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How To Create KPI’s That Actually Work

How To Create KPI’s That Actually Work

Pedro Araez 526 17-Feb-2021

To ensure you remain competitive and relevant in the market, you need to ensure that your business is performing well. Every business has different goals and milestones in place that it must reach to be a success. How you define these goals is important. However, arguably, how you measure these performance indicators is even more important.

Key Performance Indicators, or KPI’s, are incredibly useful to business owners in tracking business performance, provided you choose the right KPI’s for your business. Tracking company-wide goals are crucial in ensuring that you are moving forward as a business. Understanding what defines success in the different aspects of your business will allow you to create effective KPIs that will give you the data you need to make better business decisions in the future.

Let’s take a look at a few key things you need to consider when you are establishing KPI’s to ensure they are effective.

Keep It Simple

KPI’s should be uncomplicated and simple to measure. When you are creating your KPIs aim to create effective KPI’s that are clear and concise. They should promote decision and not additional questions. The key is for everyone involved in reaching that goal to be able to clearly identify their role in achieving the desired outcome that you are hoping for.

Relevant And Applicable

An effective KPI needs to be relevant to the business and to the overall strategy of the business. For example, if you are a clothing retailer, you might ask “How many shirts did we sell in the last quarter?”. This information is highly relevant to your sales manager, and they will find the data related to this question to be highly-valuable in formulating sales strategies moving forward. Keeping your KPI’s relevant will ensure that the people who are responsible for measuring each specific KPI understand how to reach a successful outcome.

Aligned With Overall Targets

To measure the progress of your company goals, you need to establish key performance indicators that are aligned and not that contradict or work against one another. As the business owner or manager, you should have a deep understanding of how all of the cogs of the business work together. Understanding how each component of your business affects the others will help you to create KPI’s that are aligned with one another to ensure your business is always moving forward.

Readily Actionable

The KPI’s you put in place should never be ambiguous. They should be easily actionable, allowing team leaders and managers to develop strategies in your business to improve performance. Employees should understand exactly what they need to do to ensure a positive outcome. Having realistic, attainable goals in place will also help to keep your staff motivated, as they will be able to see the light at the end of the tunnel and focus on their goal.

Easy To Measure

For a KPI to be effective, you need to ensure that it is easily measurable. Establishing KPI’s that cannot be measured is pointless and a waste of your time and energy. Generalised targets are ineffective and should be avoided. Effective KPI’s should be direct, clear and focused. They should be focused on a goal that produces quantitative and qualitative measures that can easily be determined. With more accurate measurements you will be able to monitor your business performance with more precision.

Create Effective KPI’s Tailored To The Needs Of Your Business

As every business is different, it’s important that you spend some time considering what the right KPI’s are for your business. Your KPI’s should be specific to the goals of your business and align with the overall business strategies that you have in place. Establishing effective KPI’s will help you to monitor your business performance over time, allowing you to reinvest in the right areas and reduce spending in those parts of your business that are underperforming to ensure your company remains relevant, competitive and ahead of the competition.

Pedro Araez

Pedro Araez

Thank you

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