Key Performance Indicators

Key Performance Indicators

Measuring BusinessPerformance

Although business operators initially have a great deal of control over their business, as organisations expand and take onextra staff, other staff members take on responsibilities and control. In order to continue to improve your business, you should consider implementinga formal process for measuring and improving the Business & staff performance.

Key Performance Indicators

One of the most common methods of monitoring performances within your operation is to introduce and measure certain Key Performance Indicators (KPI’s). These provide you with a quantifiable measurement of staff performance across the areas that most affect your business' ability to reach financial targets.

Selecting suitable KPI’s will help you break down the core activities of your business and monitor any shifts affecting its progressover specific periods. This can helpdirect future business decisions and identify areas of the business requiring extra attention.

Incorporating KPI’s into your business usually involves setting and measuring personal targets for individual staff members or departments. They may be used to measure such areas as:

·  Unit sales * Profit per item * Salesperson calls/conversion

·  Product quality * Customer service * Chargeable hours

·  Time required to complete tasks * Customer referrals * Staff turnover

·  Returns/Complaints * Conversion Rate * Ave $ Sale

Choosing KPI’s

The areas you choose to measure should relate directly to the core activities of your business. Due to this, KPI’s will differ depending on your specific business type, operations and industry. Although businessesin the same industry will not necessarily utilise the same indicators, KPI’s for all organisations should:

·  be tied into the overall business objectives and goals;

·  measure areas directly influencing the business' ability to succeed;

·  indicate areas requiring further action

For your KPI’s to be useful, you will need to be able to measure them over time. KPI’s should allow you to set measurable and achievable goals for improving core business activities.

If you are operating a retail manufacturing outlet for example, one of your targets may be to cut down the amount of time between the production of goods and their appearance in retail outlets. KPI’s of a takeaway food outlet, on the other hand, may include picking up customer calls withinthree rings and filling customer orders within a certain turnaround time. Larger organisations may adapt broad KPI’s to suit different sections of the business.

You should ensure that KPI’s work together to drive your business, rather than conflicting with one another. For instance, an indicator requiring the production of high quality goods may interfere with a KPI requiring reduced production times.Avoid disruptinginternal processes by setting KPI’s that work with your overall goals and acknowledge the requirements of different departments. It may be useful to consult with staff in order to achieve this.

Revision and review

After introducing a method for examining and recording KPI’s, make sureyou maintain records of your results. The process for recording KPI’s should be continually reformed and reviewed with your changing business requirements in mind. To achieve this, regularly reconsider your performance indicators alongside the ongoing development of a business plan.