KPI’s allow us to track and improve the performance of our business, which transforms into better business performance. It is necessary to have a functional resource to know if the actions developed are giving the desired results, according to the planned objectives.
The question here is: how can we measure that progress? This is when KPIs come into play, to help us discover if the path is being adequate, where improvements are needed, and how we can correct our business strategy.
What are KPIs?
Key Performance Indicators (KPIs) are metrics that measure the performance of companies, which makes them an important method for management and other practices in a business. Therefore, as its name suggests, its function is to measure whether a company or organization will be successful in any project or campaign, i.e., whether it will be possible to achieve its proposed goals, which makes them especially useful in various productive sectors, even in macro scenarios.
Initially, it is important for the organization to first define where it wants to go, and for its managers to set a general plan to define goals and performance metrics. Then, to understand the effectiveness of the actions that are being taken, it is important to constantly monitor these indicators. This helps to check not only the evolution of the goals but also the performance of the company, to implement the necessary adjustments as soon as possible.
A company without goals will never know where it is heading or at what level it wants to grow. And even if it does, it will not be enough to keep its sights on the desired destination; it will always be essential to have small goals since they will allow us to understand what is happening along the way. That is why KPIs are also functional in that part of the process.
How to implement KPIs in the company’s performance?
Through performance indicators, any company can better organize and understand its action plans, avoiding mistaken conjectures or unsubstantiated assumptions. Thus, the data and history generated in the process become a powerful tool for growth.
Learn how you could improve your business performance through KPIs.
1- Define productivity performance indicators
These indicators relate the company’s resources to the deliveries made in each period. Their importance lies in evaluating production, analyzed together with quality performance KPIs. At the end of the day, speed without efficiency does not generate satisfactory results.
2- Apply quality performance indicators
These KPIs aim to quickly assess whether deliveries meet standards. The indicator results of the comparison between the number of total deliveries, and the out-of-destination deliveries. To refine this KPI, it is worthwhile to also measure the customer’s evaluation of the deliveries made and their overall satisfaction.
3- Check the performance of KPIs measuring capability
Time is a finite resource and, therefore, each process must have a deadline; that is, there is a maximum number of outputs that can be delivered in each period. Capability performance KPIs measure just that.
4- Use strategic performance indicators
This is where strategic planning comes in, which refers to the company’s major goals and the degree to which it is approaching the major goal it set at the beginning. That is why these KPIs are related to the risk factors for success.
5- Evaluate profitability indicators
Assess and understand your company’s ability to generate profits from its services and/or product sales. Three examples of KPIs of this kind are gross margin, operating margin, and profit margin.
6- Assess your investment’s profitability
For a good evaluation of your company or business, it is essential to understand its financial performance through the investments it has made. This includes the ROI (Return on Investment), ROA (Return on Assets), and ROE (Return on Equity) indicators.
By applying these KPIs in your company, you can drive positive changes in its performance. Knowing where you are and where you want to go allows you to correct -and, thus, prevent- deviations along the way and speed up the achievement of major goals.
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