Key Performance Indicators: K(eep) P(utting) I(n) the Hard Work

A Key Performance Indicator or KPI is a measure that is placed against a business activity in the form of a value or percentage that can demonstrate whether an organisation is achieving its objectives. These KPIs are set at all levels of the organisation to evaluate each department or process’ success at achieving its goals. Overall KPI’s or High-Level Indicators show the total business performance and are a certain set of indicators whereas departmental indicators or low-level indicators are specific to their departments deliverables for example Sales, Marketing, Finance and HR. A good reference to use if you are setting KPI’s for the first time, is to also use the S.M.A.R.T. principle much like objectives. This stands for Specific, Measurable, Attainable, Relevant and Time-bound. If these are asked as questions, each KPI needs to provide the answer.

For a small business or start-up it might feel like they do not have any relevant KPI’s to measure as the operations of the business are still new with little to no historical data. It is important to track all wins and improvements no matter how big or small. Weekly growth on sales revenue could already show that the organisation is growing and to keep the team motivated. KPI’s can be measured weekly, monthly, quarterly or annually.

It is important to monitor KPI’s as this is the diagnostics tool to indicate what the position of the organisation is. When starting a new business it is expected to have some negative results until the revenue streams increase and become more frequent but if any adjustments are required to the strategy do not hesitate to make that change as it could be the difference between closing the business and surviving to operate for one more week.

It is easy to have KPI’s based on financial performance as the data is readily available based on the sales history and financial statements like the Balance Sheet, Income Statement or Cash Flow statement. But don’t hesitate to also try including measures that relate to other business practices like increasing the social media following by a certain percentage or customer satisfaction based on repeat business, social media engagements and word of mouth.

Lastly, it is important to remember that before you can set the KPI’s there has to be a business plan for the organisation with clear objectives and a strategy. It will be difficult to know what the KPI’s should look like if you are not clear on what the objectives are. Use tools like SOSTAC to help you put together a plan for your SME.

Thank you for taking the time to read my blog.

Here are some additional sources available:

• What are Key Performance Indicators?
• The 10 Essential KPIs Your Small Business Should Be Tracking
• Track These Key Performance Indicators (KPIs) for Your Small Business

Regards,

Merike