“Not everything that can be counted counts, and not everything that counts can be counted.”
– Albert Einstein
There’s more to measuring business success than the bottom line. Using key performance indicators, or KPIs, to analyze business operations lets you set specific targets across all levels of operations, and then track how well those targets are being met.
In its simplest terms, a KPI measures the performance of an organization, department or project against a defined target. For business operations, a KPI measures performance in a shorter time-frame level in quantifiable metrics. That data is then used to evaluate the operational performance of the department, project, or individuals to track processes and progress, to improve efficiency, and help businesses to understand and reflect on the outcomes.
Operational KPIs provide an accurate, data-driven tool for:
Gaining insights, future strategies and decision making.
Supporting proactive management.
Providing real-time visibility.
Fostering continuous improvement.
It’s smart to remember that while KPIs help measure the current success of targets, they do not automatically reveal new opportunities or the big picture. So, when using KPIs to evaluate a specific department or project, keep the overall goals of your company in mind. That is, remember the macro while focusing on the micro.
More than metrics
While metrics may be used to specific monitor business operations, such as the number of visitors to a website or cost-per-click, KPIs usually incorporate several different metrics to track a business objective.
“Overcoming the growth gap can be challenging for businesses,” states Marie Stacks, President of Boost Midwest “and using Key Performance Indicators can help your team see the progress they are making and, most importantly, be proud of watching the growth in action each month. Choosing the ones that work for your business are what matters most in the beginning. Being consistent matters long term.”
And, according to a 2018 MIT/Sloan Management Review report, “Based on a global survey of more than 3,200 senior executives and interviews with 18 executives and thought leaders, we find business leaders worldwide are struggling to strike a workable balance between tactical and strategic KPIs; operational and financial KPIs; and KPIs that effectively capture the moment while anticipating the future.”
Many organizations find that using a KPI Dashboard is the most efficient way to measure several metrics at once that will evaluate a business operations target. But first, the right KPIs need to selected.
Choose the right KPIs
Since every business is different, establishing the specific metrics and KPIs to measure, follow, calculate and evaluate is key to accurately evaluating and measuring success. To determine what metrics and KPIs to include, ask yourself:
What exactly needs to be measured?
Who will measure it?
What is the time interval in between measuring?
How frequently the information is being sent to the management level?
From there, determine which KPI targets will help you understand and meet your goals. Keep in mind that KPIs should match your business strategy as well as the type of industry your company represents.
The four critical KPIs for business operation are:
Within each of these categories, there are several—even dozens—of KPIs to choose from. But it’s not always necessary to build a better mousetrap! A little research into the targets and KPIs of similar industries or organizations, and their success in measuring outcomes against set targets, can save countless hours. However, it’s also true that building your targets and KPIs from the ground up provides a deeper understanding of the departments or projects—and how they might be evaluated and improved—that drive your organization.
Create a KPI dashboard
The best way to manage and evaluate KPIs is through a KPI dashboard. A KPI dashboard reports the data you use to evaluate if your company is meeting its defined targets.
To create a KPI dashboard:
Define your KPIs.
Consult with stakeholders.
Sketch your dashboard's design.
Select your KPI dashboard software. (For a dashboard that tracks only a few metrics and up-to-date data isn’t required, a spreadsheet may do.)
Gather key data points.
Create data visualizations.
Schedule a feedback session.
Deploy your KPI dashboard.
For operational KPI dashboards in particular, data updates more frequently and may be set up to automatically send alerts for deviations from set standards. Corrective actions can then be taken for any performance deviations, or even to correct standards and targets, without waiting for a weekly or monthly report.
Remember, Key Performance Indicators should work for you; you shouldn’t work for them. Don’t be afraid to change KPIs, their targets or outcomes, mid-project if your evaluation and analysis shows that is the correct measure to take.