Seize the Power of KPIs for Long-Term Success
Oh, how we love a good KPI (Key Performance Indicator). These bite (byte?) sized nuggets help us understand an increasingly complex world. They summarize business data into meaningful metrics that we can compare to yesterday, other departments or locations, and our competitors. KPIs have even followed us home — many of us wear technology on our wrists that delivers daily KPIs about our health.
But not all KPIs are created equal — some can even mask the truth. How can you create a holistic KPI strategy within your organization that promotes success? We invite you to read a new eBook on the topic, entitled Foster Long-Term Profitability with Must-Have KPIs. Here we highlight some of the eBook’s findings combined with our own perspectives on the value of KPIs.
Monitor the “good” KPIs
There are hundreds of KPIs spanning every aspect of a business operation, from finance to human resources, to manufacturing and IT. If you try to actively monitor too many metrics, you risk information overload. Instead, pick “good” KPIs. A good KPI is one that measures your company’s progress toward a stated goal. You’re likely familiar with the SMART goal tool. It states that goals should be Specific, Measurable, Achievable, Relevant, and Time Bound. When a goal is made up of measurable, actionable targets, it’s immediately clear whether the company is on track to achieving it. KPIs remove ambiguity about your company’s performance.
A good KPI will spark discussion and lead to action. For example, if you have a goal to boost employee retention rates, then employee turnover and absenteeism rates are two good KPIs to monitor. If you notice an increase in these metrics over time, it’s time to make changes in your organization.
Be sure to get the big picture
An individual KPI only tells part of an overall story. For example, while your monthly sales KPI may be trending higher, it doesn’t necessarily translate into increased profitability due to variabilities in your total cost-of-sale. Similarly, new customers gained month-over-month sounds great, but remember, it costs much more to bring on a new customer than it does to retain an existing one. And finally, KPIs showing shorter fulfillment times may seem ideal until you match them to average order volume. The point is, it often takes multiple KPIs to form an accurate picture.
How to get started
Armed with your company’s goals, it’s time to start measuring. However, many organizations aren’t able to effectively leverage KPIs because their technology cannot efficiently aggregate, process, and present them on demand. Modern cloud accounting applications, like Acumatica, were built to provide ready access to dozens of KPIs, in the form of customized user dashboards, reports, and tables.
When you empower your teams with the ability to measure their performance in real time, good things happen. Organizations can boost sales, lower costs, maximize resources, and improve profits — and gain clear insights into how and where it’s happening.
If you’re ready to design and execute a holistic KPI strategy within your organization, we encourage you to read more in the new eBook, Foster Long-Term Profitability with Must-Have KPIs. And reach out to us with your questions.