[THIS ARTICLE WAS WRITTEN FOR “INNOVATE MAGAZINE”, THE CHAMBER OF COMMERCE BUSINESS MAGAZINE]
Think back to a really successful period in your career or business life. Was it at a time when you were totally aware of everything that was going on in your business or area of responsibility? When I look at the clients I work with as a business coach and also at my own business career, it’s clear that the most triumphant stints come when we are well informed on every area of our business. Conversely, the worst times often occur when we have no real-time idea of what’s going on – it’s at these times that we often stumble across a nasty surprise or two that curtail our success.
So how do you go about preventing unwelcome curveballs? You don’t need a crystal ball – just make the most of the information you have available about your business. Implement some proactive KPIs (key performance indicators) and then know what to do with the information those KPIs give you. As the saying goes, predicting rain does not count – building arks does! So once you have KPIs, it’s important to make sure you act on what they are telling you.
Measuring key information in your business is nothing new. Galileo said in the 16th century, “Measure what is measurable and make measurable what is not so”. And Lord Kelvin (William Thomson) in the 19th century said, “If you cannot measure it, you cannot improve it”. It’s all very well knowing you should be getting information on areas of your business, but for some business people it can be a struggle to do it in a way that helps you run your business better. Here are a few ideas to consider when deciding on what KPIs to use:
1 – Some areas of business are easier to have KPIs for than others. For example, stockturn or gross profit is far easier to track than customer experience or employee engagement.
2 – The less subjective a KPI, the better. It’s most helpful to have straight data that you can make decisions from. Although, in saying that, sometimes measuring success in marketing and advertising might be considered subjective.
3 – Every person in your team needs to have their own personal KPIs. As well being an excellent motivator for them, KPIs can also be used by you to monitor and manage performance, keeping your staff accountable.
4 – To have an effective business plan and to know where you are going, you need to have good KPIs in place at all levels of your business, from the CEO to the administration team. Amazon literally has 452 KPIs in their business and they all build into 8 headline KPIs and are tied into their business and departmental plans.
5 – While some KPIs will need to be kept secret (especially those ones linked to bonuses for individuals), you should have some that are totally transparent. It is a great way to communicate to the entire company what is important to your business, what they need to do to achieve it, and how the business is going. The right KPIs will add motivation to your team.
6 – There are many metrics you can have in your business, but not all of them will be KPIs. To make sure your KPI is a true KPI, ask yourself if there is anything you can do about the result; if you can do nothing to improve it, then it is not a true KPI.
7 – KPIs do not need to be exact. Obviously the more accurate they are, the better, but sometimes an approximate view is ok if the KPI can help clarify a trend for you. A retail example would be the in-store conversion rate of foot traffic.
For me, there are three main areas that KPIs can be most helpful in measuring. They are: what your customers think is important; problems that you would like solved; and the business objectives you are aiming to achieve.
KPIs don’t lie. Come up with the right ones for your business and you’ll get incredible business insights, from what problems could be coming your way (as always, an ambulance at the top of the cliff is always better than one at the bottom), to how you can improve your business and profitability by making better decisions.
If you need a hand identifying the KPIs that will be business changing for your business or team, or if you need to know what to do with what the KPIs are telling you or any sort of business coaching or advice, sing out. firstname.lastname@example.org, 021 775 660 or www.businesschanging.com