If you have managed a business for any amount of time, the phrase “key performance indicator” is probably not new. While it’s a term that gets thrown around a lot, it is often not fully understood.
At its most basic, a key performance indicator (KPI) is a metric that helps you understand how your business is performing. KPIs can help point your company in the right direction when it comes to following strategic goals to increase your client base or revenue stream, as well as other critical aspects of your business. Effective KPIs must be:
· Quantifiable and well-defined;
· Explained and clearly understood throughout your company;
· Crucial to achieving a well-defined goal; and
· Applicable and tailored to your company.
There are a few broad categories to consider when choosing KPIs relating to financial, customer, process and people metrics. Here are a few basic ones to start off with:
This hardly goes without saying. Every business is in the business of making money. Even if this has nott been a well-defined, specified KPI, it is likely something that you think about and take into consideration on a daily basis.
Along the same lines as #1, considering your costs (or how to decrease them) is a basic KPI that will be applicable to nearly every business.
3. Customer Satisfaction and Retention
This is another pretty simple KPI to start looking into. The logic is pretty simple – keep customers happy and they will keep returning.
4. Employee Turnover Rate
High employee turnover can be a huge expense for a company. If this is an issues for your business, it might be time to take a look at your company culture, work environment, and compensation packages.