Are You Implementing Key Performance Indicators?

Joe Weinlick
Posted by in Career Advice •


Measuring success is a crucial component for improving the productivity and profitability of your business. However, success is not defined by revenue alone. Key performance indicators determine the satisfaction of your customers, the effectiveness of your employees' performance, and the overall morale and culture of the company. Find out if you are utilizing key performance indicators to your advantage.

Evaluate Your Current Assessment Strategy

Take a close look at how you are measuring the success of your employees, departments and teams. Are you implementing performance reviews, have you incorporated tracking software to determine peak times of productivity, and have you implemented methods for your customers to provide feedback? If the answer is no to all three questions, then it is likely you are not using key performance indicators effectively.

Analyze Past Assessments

Businesses can assess any aspect of their operations, but it is important to narrow down your scope and focus on a few areas of performance at a time. An overabundance of assessment takes time and energy away from your employees and managers that could ultimately impact your profits and productivity. Evaluate what you have measured in the past and assess whether your methods have aligned with the company's goals and vision. Did your goals during assessment link to individual performance? Were internal processes established to meet client expectations or the company's strategic goals? Did your management team analyze the results and make recommendations to improve the performance of employees and the company as a whole? If not, it may be time to transform how you utilize key performance indicators.

Understand Your Options

You may have established key performance indicators without even knowing it. In fact, many of these indicators are embedded into daily processes. The key to success with assessment is to efficiently evaluate the financial aspects of the business while also analyzing customer, process and people metrics.

Financial metrics measure prompt management to analyze gross and net profit margins, strategies to manage and reduce costs, and the cost of goods sold. Key performance indicators related to finances also measure sales by region, processes related to collecting accounts receivable and how the actual overhead compares to the forecasted budget.

Customer metrics focus on acquisition and retention. For example, consider the value your company receives from developing long-term relationships with clients. Are you spending adequate time and money to acquire new clients? Are these new customer acquisitions providing higher profits? Customer metrics also focus on satisfaction. Are you requesting feedback through social media, online polls and voice calls? Analyze how the feedback translates into repeat business or referrals. An additional key performance indicator focused on customers is to tally the number of clients you have acquired yet lost. This indicator helps organizations identify how customer needs are not being met.

Process metrics indicate the effectiveness of your company's operations. For example, customer support tickets help identify how many tickets have circulated through your departments, the number resolved and the average resolution times. An analysis of how many defective products are produced also indicates if your internal processes are effective.

Key performance indicators should also focus on the people in your organization. Are you evaluating your employee turnover rate? High turnover rates can indicate problems within the workplace culture, salaries provided, the overall work environment and incentives offered. Key performance indicators should also help to identify the attractiveness of your business to job seekers. Are you tracking the number of applicants for job openings? An analysis of your employees' satisfaction levels is also worth measuring. Distribute surveys, encourage feedback and measure productivity to determine if efforts are needed to boost morale and motivation.

The day-to-day operations are crucial to maintain a productive and profitable business. However, implementing key performance indicators is worth the time to ensure your employees and customers are satisfied, as well as determining if your internal processes are working efficiently. Take a clear assessment of your key performance indicators on a regular basis to keep your business running smoothly, gaining necessary exposure and attracting clients and employees.

Photo Courtesy of Stuart Miles at FreeDigitalPhotos.net
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  • Nancy Anderson
    Nancy Anderson •

    @Lydia I would think that for a small business start-up that finances would be the number one consideration. As the company grows, they can add some of the other metrics along with KPIs to keep them on track. Most start-ups begin on a shoestring budget which is why I consider financial metrics as the top priority. Does anyone have any real life experience with a small business start-up?

  • Lydia K.
    Lydia K. •

    I agree with @Jaqueline's comment. I assume that small business and startups have just as much need to utilize KPIs as larger companies. As stated in the article, overabundance of metrics can be overwhelming and probably more so for a small business. What steps can a small business take to evaluate current strategies and past assessments on a smaller scale and for shorter time frames? Which of the options listed in the final section are most important for small businesses?

  • Jane H.
    Jane H. •

    You've brought up lots of good ideas here for implementing KPIs. One that you mentioned that particularly resonates with me is the feedback survey. These work great inside and outside the company to gauge both employee and customer satisfaction. I'm particularly fond of a good survey, especially when it's tied to an incentive to complete it. With the proliferation of companies offering free survey services, it's easy and affordable to find out what customers are thinking; providing them with a token incentive or an entry in a drawing helps maximize participation.

  • Jacqueline Parks
    Jacqueline Parks •

    There is a lot of information here, and I find it a bit overwhelming. Where is a good place for a small business to start with analyzing KPIs? I understand that each individual business has different assessment needs, but I'd like to hear how others used KPIs in small startup companies.

  • Shaday Stewart
    Shaday Stewart •

    @Catherine S, Similar to sales, nonprofits are focused on finding good leads, so KPIs are valuable for measuring the effectiveness of outreach campaigns. For example, they can compare the effectiveness of different marketing channels or generate a target ratio of letters sent versus successful responses received. Nonprofits may also use them to analyze their websites to determine which types of content draw the most traffic and the click patterns of site visitors. These factors can help them refine their target audience and improve web design and content strategies to increase donations. These are just a few ways. The great thing about KPIs is that each individual business or organization can always find new ways to leverage the data they collect.

  • Shannon Philpott
    Shannon Philpott •

    I agree that analyzing past and current assessments is a strong move. You don't always have to reinvent the wheel if you are getting it right in some areas. And, while analyzing, you can tweak some of the assessment strategies so they are more successful.

  • Abbey Boyd
    Abbey Boyd •

    I understand the idea of focusing on a few areas at a time, but I disagree with the idea that more assessment is harmful to the organization. You should always be tracking all aspects of the company, even if you only focus more in depth on a few select areas. I don't believe there is ever any such thing as over assessment. The more you track your processes, the more prepared you are to move into the future.

  • Jacob T.
    Jacob T. •

    What is a good way to implement KPI reporting or the best place to start? Are there particular metrics that a company in any industry should be measuring to understand where sit within the industry?

  • Katharine M.
    Katharine M. •

    It's amazing how many ways these metrics can help. When I worked in retail, they were very useful for tracking customer habits and making it possible to tailor service to each customer to serve their needs. It was also helpful to keep track of individual employee performance- receiving more consistent feedback was better for employees than having annual evaluations.

  • CATHERINE S.
    CATHERINE S. •

    How do you determine the key performance indicators if you work for a non-for-profit company? The ones mentioned above focus on financial and consumer metrics for the most part. I do appreciate how you included that an important part of the evaluation of the success of a company is employee satisfaction. Unhappy employees will always have a significant impact on the bottom line.

  • William Browning
    William Browning •

    Thanks to improved software and decreased costs of computer technology, companies almost have no reason to invest in KPI programs. Without KPIs, your company sinks before it even makes its first dollar. You have to find ways to measure success from day one or your competitors already have a head start.

  • Jay Bowyer
    Jay Bowyer •

    I absolutely agree with the part about analyzing past successes. Psychologists say that the best indicator of an individual's future behavior is his or her past behavior, and the same applies to business. If we look at the patterns in previous business endeavors, we can plot a good theoretical trajectory and aim to excel.

  • Duncan Maranga
    Duncan Maranga •

    I have to, politely, disagree with the idea that an over-abundance of assessment works negatively to waste time, exhaust employees and reduce productivity of the business. For me, there is nothing like an over-assessment because anytime there is need for assessment it means that the business actually needs it. The fatigue and time spent during such a process is therefore worthwhile.

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