KPI stands for Key Performance Indicator. KPIs is simply the plural, usually referring to a pool of every KPI that is relevant to you or your business.
Most corporate managers, business analysts and staff of well structured companies know the meaning and value of KPIs to their company’s success. But some do not know the full value of KPIs. They see them more as a management performance grading tool and a buzz word to use at management meetings. And much worse is the fact that most people do not even see the need for having and monitoring KPIs in their professional life (not just for the company).
In today’s special post, I’ll be helping you understand the full value of having KPIs for your professional life and your business/company. The right way to identifying those KPIs. How to monitor them and use them to make intelligent decisions that will propel your career and company forward faster than ever before.
VALUE OF KPIs
Key Performance Indicators (KPIs) are the aspects of your business or professional life that you can reliably measure and monitor, and that most reflect your level of success.
The things to note in that definition are:
- Aspects of your business or professional life: KPIs are about your business or professional life. And so mustn’t be gathered from sources external to you or your business. The economic growth of Nigeria shouldn’t surface as a KPI for you. You have to focus on things that are internal to you and your business.
- Reliably measure and monitor: In the business world, data makes all the difference. The businesses with the most data have a better chance of success than one without as much data. And that is why there is a multi-billion dollar industry built entirely to sell data, called, market intelligence. But the most beneficial data you can ever have is the one you get directly from yourself and your business. You have to set up a reliable way of measuring every major aspect of your life and business. And monitor them, putting in place a system that shows you how each aspect is trending: Improving or degrading.
- Reflect your level of success: In reality, no two companies or persons should have the same KPIs. Even if they are competitors. Your KPIs should be carefully picked. You will want to focus on the aspects of your life or business that most reflect your success or failure. And as long as your company has a unique business strategy some of your KPIs will be unique.
CHOOSING THE RIGHT KPIs
KPIs are a means to an end: your success. They help you reach your goal as fast as possible and to maintain your success. In business failure is not the worst thing that could happen to anyone, In fact, the most successful businesses today built themselves from the ashes of their failures. They used every failure they encounter to build a better and stronger business strategy. The worst thing that can happen to anyone in business is to succeed and not know why. It’s the kind of success you can’t keep and can’t learn from. It’s like winning a gamble. It can’t be repeated and it’s gains are soon lost.
So, much more than getting to your success faster, KPIs are to help your understand your business and professional life deeply. To give you the factual explanations behind your success and failures. To prevent you from groping in the dark. To help you find a strategy that works and can be reused, then updated and reused.
To pick these KPIs, you first have to measure everything about your life and business. Record and monitor them, they are your performance indicators. Soon, depending on the nature of profession or business you are in, you will notice a few indicators that most reflect your general performance. These ones are what will form your Key Performance Indicators. They are the one you want to monitor more closely and consider in every business strategy you’re making. But it’s recommended that you keep recording everything. Occasionally, the business environment changes, and an unimportant performance indicator becomes a key performance indicator. And in almost all cases, the only way you’ll know is if you keep looking at all the performance indicators once in a while, and you suddenly notice one indicator showing more an unusual trend.
STRATEGIC USE OF KPIs
I used to work for the Africa operations team of a leading international telecoms company. We measured churn rate, market penetration rate, revenue growth, customer base growth, average customer lifetime value, average revenue per user (ARPU) and promo success. We do this everyday, holidays and weekends inclusive. We check with projection, with last week’s data, last month’s data and last year’s data. It was a lot of measuring and monitoring. We knew the cause of every sales spike or slump. And we were almost always beating our targets, because we knew and monitored everything about the business. I was in charge of making most of the analysis and daily reporting. I saw firsthand how powerful data can be. And the company flourished because it had managers that use the analysis reports and even ask for endless adhoc reports. Everyone worked with data, and very current data, not older than one day. And that is one of the few places I have seen a correct strategic use of KPIs. Not for employee rewards or punishment but for company success.
KPIs work miracles when they are immediately used and everyone from the tech team to the CEO have the same very current data. And it also applies to your professional life. You need to work with today’s data, not last year’s or your predecessor’s. You need to stop thinking you are doing better because you have more resources, you need to consider your return on assets (human and capital assets) whether it’s going up or down.
When it comes to KPIs, whether you are a company or a professional, you need to measure, strategize, propagate and innovate. And measure again.
Finally, don’t forget to contact us for all your corporate Excel training needs, custom KPI dashboards, Excel VBA and business data analysis outsourcing.