We’ve talked about Key Performance Indicators in the past. It’s a phrase managers of all kinds are familiar with. To summarize, Key Performance Indicators, or KPI, are a series of measurements, which may vary from company to company, that are believed to reflect the current state of health of the business.
It’s not uncommon for a business to have a different series of KPIs for different categories within the business. For example; there may be one set of financial KPIs, one set designed to tell the business about its customers, one set to determine the effectiveness of a particular marketing strategy.
If this is starting to sound like a lot of data, that’s because it is. Unfortunately, the practice of gather information for KPIs is not always as concise as it should be. When selecting KPI parameters, one should start by determining what information needs to be tracked, then identifying the data measurements that will most accurately reflect that information.
This, arguably the most important step in the use of KPIs, is regularly overlooked. Instead, any and all data that can be easily measured is accumulated and counted. The problem with this methodology is how ineffective it usually is. It’s rare that a great sweeping in of numbers will actually yield any useful information.
In order to prevent this kind of catch-all confusion, be sure to invest a significant amount of time to the initial steps of KPI management. Start by choosing the questions for which the KPIs will provide answers. For example, if a business wants to measure employee job satisfaction using KPIs, the first question could be “Are the employees happy with their work?” Some of the data one could then accumulate to answer this question are attendance records, work output etc.
KPIs can be an integral part of managing a successful business, when used properly. However, when there is no strategy there can be no answers. Careful planning can provide long-term, beneficial knowledge.