Key performance indicators can help a manager define and measure the progress that has been made towards the goals they have set for himself and their team. These measurements of business performance will differ from company to company, but all must reflect the goals of the organization, be key to its success and be quantifiable.
A call centre may consider the number of customer calls answered in the first minute a key indicator of business performance, whereas a driving instructor business may look at the pass rates of its students. Another business may consider the percentage of its income generated from repeat customers to be a key performance indicator, while an expanding company may want to judge success by the number of first-time customers.
If an indicator of business performance is going to be any value, there must be a way to define and measure it accurately. For instance, a company keen to generate more income from repeat customers must have some way to distinguish between new and repeat customers. It is just as important to set targets for each indicator. For example, say 50 per cent of income generated has to come from repeat customers.
Just because something is quantifiable, it does not mean it is key to the success of the company. When selecting indicators of business performance, a manager must limit them to areas that are essential to the business achieving its goals. Keep the number of indicators small, so that everyone within the team can stay focused on the same goals.
In larger organizations, each departmetn can have its own indicators that fit in with the overall goals of the company. This allows managers to gather their business intelligence and makes their own business performance management possible within each department.
For instance, one of the main goals of the company may be to increase customer satisfaction. For the sales department, this may mean reducing the amount of time customers spend on hold before a sales representative answers the call. That is no good an indicator for the distribution department, however, which may instead want to reduce the amount of time it takes for products to be sent out to customers. Therefore, both departmetns can have their own indicators that allow performance management and fit in with the company’s goal of improved customer satisfaction.
Once a manager has clearly defined their business performance indicators and ensured that they are both relevant to the company’s goals and quantifiable, they can use them as a performance management tool. The indicators themselves tend to be long-term considerations and so the definition of what they are and how they are measured does not change too often. What is more likely is that the targets for a particularly indicator will change as the company’s goals change or as it get closer to achieving a goal.
Because these indicators give everyone in the company a clear picture of what is important and what needs to happen, they are ideal business performance management tools. A manager can ensure that everything each team member does is focused on meeting or exceeding targets defined by the indicators.
The business intelligence gathered can be used as a motivator too. Post the latest information on each of the indicators on the company intranet and website, and print off hard copies and display them on canteen walls and in conference rooms. Showing the targets for each indicator and the progress made towards these targets can motivate staff to reach greater heights.