Being the CEO of a fast growing company can be fun, rewarding and challenging all at the same time. As businesses grow, CEOs often have to give up some level of control to the management team for the company to be successful. One way to give up control while monitoring that the company is headed in the right direction is through the use of Key Performance Indicators (KPIs). Key Performance Indicators are quantifiable measurements of how the company is doing compared to its goals. They help measure success against these goals and are early warning indicators of underperforming areas so that corrective actions may be put into place.
For KPIs to be effective, they should possess certain attributes. They should be:
– Specific – A KPI should state explicitly what it is that needs to be achieved.
– Measurable – A KPI should have a target against which to measure performance.
– Achievable – While challenging, A KPI should be within reach with effort.
– Realistic – A KPI should pertain to a factor that is within an organization’s control.
– Timely – A KPI should provide a timeframe for completion, with performance milestones along the way.
Some organizations measure just a few KPIs while others may have an extensive list, depending on the nature and maturity of the business. KPIs can be set for the overall organization as well as for specific functions within the organization. For example, a sales department’s KPIs may include the number of new sales, age of an average account, and sales turnover. A call center department’s KPIs may focus on average customer talk time, the number of calls per representative, and time to answer calls. And a Human Resources department’s KPIs may focus on employee turnover, and employee benefit expenses as a % of salaries.
So that everyone at every level of the business is focused on achieving the same goals, KPIs should include the involvement of the management team and directly relate to the overall objectives of the enterprise. Because a business’ goals are typically long-term, it is important to select KPIs that will remain drivers of success over time. Equally important is defining how the KPI will be measured – for example, sales could be measured in dollars or by units sold.
With consistent monitoring, KPIs offer an opportunity for businesses to target specific areas for improvement and take corrective action when needed. Backed by regular reporting, KPIs can be used as a barometer to show how the business is doing toward achieving set targets, making them a valuable performance management tool. Communicating performance figures regularly will help focus and motivate the team to exceed their KPIs.
If your business needs assistance implementing a strong process for measuring success using Key Performance Indicators, BottomLine Growth Strategies, Inc. can help.