Key Performance Indicators (KPIs) are often referred to as essential business knowledge that is crucial to driving success. If your business isn’t currently using them, especially if you’re just not achieving the results you’re looking for, it might be time to start integrating KPIs into the way that you work. There are some very good reasons why they are necessary.
The magic of KPIs
KPIs are essentially a yardstick for business progress. They have enabled many an organisation to switch from reactive goal setting to a much more proactive and effective approach. Although KPIs are goals they are much more than just a basic metric. Together they make up an actionable roadmap that can be used to steer the business along the right course, to monitor progress, stay on top of certain goals and to ensure that your business strategy continues to be effective.
Why use KPIs
Monitoring business progress is an essential component in ensuring that you’re moving in the right direction. There are multiple different ways to do this but using KPIs tends to be the most effective for three reasons:
KPIs connect customers and brands
More often than not, customer satisfaction appears in KPIs, especially with respect to securing customer loyalty. Using this metric can help to focus on who these customers really are. A good understanding of customers means the business will be better equipped to provide products or services that are well suited to them and to really understand what it is that makes people choose this product or service over another. Businesses that don’t have customer insight often fail so this type of metric can be central to progress.
KPIs extend across the entire business
All too often goals and objectives are being set at management level and are failing to trickle down to those who are actually doing the legwork every day. Using KPIs provides a clear and unambiguous structure that includes both values and goals. From management down, everyone in the business can understand them and work towards them, finding new and innovative ways to achieve more and to add value. The end result is that everyone in the business is contributing towards its growth and development and so the entire enterprise is moving forwards as one.
KPIs help to improve financial management
If you’re working with financial KPIs you’ll quickly be able to see where existing approaches to financial management are just not working. From balance sheet and cash flow to profit and loss, using KPIs forces business owners to start taking responsibility for the financials down to the most minute detail. This not only results in the ability to meet those KPIs but a much better grasp of financial competence too.
Working with KPIs can create significant competitive advantage once you understand how they operate and why they are so essential. In fact, it may be difficult for any business to really progress if they do not form part of an ongoing approach.
Find more business tips and advice by getting in touch with Brian Doubleday today.
