Information and Visibility is key
I have spoken about the importance of data in many of my blogs, be it in decision making, or in removing disparity within an organisation, or reconciling between operational and financial systems. Data in its raw format is meaningless to businesses. The translation of this data into quantifiable, measurable indicators is what helps to drive a business towards its success.
Today I wanted to talk about key performance indicators (KPI’s), which are implemented post data collection and post removal of disparities. KPI’s are a pertinent part of measuring the success and failure of an organisation. They help organisations understand whether the business is headed in the right direction and if not, what it needs to rectify.
KPI Definition: A KPI is a quantifiable measure a company uses to determine how well it is meeting its operational and strategic goals.
There are 3 main characteristics of a KPI:
• Practical – KPI’s must integrate well with an organisation’s business processes.
• Quantifiable – KPI’s should be clear and be measurable. It is important to remember that KPI’s are not company goals or target in themselves, but they help an organisation understand how close or far they are from their goal.
• Actionable – KPI’s can be put in practical use if they are not meeting the desired target.
KPI’s allows business owners or managers to get an overview of how their business – or individual departments – are performing at any given time.
To have a meaningful impact, a KPI must be based on legitimate, cleansed and classified data and must provide context that echoes business objectives. KPI’s must be carefully defined so that any external factors, beyond the control of a company cannot interfere with them. KPI’s should also be time specific and divided into key checkpoints for accuracy.
Few examples of KPI’s are as follows:
• The number of new customers acquired
• Customer profitability by demographics and products
• Customer segments by profitability and demographics
• Number of sales by agents / Channels
• Number of sales by marketing campaigns
• Amount of waiting time for delivery of customer orders by Channels
So Why are KPI’s important:
- Measure your Targets – One cannot manage what they do not measure. If you have a goal set and you are not able to track it in an automated fashion regularly, your goal post either keeps moving, or worst, is not met. If your goal is to increase sales by 5%, your KPI will show you how close or far are you to reaching your target. It gives you the opportunity to see where you’re going wrong and subsequently make decisions that help you reach your goals faster. This is one of the most significant uses of a KPI.
- One version of Truth – KPI’s are generally displayed in a reporting dashboard. At the executive dashboard, the main critical KPI’s from across the departments are consolidated and shown in one place, where as individual departments may have more KPI’s at department level. This ensures that all levels of organisation track or monitors the same number and there is only one version of truth.
- Visibility of Important Information - - KPI’s provide an immediate snapshot of the overall performance of your company. When you’re in a highly competitive market, that information can be a crucial part of your attempts to gain competitive advantage to your competitors.
- Encourage Accountability – KPIs are also valuable in helping promote individual and departmental accountability to the greater organization, as well as corporate accountability to shareholders and other interests.
The real-time data that KPI’s provide allow you to make systematic adjustments so that you’re not left making frantic changes at the end of each month to reach your goals.
Having the above information to hand daily through an automated process increases the efficiency of each department and helps them to action and dedicate time in driving the department towards its goal.
About the Author: Sarbani is the Managing Director of ei²® a consultancy specialising in #data #insights #performance