Key Performance Indicators - your business' success signposts

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Driving your business forward is much easier when you have a destination in mind

, but how do you determine if you are on track during the journey? Key Performance Indicators (KPIs) represent the signposts along the way to ensure your business is on track to meet its goals, and to warn you when you're veering off course.

KPIs are a commonly used business performance management tool, particularly popular because of their ability to measure a very wide-variety of criteria across all business departments including often hard-to-measure criteria. KPIs are developed to measure important business processes in your organisation. The KPI will measure for success based on your criteria and then provide results, whether quantitative or qualitative, as to whether the process is under-performing, on target, or exceeding expectations.

Every business is unique and it is important to develop KPIs that are relevant to your business and your expectations. It is advisable to develop your KPIs to that well-known acronym SMART:

Specific

Measurable

Attainable

Relevant and

Time-bound

For example, an important KPI within the call centre industry is call answer time'. It is a specific business process, measurable in seconds, attainable, extremely relevant as a lost call may be a lost sale, and will be time-bound either within a month, quarter, year etc. The results will highlight weaknesses or strengths within a team, may highlight the need for more or less staff or another solution to ensure this area of the business is on track to achieve the overall goal.

Implementing or improving the KPI system within your business will assist everyone to work towards common goals with clear objectives. KPIs will also assist managers to manage effectively, help define expectations and recognise success, evaluate progress and provide evidence for necessary changes to business processes. Externally, results against KPIs can prove an important snapshot of the business to investors, stakeholders and regulatory bodies.

However, your unique KPIs need to be developed with a few considerations in mind. You must recognise which KPIs align to your business success it is not a Key Performance Indicator if it is not vital to your business success. Then determine how many you can effectively manage only choose KPIs you can successfully monitor and ensure you implement systems to support supervision. Plenty Systems recommends deciding on no more than 20 KPIs for a small to medium sized business any more will be too hard to manage. Additionally, develop your KPIs using historical data, customer feedback, industry benchmarks and other relevant indicators don't guess or the targets may not be attainable. You must also establish where it is fine to be average and where you need to excel. For example, sales figures may need to exceed all others comparisons, but you may only need to meet industry benchmarks for employee training hours to still achieve your business goals.

Key Performance Indicators - your business' success signposts

By: Sophie Marshall

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