Key performance indicators (KPIs) are a practical, quantifiable way of tracking where your business is at and where you’re going. KPIs are central to your business’ success and imperative to your strategy. They instill accountability, track patterns, and drive results.
Create proactive and realistic goals.
Your team won’t be motivated to improve your KPIs if your goal is farfetched, but they also won’t be motivated if your goal is like low-hanging fruit. Choose a goal that is realistic and encourages each member of your team to be proactively challenging themselves. A good starting point would be researching the industry standard of your ideal goal and seeing how your company stacks up. Once you’ve set your KPIs and overarching goals, communication with your team is critical to ensure each member is being held accountable and doing their part to improve your KPIs.
Determine your timeline and work backwards.
Take your overarching goal and break it into measurable chunks, whether monthly, quarterly, or yearly. Starting from your top goal, work backwards to determine what you’ll need to accomplish on each milestone to ultimately meet your goal. Use these micro-goals to determine what KPIs will be necessary to track your progress. Be sure to mathematically determine specific objectives using measurable results.
When you’re differentiating your KPIs, it’s essential to determine your lagging and leading indicators.
- Lagging indicators measure final outputs. These are easy to measure but typically hard to directly influence. These are things like your total annual sales or labor cost, which are usually reactive of your leading indicators. That’s why you need to proactively incorporate leading indicators into your strategy.
- Leading indicators are harder to measure but easier to influence and improve. These are things like the number of unique visitors to your website or customer satisfaction. They can help you predict possible outcomes and track necessary steps to reach your goals.
- Take into account the time lag for leading indicators – KPI results from your lagging indicators are rarely immediate responses from your leading indicators. It can take time to see results. It’s important to be vigilant about your leading indicators because they’re not always accurate. If you’re seeing positive improvements in your leading indicators, it doesn’t always mean the final outcome will be positive.
KPIs serve many purposes, each one mutually beneficial. They’re a great way to use data to predict your company’s progress, to track your current goals, and is a powerful tool to sell yourselves to investors to gain capital. Your KPIs tell your company’s story, from where you are to where you’re going.
For more info on how you can be incorporating KPIs in your business strategy, contact Brand Iron today.