Wherever you are in your business life, whether just starting our or heading up a major enterprise, one of the most important tools in your armoury will be the ability to set KPIs. In this article we’ll take a look at what KPIs are, what they can help you achieve and how to go about implementing them in your business.
What are KPIs?
KPIs, or key performance indicators, are a set of measurable values used to determine how successful a person or organisation is at attaining specific set targets. High-level KPIs assess a business’s overall success, while lower level KPIs can be used to monitor an individual, team, or department’s success. KPIs aren’t just about managing others however, they are also a great tool for self-management and for working towards your goals, whether in business or elsewhere
How are KPIs effective?
An important quality of KPIs is their ability to keep people focused on a specific set of objectives. KPIs define the roles of individuals in an organisation. Furthermore, KPIs define the overall direction of the organisation. By defining each person’s role in the organisation, with set timelines, KPIs are a crucial way of keeping everyone focused.
Defining KPIs is vital therefore crucial. The best and most effective KPIs have a certain set of qualities that you can apply when defining your own KPIs. Good KPIs should be.
Specific: A KPI should be detailed, clear, and simple, outlining what you expect from a given activity. For example, saying you wish to increase sales by the end of the year isn’t specific enough. A better KPI would state you expect to increase sales by 20% by the end of the financial year.
Measurable: The KPI should use quantities to outline your expectations. The KPI mentioned above could include the previous year’s sales figures to indicate what a 20% increment looks like.
Achievable: The KPI should be ambitious enough to motivate action and within a good performance. Additionally, achievable KPIs help manage all stakeholders’ expectations.
Relevant: KPIs should align with the overall business objective. For example, you may plan to succeed through excellent customer support. Therefore, the customer service department’s KPIs should aim to improve customer support satisfaction. In addition, there should exist a symbiotic relationship between your high-level and low-level KPIs.
Time-bound: A KPI is effective and motivational when there’s an element of a deadline about it. Failing to attach a timeline to the KPI breeds complacency and makes monitoring progress difficult
Evaluate: KPIs should leave room for you to assess whether they are still relevant. As times change, your business evolves, so you need to constantly check that you are still in the right direction.
Readjust: After evaluation, you may have to redefine your KPIs. If you achieved the objective of the KPI before time, you’d need to create new ones. On the other hand, a KPI that’s proving unattainable with the time and resources left needs significant adjustment.
How do you design KPIs?
To design effective KPIs, you first need to determine your goals. You need to state what you expect out of your entrepreneurial undertaking. With your goals in mind, you then need to ask some critical key performance questions (KPQs). For example, one of your goals could be to sell as many products as possible, ask yourself, how many units do you want to sell? Who is your target customer? How do you approach the customer? Do you have the resources to supply the expected demand? What sales channels do you intend to use?
When you answer these questions, you’ll have the basis designing your KPIs. Following the guidelines of a quality KPI, you can now design good ones for your organisation.
Conclusion
The entrepreneurial world can be a highly dynamic one, where priorities shift by the day and where every day brings fresh challenges. In the midst of the chaos, KPIs can help define activities and the pathway to success and, more importantly, it can keep everyone focused on these things.
