Key Performance Indicators – Your Business Compass
Every business needs a sense of direction; without this it is nearly impossible to monitor success. KPI’s allow a business to assess their current situation and set desirable targets for the future. The monitoring of these targets can be translated into actionable tasks towards a desired strategic direction.
Lead and Lag KPI’s
A key element of managing a business’s performance involves ‘leading’ and ‘lagging’ KPI’s – but what is the difference between the two?
A lagging KPI is focused on measurements of a business’s output and are typically simple to measure but difficult to improve. For example, a business has a goal to increase sales by 10%. The lagging KPI for this would simply be the current sales, whilst the target KPI would be 10% more than the current figure.
However, the question must be asked as to how this new sales KPI will be achieved? This is where leading indicators come into play. An example of two leading indicators for increasing sales could be the number of new leads coming in per day, and the click through rate on the company website. These may be more difficult to measure, but by breaking a KPI down into these leading indicators, it’s much easier to generate task-oriented strategies towards your business goals.
The Importance of a KPI Monitoring System
Once you have established your ‘lagging’ and ‘leading’ KPI’s, it is important to have a system in place to monitor these KPI’s and track their progress. This system should combine financials, strategies, obstacles, and action plans and should be compiled in a single location for analysis. This location should be digitally stored and accessible to all employees.
The layout of the KPI system should be easily interpretable. Businesses should use a combination of graphs and traffic light displays to more easily track progress. It is also important to note that KPI’s do not necessarily need to be analyzed on an individual basis. By comparing similar KPI’s, or lagging and leading KPI’s, a deeper analysis is likely to be provided. For example, by comparing the number of fatal injuries on a work site to the number of employees who have completed a first aid training course, a business may observe that a possible reason why fatalities have increased is due to the lack of first aid trained employees.
Individual KPI’s and Accountability
Within a business exists various departments, each department has its own employees specific to that department, and each employee has their own duties specific to that department. This being said, it is important to distinguish between general business KPI’s and KPI’s which are assigned to specific employees.
General business KPI’s can be used to measure company wide performance. For example, total sales, total complaints and employee turnover. However, it is also important to assign KPI’s to individual employees or teams. This boils down to the importance of accountability where employees are aware of their performance and can compare their actual results to their original target. This allows employees to assess their performance at any point in time rather than waiting for scheduled performance reviews.
By encouraging a culture of performance management and accountability, an employee is not only able to take corrective actions where KPI’s do not meet their targets, but can also rearward themselves for meeting or beating their targets. This has the ability to increase morale and praise within a company, as well as provides the opportunity for feedback when necessary.
MAUS KPI Dashboard
- Create a one-page KPI (Key Performance indicators) snapshot of your business
- Both cloud & desktop versions available
- Automatically import your accounting data from Xero and QuickBooks
- Compatible with MAC and Windows devices
- A common platform to engage your staff and review performance
- Instant reports that export to excel
- Multiple logins and permissions for employees, and managers
Guaranteed with the MAUS 30-day money back guarantee.