Performance Indicators or KPIs are management tools that allow for the analysis of a company's performance in relation to a specific aspect, thereby continuously improving the business's competitiveness.
Various business strategies use them to direct the organization's actions, such as the Balanced Scorecard. However, when defining the KPIs to be measured, the question always arises: what types of KPIs should I implement? How and why should I measure them?
The truth is that each company has its own objectives and, consequently, its own KPIs. What you should understand before you start measuring results is how these indicators contribute to charting your path to success and what the main areas you should be concerned with are.
Understanding Different Types of KPIs
Financial indicators
The financial area must always be guided by reliable data and information, after all, any poorly made investment can bring losses to the enterprise. In this regard, it is essential to determine which KPIs are vital for success in this area.
Among the KPIs to be measured are: project feasibility, business profitability, profit margin, return on investment (ROI), efficient resource utilization, and results per product or service line.
It is important to emphasize that all of the company's business lines must be measured from a financial perspective, including services, which are considered intangible assets.
Management indicators
The company's management must also be based on consistent data and information to make decisions, which requires measuring performance indicators that are aligned with the business's strategic objectives.
These objectives should be broken down into goals by area/sector (tactical) and for each function of the organization (operational), aiming to integrate all professionals so that they are aware of their responsibilities for the organization's overall results.
Management indicators should focus on processes and essentially measure the efficiency and effectiveness of each one, aiming for continuous improvement.
Incentive indicators
For organizational results to be achieved, the team must be committed. However, it is not always possible to get everyone involved in their activities in the same way and in an increasing manner. What is done, then, is to encourage or motivate the team through rewards, which can be financial or not.
These indicators must be linked to the value that employees can actually generate, i.e. they must be achievable. They should also refer to performance and results, always in the most objective way possible.
Comparison indicators
To know how your performance stacks up against the market, you need to evaluate the competition, which means performing benchmarking. It's not about spying on your rivals, but rather learning from the best practices they use, as well as their mistakes.
By comparing yourself to other competitors, you are able to determine your strengths and weaknesses and thus develop differentiation strategies that allow your company to grow sustainably, gaining market share.
Benchmarking indicators should be measured based on various reliable, understandable, and relevant research sources for the organization.
Evaluation indicators
Periodically, you should evaluate the overall business performance, checking its performance in strategies, tactics, and actions. It's a way to know if what is being implemented is truly contributing to the objectives set in the strategic planning.
Here, it is appropriate to evaluate the performance and quality of suppliers, clients, staff, and the company's own management, using a comparative method with previous periods, which were also evaluated.
