A guide on how to set the right key performance indicators (KPI) for your business.

Metrics and KPIs for Your Business

Let's break down the best approaches to setting the right goals for you business. We'll talk about what are the key performance indicators, how to set and monitor them and what's most important - how to achieve those.
When was the last time you reviewed your metrics?

There is no need to emphasize the importance of metrics and KPIs for each and every business. We believe you know that and have already become a specialist in calculating and monitoring different types of metrics. Another question is if you are sure that you measure the right metrics and KPIs.
First of all, it is better to clarify the difference between those two notions so that everyone is on the same page.

Metrics - are quantifiable measures that can be used to assess different parts of the business process. For example, you can see how satisfied your customers are with your product with the help of CSAT (Customer satisfaction rate). By measuring NPS (Net promoter score), you will understand how loyal your customers are and if they would recommend your company to someone they know.

Key performance indicator (KPI) - is a subset of metrics that are used for performance measurement. KPIs should be always measurable so you could understand if you were able to achieve your strategic goals. As an example, you want to sell 2000 units of your product in the next quarter. When you set your target that way, it is easy to measure the progress and apply necessary steps in case the achievement of the KPI is under the risk.

If you track relevant metrics and set challenging yet achievable objectives and KPIs, then you get a powerful tool to drive your business. You will be able to receive the following benefits:

  • monitor and measure the performance of the whole company, each department, and every employee;

  • make your vision transparent to your employees, thus moving into one direction as far as all metrics, plans and taken steps are clear;

  • reveal hidden issues and obstacles that might go unnoticed during some period of time;

  • improve decision making by setting clear and measurable goals, adjust your strategy based on factual data.

There is no use in setting up KPIs and metrics if you do that only for the sake of having them. Such an approach is totally irrational and can result in a waste of your time and resources, discourage of your employees as no one likes to do useless work, and accumulation of old and new problems. Unfortunately, a huge amount of organizations made such mistakes at least once, but it is never too late to admit that something was done wrong and correct it. If to talk about the correct way of choosing metrics and setting up your company's KPIs, we can define the following principles:

  • understand what metrics are vital for the existence of your business (like net income or sales revenue);

  • start monitoring processes related to those metrics and set up objectives and KPIs to improve them;

  • do not forget that you should cascade your KPIs across an organization so that each department and employee is involved in the achieving of a common goal.

Don`t think only about data when you set up your KPIs, think about employees too, because they will be the ones to achieve them. Your goals should be challenging yet achievable. In that way, you won`t discourage your employees with unrealistic tasks but will help them to progress, move forward, and drive your business` growth. Concentrate on the most problematic spheres that require the most attention and improvement.

For example, if to talk about the sales department, you might want to increase the number of new contracts signed per quarter by 10%. Then you analyze the work of the department and sales agents in particular in order to understand what exactly requires improvement. It can be the underperformance of specific agents, outdated sales scripts, weak work with leads, or anything else which is relevant for your situation. Due to constant monitoring of the chosen metric as well as implementation of the improvement plan, you`ll be able to measure your result at the end. Moreover, if you keep abreast of all processes during the quarter, you`ll be able to adjust your actions in case something doesn`t work.
This method has shown its effectiveness, so just make sure that you monitor the right metrics and KPIs that help you grow your company. Do not forget to use modern tools for visualization of you data to make the process easier and more effective.

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