a small business has many features, not all of which are compatible with each other or even with the company's financial performance. But when an organization focuses on the right KPIs, everyone on the team can quickly understand how the business works and how their work contributes to the company's performance. When you define key performance indicators, business goals become clear to everyone.

Assessment of occupational health.

A carefully crafted set of KPIs helps executives understand where the organization is and what needs to be improved. Take, for example, an application development company. Two common KPIs for this company are user growth and daily active users. By tracking these two related but distinct metrics, leaders can better understand what is working and what is not. Based on this assessment, leaders can make informed decisions about how to improve the business.

Get information about employees.

Teams can set their own KPIs in addition to company-wide goals. In this way, KPIs help managers hold employees accountable to their departments and the entire organization. Setting individual KPIs also gives team members a goal for their efforts and tells them where to focus their efforts. Monitoring their progress will show you who is doing well and what KPIs need to be changed. KPIs can also boost morale if they reward those who achieve agreed-upon goals.

How do you define KPIs?

Every department in a business, be it marketing or finance, can have different KPIs. Once you've determined what your KPIs should be, set relative metrics to help you focus on what's most important to you and your brand. For example, the KPI for your marketing efforts could be "Number of conferences attended in X months" and the KPI for your financial efforts could be "Percentage growth in revenue over X years."

KPIs also vary by industry. PR agencies can measure media mentions, while consulting agencies can measure client profits. However, no two companies, even in the same industry, should have the same KPIs. It is very important that you define your values ​​as a business so that you have a unique vision of measurement and measure the right aspects of the company.

To determine the right KPIs for your organization, ask basic questions about your brand: What can it add to your industry? What do you offer your customers that your competitors don't? What are your financial goals and how can you achieve them?

You can start by setting some SMART goals (specific, measurable, achievable, realistic, and time bound). Then select the best KPIs to see if you meet them. [Read the related article: How to set achievable business goals .]

“In order to set KPIs, you need to know how the strategy creates value and what that value is,” said Kyle J. Proust, CEO of Spark Insight Partners. “Once you have identified… the unique or key activities that you will be doing, you can start setting your own KPIs by making those activities measurable and then measuring them.”

Make sure your business model and employees reflect your KPIs. Everyone involved with your brand should have the same overall goal, so hire only those who share your vision and then measure those goals as well. Creating a clear company vision statement can help with this process.

Almost all companies use some form of email marketing. Here are the email marketing KPIs you should keep in mind to track the success of your campaigns.

How do you measure KPIs?

To get the most out of KPIs, companies need to align them with their goals.

Kent Lewis, president and founder of digital marketing company Anvil Media, says one of his clients only rates his business on one metric: customer satisfaction. “He found that regularly checking on customers can solve small problems before they grow into big ones,” says Lewis. “His satisfied customers drive his business through increased retention, account growth and referral of new customers.”

Customer satisfaction is, in fact, a critical success factor. If you want to meet your KPIs, you must satisfy your customers. To measure customer satisfaction with their business, Lewis analyzed Anvil's Net Promoter Score, which measures the likelihood that a customer will recommend a company to others.

“Anvil sends out a short survey to its customers twice a year to gauge the quality of their service,” he says. “This process helps us identify strengths and weaknesses and improve the customer journey.”

Another simple yet effective way to measure your success is to regularly review your KPIs, especially financial statistics.

“The determinants of these KPIs can be growth in your revenue, profits, and shareholder value,” says Ketan Kapoor, co-founder of Mettl, an online job scoring tool. "If these numbers show an upward trend, consider that your employees are doing well."

If not, you'll want to make changes. When something does not work in your company, you will not have your own KPIs and the knowledge of how to correct them. KPIs can also promote self-assessment of performance by helping team members objectively assess their progress.

Effective KPIs are essential to running a successful business

Successful companies have leaders who understand where the organization is and where it needs to go. KPIs help companies quickly set and measure goals so that everyone stays on track. How a company defines its KPIs and how they measure them is often a good indicator of its outlook. The results can inspire you to do things like upgrade your company's technology stack or implement results-based payments. Keep in mind that this should be an ongoing process. Reassess your KPIs regularly so you can make adjustments as needed and stay on track.

Sami Caramella contributed to the writing and preparation of this article. Source interviews were conducted for earlier versions of this article.