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Developing KPIs for your Business

The competitive environment that businesses operate in makes it imperative to have the right systems in place in order to gauge business performance. Reporting of performance against Key Performance Indicators (KPIs) among your team will allow informed decisions to be made.

KPI selection and adoption should be a considered process, with periodic refinements based on market and operational realities. In order to develop appropriate KPIs for your business, you should consult with staff, key suppliers and customers in order to identify the most important indicators of business success. Consulting with these groups will allow you to focus on measuring and reporting on the things that really contribute to the success of your business.

You will need to address the following in order to successfully develop relevant and measurable KPIs:

• What are the critical success factors of your business?
• Why are performance measures being introduced?
• How will performance measures be used?

When developing your KPIs with the management team it is important to emphasise that these performance measures will be used in order to keep the business focused on achieving its goals. The management team should consider how the KPIs fit with other strategies, especially highly visible ongoing enterprise-wide initiatives such as winning profitable customers, improving quality of service, etc. Stress that these new measures enable everyone in the firm to focus on achieving business success.

Importantly, your KPIs should be easy to measure and allow for action to be taken immediately. Once you have created your draft list of KPIs, you should consider the following questions:

• Have you covered all critical success factors?
• Can you easily sustain the number of performance measures that you are proposing to use?
• Is each performance measure providing useful information that can be used to analyse and improve key processes in the business?
• What happens when a KPI target or goal is not achieved?