Using performance indicators - checklist

wooden blocks spelling KPI

Key performance indicators, or KPIs, can help you measure how your business is performing in particular areas, so you can track and improve this over time

  • Focus on the areas which affect profitability and cash flow - sales, costs and working capital.
  • Identify the key drivers which significantly affect performance. These might include factors which have a major influence on the quality of your goods or services, customer satisfaction and costs.
  • Monitor indicators which reflect your strategic goals. If you aim to expand your customer base, track the number of new enquiries.
  • Look for indicators which are measurable, such as number of complaints - rather than qualitative assessments such as 'customer satisfaction'.
  • Aim for direct indicators, but use indirect ones if necessary. For example, absenteeism as an indicator of employee motivation.
  • Look for indicators which can be targeted either by comparison with historical performance or by benchmarking them against other companies.
  • Consider indicators which demonstrate efficiency. Monitor defect ratios, levels of production wastage, the conversion rate of new enquiries into sales and delivery time, for example.
  • Focus on a small number of key indicators to monitor at board level; leave more detailed, subsidiary indicators to individual managers to monitor.
  • Identify any external drivers - such as foreign exchange rates - which need monitoring but are beyond your control.
  • Decide how frequently to monitor each indicator. Some figures - such as the cost of premises - might only be reviewed annually, while sales progress, cash flow and credit control should be reviewed weekly or even daily.
  • Present the information in a way that demonstrates the trends and highlights the significant variations. Using graphs or charts can be particularly effective.
  • Dig deeper into areas where performance levels have changed unexpectedly to identify the reasons behind the change.
  • Use your findings to address any issues you uncover or to explore how you can exploit positive changes in your business, market or circumstances.

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