Developing Key Performance Measures For Your Business
If you’re the MD or CEO of your company, or you are the head of a department, and you would be given only six bits of information on its performance each week, what would they be?
With competitive and economic pressures increasing all the time it is vital to have the right systems in place to measure business performance. Reporting of performance against a short list of Key Performance Indicators (KPIs) will mean that much better informed decisions can be made.
KPI selection and adoption should be a careful process, with periodic tweaks based on market and operational realities. In order to develop appropriate KPIs for your business, you could consult with staff, key suppliers and customers in order to identify the most important indicators of business success.
It’s worth addressing the following to develop relevant and measurable KPIs:
- What are the critical success factors of your business (see the first paragraph above)?
- Why are performance measures being introduced?
- How will performance measures be used?
It’s important to emphasise to your team that these performance measures will be used in order to keep the business focused on achieving its goals such as winning profitable customers, improving quality of service, generating more cash, and improving margins.
Importantly, your KPIs should be easy to measure and allow for action to be taken immediately. Once you have created your draft list of KPIs, you should consider the following questions:
- Have you covered all critical success factors?
- Is each performance measure providing useful information that can be used to analyse and improve key processes in the business?
- What happens when a KPI target or goal is not achieved?
- Do you need to see the KPIs daily, weekly, monthly?
- Should the KPIs for each department/function roll into one short list for the MD or CEO?
- Should the KPI list be limited to six or fewer items? Avoid ‘information overload’
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