Key Performance Indicator (KPI)

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The right key performance indicator (or indicators) may be all you need to turn things around.

business-measurement

Now, something doesn't seem right. Yet no one on your team can tell you what's wrong.

Business is down, expenses are up, and the future is uncertain.

As a motivated manager or business owner, one with a vision of success, you know it can be different. You are committed to figuring out how.

This is where objective measurements are invaluable. This is where you need a key performance indicator. And, you need at least one for every important process and outcome in your business.

A kpi is a measure of success. It tells you how a particular piece of your business is doing. It allows you to eliminate anecdotes and guessing. And, a collection of kpi's allow you to see the big picture. True performance improvement is possible when you can objectively see how things connect.

There are three reasons why great problem solvers choose to measure their business:

  1. To remove complexity.
  2. To motivate behavior.
  3. To improve.

Remove Complexity

Every business is collection of many different processes. Marketing, sales, customer service, manufacturing or service delivery, billing, hiring, and staff scheduling are just a few of the hundreds (or even thousands) of processes within a business. And they are all connected and influence each other.

Once selected and organized, key performance indicators reduce complexity. They present an objective picture of the business. A picture that makes sense. A collection of key performance indicators paints a picture of the connections between processes. And, kpi's are easy to see and discuss. Especially when they are recorded in a tool such as a balanced scorecard or business dashboard.

The moment you can see the current performance and past trend of the things that matter most to your business, what to do next becomes clearer. Complexity decreases.

Motivate Behavior

Can you answer the question, "what matters most to my business?" For the sake of your own time management and for the focus of your employees, you should work to find the answer.

We all tend to focus on what's right in front of us. The pressing need, the current 'crisis', or the issue that is screaming the loudest. Without a predetermined guide- a reference that tells what to do- our human nature will sometimes lead us down paths that we shouldn't follow. Selection of the right key performance indicator provides clarity, concensus, focus, and the ability to communicate the things that matter. Information must be shared with the people that can influence improvement.

To Improve

No business is perfect. Nobody gets it right 100% of the time.

However, the business that is committed to improvement has a tremendous advantage.

Measurement provides feedback. Feedback changes behavior. Behavior change that is connected to business goals gets results. Well selected performance measures communicate what's important. They will focus efforts and organize business operations toward the achievement of common goals.

Communicate, improve, learn from it. Communicate, improve, learn from it. Do this and your business runs on continuous improvement...not reaction and fire-fighting.

Measurement in business is not something extra. Instead, every key performance indicator is like a vital sign that describes the health of your business. When the health of your business is failing, kpi's can explain why. They can help others understand how what they do influences success. And, they can direct the improvement that brings the business back to life (or, gain a competitive advantage that takes it to new levels of health).

Motivation plus measurement encourages creativity. Motivation plus measurement overcomes helplessness. Motivation plus measurement drives managers and business owners to focussed effort that gets results.

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