Grow Your Business With The Right Metrics
Improved business performance and practices don’t just happen. It’s something that an organization has to plan for and work steadily towards. This requires expertise and knowledge of best business practices, like that found from specialty consulting services.
Organizational success is the deliberate result of a clear strategy with well-developed goals and established steps to achieve those goals.
This article helps identify the best ways to achieve organizational success through well-developed goals with established steps to achieve those goals, through what are known as KPIs.
What are Key Performance Indicators?
Key performance indicators or KPIs are metrics that help a business measure changes as it relates to specific activities or achieving established goals. KPIs should reflect your business’s strategic priorities.
In school terms, KPIs are like grades. A grade is a metric that is used to measure how well a student understood a concept and performed on an assignment.
Since businesses don’t rely on grades, they rely on KPIs. In very basic terms, if a business sets a goal to sell more products, a KPI will be used to measure how much of the product they were able to sell after they established this goal.
How do Key Performance Indicators Work?
Simply measuring a metric isn’t enough, though. Actually, that’s quite arbitrary and would not be very useful for benefiting business processes like improving performance.
KPIs only work because they follow a process.
To utilize key performance indicators successfully, you must follow certain steps.
- Identify the practice or behavior you are seeking to change and set a specific goal.
- Take a baseline measure. This is a way to establish where your business currently stands in that activity.
- Brainstorm ways to change behaviors to impact the measure in the direction you’d like to change it. (Just like managing changes across your organization!)
- Choose the change(s) and implement.
- Review the KPI.
- If it has changed in a positive direction to benefit your goal, keep going.
- If it has not changed, revisit step three. Brainstorm new ways to change behaviors and impact the metric.
This cycle can repeat or once KPI goals are hit, create new ones!
Let’s take a look at the above steps with a clear example in mind: selling products.
- Our business wants to double our product sales.
- We currently sell 1000 items per month. Now, we’d like to sell 2000 items per month.
- We can increase our digital advertising spend, hire new salespeople, or sell our products in more stores.
- We are hiring 1 new salesperson and selling our products in 3 new stores.
- Sales have increased by 50%, but not doubled. We will now try increasing our digital marketing spend and reevaluate the KPI of how many items we’ve sold until we reach our goal of selling 2000 items per month.
These examples are basic and are only intended to illustrate the general practice of implementing KPIs.
In actuality, KPIs can be very complex. They are time-dependent, unexpected variables can interact with each other and change the outcomes, and ultimately KPIs require very specific attention. You may want support when implementing KPIs because of their complexity, and Hunter Stevens LLC is here to offer support.
Defining KPIs For Your Business
The KPIs you will use will depend on your unique business or organizational goals, and maybe plentiful. It’s important to be clear when establishing KPIs so you can achieve them!
For example, each department of a business has unique goals. The IT department may opt to implement different KPIs to determine how well it is performing, compared with the finance unit.
At the same time, the business as a whole has goals, and each department must implement certain changes to contribute to the business achieving its larger-scale goals. In this way, determining the right KPIs for your business can be complicated.
It’s a good idea to seek support from experienced specialty consultants to determine which KPIs will best serve your organization or help define which strategic goals to aim for.
Key performance indicators can encompass everything from hitting sales targets to growing stock value, increasing website traffic, or even cutting payroll costs. It all depends on your business.
Review these sample KPIs to get a clear idea of what KPIs for your business could look like:
- Decrease customer acquisition costs
- Improve customer satisfaction scores
- Reach sales target % (actual versus forecasted)
- Reduce operating cost margins
- Increase ROA (return on assets)
- Lower debt to equity ratio
- Grow working capital
- Increase sales revenue based on price per unit sold x number of units sold
- Increase prospecting activity
- Improve sales funnel flow
- Grow customer retention
These examples are meant to illustrate touchpoints that your business may seek to improve or grow, and although they are not specific, a specialty consulting firm can help you identify pain points that your business operation currently faces, and develop specific goals with relevant KPIs to improve business performance.
The Basics of Key Performance Indicators
KPI measures should be taken regularly. How often your business reports on KPI measures will depend on the specific measure, the goals, and the desired results.
KPI measures can be reported:
The frequency in which measures are reported and analyzed will depend on each goal.
It might make sense to report KPIs for product sales daily, while key performance indicators surrounding customer retention would be best reported on a monthly or quarterly basis. Review a few keys to using key performance indicators before you establish yours.
Importance of KPIs
Targeting specific KPIs for specific goals is also important. If your goal is to increase sales, it wouldn’t make very much sense to measure staff satisfaction, would it?
The answer is complicated.
This scenario brings up an important point regarding KPIs:
KPIs help us see the interconnected nature of our business organization.
We sometimes see variables or factors as completely independent of each other, or unrelated, but often there are hidden correlations between many different variables that could become KPIs.
In the above example, we might think in a straightforward way that increasing sales is solely dependent on reaching a larger market, improving our marketing funnel, or increasing advertising spend. However, if our sales staff is unmotivated, or unsatisfied with their workload or their duties, sales numbers certainly aren’t going to grow.
One of the most important benefits of using KPIs is that they help us bridge otherwise invisible gaps between data and information, and reach our goals. Through key performance indicators we can see concepts in more abstract, and interconnected ways that ultimately help us to reach our goals and strategic objectives.
KPIs may be metrics and data-based, but they also open a problem-solving, creative mind that we often leave out in our business or organizational practices.
With the support of an experienced, unbiased, and expert consulting team like Hunter Stevens LLC, you’ll be able to identify KPIs and bridge the gap between abstract concepts and reality that will lead to large-scale business success.
KPI Consulting Services with Hunter Stevens LLC
Performance improvement for your organization, and achieving long-term business success are dependent on developing and implementing the right KPIs.
With well-established metrics and measures of growth, you’ll be able to identify areas of strength, as well as current pain points. Our team of expert consultants is prepared to audit your business processes and functions and offer support in determining effective KPIs and how to implement them.
Ready to reach your organizational goals? Contact Hunter Stevens LLC and get started.