Using performance indicators - checklist

Using performance indicators - checklistKey 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 quality, 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.

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