We can learn a lot about a company’s business model just by examining their KPIs. Whilst helping our clients get the most out of their business through efficient strategic reporting, we often find that companies rarely harness the true potential of KPIs. In this article, we’d like to share five common approaches we’ve noticed our most successful clients take in creating their KPIs.
Focus on your Strategic Objectives
The first step on the journey to a good KPI is to identify your firm’s key objectives. The KPIs that you then choose should support those goals at all levels of your business. As every company is different, we would encourage bespoke KPIs to help you maximise the value of your reporting. Done well, personalised KPIs allow you to set yourself apart from the rest of the industry and encourage positive working practices. This can ultimately result in a variety of benefits, such as, improved profitability, better efficiency, more enjoyable working environment, greater return on investment, or higher customer acquisition to name a few.
Case study: Professional Services
Many firms measure the productivity of their staff through a utilisation calculation, but does it present you with an accurate view of your workforce? In some cases, we have recommended our clients move towards a smart utilisation metric which strips out time spent on staff tasks and training. This way you see the true utilisation of available time and staff aren’t tempted to skimp on development initiatives.
Less is More
Don’t bamboozle your staff with a litany of complex KPIs. Restrict yourself to a handful that are easy to understand. For maximum impact you need your KPIs to be instantly useful across your business. Consider using ratios as well as absolute values to get right to the heart of the matter and demonstrate key areas for improvement.
Case study: Sales
We often see cross-selling drives that focus on increasing the absolute value of a customer’s account with the firm. To compliment this, consider tracking the number of clients that accept a new service as a result of talking to your sales team. This gives a neat ratio to help keep you abreast of the campaign and it will naturally encourage your staff to regularly promote a variety of services to customers.
Your business changes and grows over time and your KPIs should too. We encourage our clients to implement a regular review and update cycle for their KPIs to ensure that they continue to deliver. Well-chosen KPIs can facilitate every stage of your company’s development, whether you’re starting up, undertaking rapid growth, or a mature SME.
Take the time to familiarise staff across the business with your chosen KPIs. Help them to understand why you’ve chosen these metrics and how they support the business. It’s also important to find an easy way to communicate the KPI progress to your team long term to encourage positive behaviours.
Case Study: Manufacturing
If production planning is tied up in Excel sheets it can take time for the reporting to hit your desk, particularly at busy times when you need it most. To overcome this, we provide our clients with dashboards that update automatically so the latest numbers are always available. This enables staff to spot the signs of a problem and work to address it before it becomes a problem for you.
Call to Action
The purpose of a KPI is to drive impactful action – so it’s important to make sure that the measures you choose to monitor are ones which affect the daily operations of the firm. We make a point to ask our clients what action will be taken if a KPI figure changes, and the answers are enlightening. There’s no space for vanity metrics here; make sure you are harnessing the power of impactful KPIs to drive your business forward.
“Staff will change their behaviour to meet the KPIs they’re held to. Consequently, you must measure what counts, otherwise you risk getting the behaviour you’ve asked for rather than the behaviour you desire.”
Reuben Barry, Director of Data Analytics Ecovis Wingrave Yeats
Understanding KPIs can bring real value to your business. A set of well-chosen KPIs can be a powerful force for corporate transformation and, together with suitable reporting, can empower staff to work proactively for the health of your business. A curated set of KPIs is an invaluable asset and will help you to navigate your business through feast and famine, confident that you’re making the right decisions at the right pace for your firm.
If you would like to learn more and have time for a chat, please get in touch.