Does your business use Key Performance Indicators (KPI’s)? What is their purpose and when were they last reviewed?
KPI’s are a tool used to help businesses track performance, identify issues and measure success against a goal and align performance with strategic direction and goals.
They are applied to businesses as a whole or to projects and components within a business and ideally should answer a question relating to performance.
Examples of questions KPI’s can be used to answer include:
- Is my business profitable?
- Can my business cover its debts in the case of a decrease in turnover?
- Is my business in a position to grow for the future?
- Is my customer base expanding?
To test your KPI’s apply the following test:
- What question am I asking to measure my goals?
- Does the KPI provide a suitable answer?
- Is there a way the KPI could provide a better answer?
For example, if your business has set a goal around improving efficiencies you may be asking, “Has the manufacturing efficiencies of Product Line A improved over the last two months?” A KPI could be developed using the Gross Profit Ratio for this line allowing you to track the trend. This means you can answer the question and determine whether you have been successful in improving efficiencies.
You may have KPI’s in place, but are they effective and relevant to your business? Contact us for an obligation free review.