You've probably heard about performance indicators, or KPIs. For a company to be successful and grow healthily, it's essential to constantly monitor results.
This is when you can count on performance indicators. They are metrics that facilitate these analyses. In other words, they use quantitative data that serves to guide managers in making more strategic and efficient decisions.
Therefore, understanding more about them, their types, and advantages is fundamental to being able to perform a more qualitative evaluation and track results more securely. Continue reading to understand better.
What are performance indicators?
Performance indicators, also known as performance metrics or key performance indicators (KPIs), are a set of metrics used by companies to measure and track not only the effectiveness of actions, but mainly their results.
It is common to believe that they only serve to measure the profitability results of an organization. However, they go beyond that. They are important in all areas of the company, as their objective is to monitor the performance of actions proposed in planning in order to achieve certain goals.
In other words, performance indicators serve to evaluate and understand the success of the actions planned by the company. They serve as a guide so that, if necessary, the manager can change plans to achieve the goal.
This is because when they are used, they help identify and measure the company's errors and successes, redirecting strategies whenever necessary. The indicators can be pre-defined, using existing models as a basis, or customized.
The ideal is to consider indicators that truly meet the company's needs. They need to be measured uniquely to achieve the best results.
Here at Actio, you'll find the ideal software for your company. advance the results.
Advantages
When implementing performance indicators in your company, you can, for example:
- Increased productivity;
- More assertiveness in processes;
- Significantly reduce costs;
- Sales increase;
- And much more!
What is the importance of indicators for a company?
Performance indicators are essential for companies because they help track and identify potential failures or risks based on assertive data. This, in turn, provides direction for more assertive decision-making, both for problem-solving and process improvements.
In other words, indicators are an important tool for analyzing and measuring the actions and activities that happen within the company. All based on numbers, statistics, and graphs so that managers avoid guesswork and make decisions based on concrete information.
It can be said that performance indicators serve as a management tool, for both risks, performance, and strategy, as they encompass various organizational aspects.
What are the main types of performance indicators?
There are currently around 13 performance indicators that can be used in a company. Each of them has a specific characteristic and function, contributing positively to the organization achieving its objectives in a strategic and safe manner.
Below we have separated what they are and how they are used. Check it out.
Profitability
The most common and used by companies. This indicator can be measured in different ways, both in percentage or nominal terms, including calculations of operational profitability, contribution margins, and also assets, whether intangible or tangible.
The measurement of this type of performance indicator serves to track and understand if the company has achieved or improved the expected results in a given period. However, evaluating only the company's profitability can be a problem.
Ideally, this indicator should help understand not only the profits obtained in a given period but also the overall financial health of the business. This way, managers can avoid crisis moments due to debt or financial losses.
The Budget Matrix developed by Actio, for example, helps your company achieve revenue and expense goals with efficient budget management.
Effectiveness or satisfaction
This indicator is the most used when the goal is to measure and understand customer satisfaction, based on the effectiveness of communication actions taken. With it, it's possible to understand if the customer would recommend your product or service, if they would buy again, if they liked the service or not, among other points.
Results can be obtained through surveys, emails, and online reviews. A good example of this type of indicator is NPS surveys, which are composed of questions with scale-based answers, such as “On a scale of 0 to 10, how likely are you to buy from our company again?”
The answers help identify the assertiveness of the solution offered, as well as serve as insights to further improve the customer experience.
Average ticket
The average ticket performance indicator is the most common in sales. This is because it is specific to understanding and measuring the activities and dynamics of this sector. With it, you can identify, for example, which are the most active customers and compare the results with those of other customers.
This way, you can offer personalized service to each client, making the experience better and more efficient so that each one of them remains loyal.
Turnover
Turnover is a big problem for companies and can happen for various reasons. Among the main ones are the devalorization of professionals, leadership problems, lack of incentives, an insufficiently defined organizational culture to retain employees, among others.
These are internal issues that cause talented employees to seek new opportunities, which can affect company processes. The turnover indicator is used to avoid this.
Your objective is to measure the number of dismissals and hires within a predetermined period. When the presented results are high, it means there are internal problems that need to be resolved.
This contributes significantly to retaining employees as well as attracting new talent.
Productivity or individual performance
Individual productivity or performance indicators are used to measure how employees are performing in their daily activities and deliverables. When the evaluated data falls below average, it means something is happening.
Most of the time, a drop in productivity is related to both demotivation and a lack of resources to carry out activities. In both cases, performance indicators help to overcome the situation so that the indexes rise again, improving the results of the team and the company.
The Actio Performance Management, for example, helps your company simplify performance management. With specific features for the People and Management area.
Return on Investment
Quite well-known by organizations, Return on Investment is an indicator that allows us to understand the result that a certain action, whether part of a campaign or strategy, managed to achieve.
With it, managers can get information about which investments made were effective and which need more careful analysis. Additionally, ROI offers a more comprehensive view of revenues and costs.
Cost per lead
Although it may not seem like it, cost per lead is indeed a performance indicator. Very common in marketing, it helps understand how much the company spends to acquire a new lead.
This indicator shows the efficiency of marketing campaigns carried out by the company. When the cost value is too high, it means the audience is not very engaged.
Stock
Yes, there is a specific performance indicator to evaluate companies' inventory turnover. It measures the flow of products in and out, offering a broader view of which are best-selling and which have low adoption.
This way, your company achieves greater efficiency and accuracy not only when determining restocking deadlines but also when creating sales strategies for products with low adoption.
Process quality
Performance indicators focused on quality in processes help to better understand production dynamics. This offers a more comprehensive view and valuable insights to ensure process improvement, which is fundamental for achieving increasingly satisfactory results.
Strategy
Strategy, as well as planning, is a vital part of a company. Likewise, monitoring them is essential to ensure that objectives and goals will be achieved. After all, there is no point in creating various actions if they are not strategic and of significant value.
A strategic performance indicator helps you understand what's needed for proposed actions to actually be carried out, helping the company achieve new results to drive growth.
With Action Strategic Management, you strategically drive your company's performance, achieving immeasurable results.
Efficiency
Very similar to the strategy indicator, the efficiency indicator is used to specifically measure the ability of the company and teams to act correctly, based on the established goals.
This means that your function is to evaluate whether the goals are actually being met based on what was planned. This indicator also presents information about the cooperation and focus of the teams, as well as the expenses and resources used for everything to be realized.
It is still possible to observe what has already been done in previous eras and outline more targeted and personalized actions for each area to achieve its objectives.
Sales increase
Finally, there are performance indicators that help understand the increase in the company's closed sales. This indicator measures conversion and success rates to understand if sales actions are truly offering satisfactory results.
Is it possible to create new performance indicators?
Yes, it is possible to create performance indicators for your company's needs. If the available templates do not yet meet your organization's analysis needs, don't worry, you can develop a more personalized option.
But for this, it's important to pay attention to a few points. The main one is to have very well-defined objectives and goals, based on the current economic, social, and political segments and scenarios.
Furthermore, it is essential to consider the team's particularities and characteristics. The OKR methodology, for example, is one of the facilitators in the creation and definition of new performance indicators.
Common mistakes when choosing performance indicators for your company
Even though performance indicators are intuitive tools, it's important to know how to define them. After all, they need to provide real data so that actions are as assertive as possible.
Check out the most common mistakes at this time to avoid them and achieve adequate results:
Choose the easiest metricsSome performance indicators are simpler than others, but this should not be the main factor in choosing. The effort should be based on objectives and not on ease of analysis.
Not having well-defined goalsOne of the main mistakes that hinders managers the most is not having well-planned objectives. Without this, it becomes difficult to determine the best indicator to track and measure results.
Use performance indicators to measure tasksThe function of indicators is to ensure that goals are achieved. Therefore, they end up being confused with evaluators that measure actions, which is not the case. Because in this way, they do not present the necessary results to guarantee effectiveness or set new goals.
Do not consider the team when choosing the indicatorIt's common for managers to get very involved and focused on achieving goals, ending up forgetting the key element for that to happen: the team. For results to actually be achieved and indicators used correctly, it's important to involve the team.
When you consider these points, remember that there are no perfect indicators. Each one will help your company in a specific area, but they can and should be changed if necessary.
How Actio helps you analyze and choose the best performance indicators
For your company to optimize and ensure more efficient performance indicators, it is essential to have solutions so that management includes and leverages data analysis correctly.
At Actio, you'll find solutions that help you achieve these results. All software developed by our company allows you to create, track, and monitor the progress of actions.
With Actio, you have everything you need to achieve your goals. Whether it's to avoid risks, with the Actio Risk Management,recognize team performance and reward them appropriately, or even strategically manage your company.
Here you'll find the perfect system to elevate your business results and go beyond. Get in touch and learn more!
