Collecting the right numbers equals a big payback. For any business, utilizing the correct measurements, sometimes called KPIs or key performance indicators, will determine if the business is slated for a big profit or huge loss. The information generated from these KPIs are significant in helping enhance and improve the overall operations of a business. Without these measurements, a business is operating in the dark. KPIs provide a business owner/manager the “big picture” view of a business as well as specific information about the effectiveness of the company’s products, services, and various departments.
Analytics data is used heavily in the sports world today. There are an unlimited number of signs used to gauge the effectiveness of a team. The same philosophy holds true for any business. The key is to select and collect data which have a direct impact on growing profits as well as sustaining a business for the long run. Here is a list of some of those KPI examples:
- Income
- Costs
- Cost of sales
- Website visitors
- Outcomes of specific marketing initiatives
- Keeping customers or losing customers
- Product rebates
- Quality assurance
- Employee attrition
- Accounts receivable
- Consumer dissatisfaction
Every business is different. Therefore, the following are some suggestions for every business owner/manager to consider when picking which KPIs to use. After all, collecting the right numbers will equal a big payback.
-
Avoid Getting Stressed Out
Pick the appropriate KPIs which will give the best indicator of business success and failure. With the multitude of measurements to select from, it is very easy for the business owner/manager to become overwhelmed and stressed out. So, take a deep breath. Management should focus only on those metrics or data points that actually assist the business in reaching its various goals and objectives. A business could lose sight of its “big picture” goals if the business collects measurements which don’t move the needle towards profitability.
-
Pick the Appropriate Measurement
Collecting data is important. As stated previously, the foundation for business success hinges on picking the metric or metrics which actually paint the picture of success. A business must rely on measurable and timely KPIs in order to reach the heights of success. The metrics selected must be related and connected directly to the overall goals and objectives of the business.
-
User Friendly is a Necessity
Some business owners/managers are not “numbers” people. Their eyes glaze over once the discussion shifts to numerical data. Therefore, it is imperative for the selected KPIs be easy-to-understand and pertinent, especially for those non-financial business owners and managers. If the metrics aren’t fully understood by certain managers, then there won’t be a commitment by those managers. As a result, in order for there to be “buy in,” selecting the most appropriate KPIs and educating their importance to managers will go a long way in ensuring their compliance.
-
Numbers Must Be Accurate and Reliable
We’ve all probably heard of the term – “garbage in, garbage out.” To ensure valid KPIs output, a business owner/manager must ensure that the collected inputted information is not flawed, outdated, or not dependable (garbage in). Otherwise, the output will not be reliable or helpful (garbage out). Therefore, prior proper planning as to what metrics should be collected prior to the start of collection should help reduce the chances of gathering imperfect data.
-
Fulfillment Needs to Be Manageable
Gathering and examining KPIs will only be successful if the person in charge utilizes and implements the steps required to improve the performance of the business. Ignoring or not using the collected data will certainly not improve business operations. In fact, the whole exercise in collecting measurements will then turn into a waste of time and money.
Collect What’s Essential
Start small in collecting measurements. After realizing positive results, it then might be easier for management to expand and accumulate additional KPIs. However, it is critical to only collect those key performance indicators that are crucial to helping a business succeed in addressing its short-term and long-term goals. When it’s all said and done, collecting the right numbers equals a big payback.