Key performance indicators and why they’re good for all businesses

Too many businesses chug along on a day-to-day basis without being very clear on where they are going, how they are going to get there or even if they are anywhere near the “there” at all. The first step in giving your business clarity is to define your strategy and your strategic goals – what do you want to achieve? Once you have this clearly laid out, you need to define how you will measure the business’ performance against those goals and that’s where Key Performance Indicators (KPIs) come in. 

The basics – What is a KPI? 

A KPI is a quantifiable measure of performance over time for a specific strategic objective. KPIs are important as they are a clearly defined, consistent way of measuring performance against the strategic goals that the business is trying to achieve. Over time, they become familiar and it is easy for leaders and staff to quickly identify whether the business is on track in achieving its goals or if they are not performing as they should.  

KPIs are often assumed to be financial but whilst almost certainly some of your KPIs will be financial, it isn’t necessary for all of them to be – there are plenty of customer / operational / people / sustainability, etc KPIs that you could measure if it is relevant to your overall strategy. 

Why are KPIs good for all businesses?

To measure your performance against your strategic goals. As set out above, this is the primary reason for using KPIs within your business. When you’re able to regularly measure performance in this way, it is easier to identify issues and swiftly make decisions to get you back on track and reaching your goals faster. 

To create an atmosphere of learning. Having performance measures that are universally understood across your business gives you the opportunity to talk to employees about specific performance and agree actions to achieve a better or different outcome going forward and allow everyone to understand how they contribute to the success of the business overall.

To engage with key stakeholders on how you’re doing. Stakeholders might include employees, customers or investors, all of whom will have reasons to care about the performance of the business. It will be useful for you to regularly report or publish performance against the KPIs that matter to these stakeholders so that they can have confidence in your management of and progression against your stated goals. 

Once you start using and reviewing your KPIs regularly, it is likely that it will lead to you asking more questions to understand the performance you’re seeing which will ultimately give you a deeper understanding of your business, your operations, your employees, your markets and the economic environment that you are working within. 

How do you use KPIs effectively? Read here…