KPIs: What are they, and which ones count?
Why are KPIs so important? KPIs provide management with extremely insightful information at a quick glance. And, since KPIs are handpicked by management, they are guaranteed to focus on what’s most important to the company.
A handful of typical KPIs are beneficial to a broad group of companies, such as revenue growth, profit margin, EBITDA, working capital, etc. These KPIs should be tracked by most companies.
However, many of the most beneficial KPIs are those that are tailored for your specific goals and objectives. These can be both financial and nonfinancial KPIs. These tailored KPIs generally support many of the “typical” KPIs listed above.
Some of the most tailored KPIs are non-financial. Choosing the right non-financial metrics can be a daunting task, but these should be considered as important as financial KPIs. Non-financial KPIs can be very useful in tracking and locating a company’s pain points. This information can be turned into improvement points that drive the performance of financial KPIs. For example, a combination of customer satisfaction and retention KPIs analyzed in conjunction with customer acquisition cost and customer lifetime value KPIs can allow a company to take a more in-depth view of its customer base. It may prompt decision-making surrounding customers, such as recurring customer incentives, that may not have been considered in the past without the information provided by these non-financial KPIs.
Most importantly, your KPIs should evolve as your company evolves. KPIs are great tools to track strategic objectives of a company, but if they never change, then there’s a likelihood the measured KPIs are misaligned with the company’s current objectives. When a company begins its future goal setting, KPIs should be involved in the discussion - no matter the time frame.
The frequency of reviewing KPIs depends on the information you’re tracking. While many KPIs are reviewed monthly or weekly, some metrics, you might want to track daily. A daily KPI is most likely reviewed by production staff and supervisors. Daily KPIs should align with the goals of the quarterly or annual KPIs that are tracked by owners or management of the company.
For example, a manufacturing company might set a KPI for daily production; a metric that would be followed by production employees and supervisors. At the same time, a KPI for annual production may be a company objective, which would be viewed and followed by company owners on a monthly, quarterly or annual basis. Following these KPIs helps the employees of the company, and their outputs, to stay aligned with goals and objectives set by management.
When 415 Group examines a client’s KPIs, we use a combination of both historical results and industry trends for analysis and goal setting. The main consideration is ensuring the industry averages are generated for the appropriate size of the company, as these can significantly shift based on the size.
Sometimes, a historical database to view trendlines may not be available. In that case, we compare industry benchmarks for similar-sized companies in the same industry, and, after the initial set up, certain obtainable goals are put in place with appropriate plans to achieve those goals.
415 Access assists in determining and providing KPIs that are beneficial toward meeting the goals of your company. We offer customized KPI reports that help remove all the ancillary data, so the focus remains on what your management team determines is most important.
If you’re interested in setting meaningful KPIs that can drive the future of your company, reach out to 415 Group today.