Key Performance Indicators - Use Your Data to Improve your Business
What are KPI's and Why Are They Important for Your Business?
KPI's (Key Performance Indicators) are metrics used to measure and track the performance of a business. These metrics are used to measure if a business is meeting its goals and objectives, improving performance, and driving success. KPI's are important to businesses because they provide an accurate view of how a business is performing, enabling businesses to identify areas where they need to improve.
Types of KPI's
There are four main types of KPI's which can be used to measure and track performance in different areas of the business. These KPI's are safety, quality, cost and delivery:
- Safety: Safety KPI's measure and track the health and safety of employees, customers, and other stakeholders. Safety KPI's can include measures such as employee injury rate, number of safety incidents, number of near misses and number of safety violations.
- Quality: Quality KPI's measure and track the quality of products, services, and processes. Quality metrics can include number of defects, customer satisfaction rates, and quality of service.
- Cost: Cost KPI's measure and track the cost of operations, processes, and materials. Cost metrics can include cost per unit, cost of production, cost of sales, and total cost of ownership.
- Delivery: Delivery KPI's measure and track the delivery of products or services. Delivery metrics can include order on-time rate, average delivery time, and customer service response time.
KPI's are an essential part of any business, providing vital information on the performance of the business and identifying areas which need to be improved. By tracking and measuring the correct KPI's, businesses can ensure they are focusing on the right areas of their business and have the data to make informed decisions.
Your KPI's should be reviewed at least once a quarter, although some companies may prefer to review them more often (weekly or monthly). To fix the root cause of bad KPI's, you must first identify the root cause of the issue. This can be done by analyzing the KPI's, conducting surveys, researching industry trends, and talking to stakeholders. Once the root cause is determined, actionable steps can be taken to address the issue, such as increasing advertising budget, hiring more personnel, or changing processes.
How Can Knowing Your KPI’s Help You?
Some of the measurable improvements businesses can expect by monitoring KPI's and utilizing the data include:
- Increased efficiency: Monitoring KPI's can provide businesses with real-time data that can be used to identify areas of inefficiency and allow managers to make changes to increase efficiency.
- Reduced costs: By measuring KPI's, businesses can identify areas where costs can be cut and areas where investments need to be made.
- Improved customer satisfaction: Through monitoring KPI's, businesses can gain insights into customer behaviours, preferences and trends, allowing them to better meet their customers' needs.
- Improved performance: By measuring KPI's businesses can assess the performance of their processes, services, and products and make adjustments as necessary to ensure optimal performance.
- Increased revenue: By understanding the performance of their business operations and customer behaviour, businesses can make informed decisions to improve revenue.
Where Do I Get the Information to Record My KPI’s?
Collecting data to create KPI's involves a few steps. First, you need to decide on the type of data you want to collect. This should be based on the goals you have for the KPI's you want to create. Once you know what type of data you need, you can start the actual collection process. You can do this by manually going through your records, or by using software or applications to automate the data collection process.
Once you have the data, you need to organize and analyze it to create your KPI's. This includes sorting the data into useful categories, and then analyzing the data to identify patterns that can be used to measure and track the performance of your business. After you have your data organized and analyzed, you can start creating your KPI's, and evaluate their effectiveness in meeting your goals.
For example, If you have a goal to increase your quality, you may measure the amount of call backs you get in a week or month, then choose a goal for reduction (5%, 10%, 25%, whatever supports your companies goal). Let’s say that after collecting your data from recent months, you notice you have a historic average of 10 call backs/month. The first thing you will have gained is a concrete set of data rather than your assumption, or gut feeling, that we all often use when trying to maintain a pulse on the performance of our company. Knowing your labour costs to perform repairs and revenue lost during this rework, you can start to see the cost of not measuring KPI’s. Second, you can now set an attainable goal for improvement.