Numerous companies are in the dark regarding how their business operates. They do have some insights into the performance of their business, but they are still somehow stuck with an idling company wondering where problems lay.
Using Key Performance Indicators, or KPIs is the best strategy for measuring the successes and failures of your business. By defining and tracking KPIs, business owners and managers can get an overview of how their business – or individual departments – is performing at any given time.
Here are ten good reasons why your company must start tracking KPIs the right way!
Why Are KPIs Important?
1. Monitoring company health.
Only a handful of KPIs is needed to measure company health. Businesses that track KPIs in categories such as revenue, processes, employees, and customers find it easier to stay on track and keep their income high.
2. Measure processes.
KPIs are often used to show if the company is achieving the strategic goals set by senior management. Multiple KPIs are used to measure processes such as quality indicators, productivity indicators, profitability indicators, etc.
3. Employee measures.
KPIs measuring employee productivity include hours worked, revenue generated, overtime, and job completion status. Measuring employee work hours can help a company understand how much time is needed to complete projects or if overtime is paid out for less productive work.
4. Customer metrics.
In addition to processes and employees, customer metrics are also of great significance. KPIs in this field can help a company track the number of customers, what revenue they generate, and even the customer acquisition cost – the amount of money spent searching for ideal customers.
5. Operation metrics.
Operation KPIs are an excellent way to help operations departments improve day-to-day operations. Operations managers can use KPIs to make sure finances, staffing, manufacturing, and even marketing are on track.
6. Handling finances becomes easier.
Companies that have KPIs and do regular reporting can prevent financial catastrophes. Knowing just how much money is coming in and going out of the business regularly gives a company enough time to react in case something goes wrong. Rather than fixing a problem at the end of the year, a company can make regular adjustments with KPI management tools.
7. Measuring progress over time.
A wise strategy for measuring a company’s progress is setting targets at the start of each year such as the number of employees, number of locations, gross margin, and even revenue. Then, a company can use weekly, monthly, and quarterly reports to stay on track with the KPIs and progress towards the goals set at the beginning of the year.
8. Make adjustments and stay on track.
By tracking KPIs, companies can notice more easily when they are in danger. Leading indicator KPIs help businesses predict what will happen in the future and their future results.
9. Solve problems and tackle opportunities.
Companies can use a combination of KPIs in a dashboard to solve problems or tackle opportunities. For example, a company in a sales slump can try to identify a handful of KPIs that can turn the tide. Or, prior to launching a new product, companies can test it out with a few clients combined with KPIs that will validate the product before it is launched.
10. Analyze patterns over time.
Companies that measure the same KPIs every quarter are able to detect patterns in their numbers. And, these patterns can be useful in various circumstances. For example, a company can predict their slow quarters and use that time to do something different, such as company-wide training or adjusting their strategy for the next year.
Are you struggling to keep track of your KPIs? HICO-Group is here to help! From KPI identification and building future-proof data solutions, we implement state-of-the-art BI concepts customized for your company that meet the needs of your business and market. We are masters in working with KPIs.
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