A Key Performance Indicator (KPI) is a quantifiable measurement for gauging business success. You need to focus on the issues and fires burning today-not tomorrow, so the most important consideration is to improve strategies that deliver optimum results.
A company must establish its strategic and operational goals and then choose the KPIs that best reflect these goals. One of the most important questions that should be asked is: What exactly does the company do? Each industry is different, but there are quantitative and qualitative factors that can influence a company’s KPIs. The most important factor is the quantitative analysis, which involves looking at revenue, expenses, assets, liabilities and all the other financial aspects of a company. This information will help you to gain all the details about the company’s future performance. A company’s long-term success is driven largely by its ability to maintain a competitive advantage, and keep it. A company’s business model will help you decide on what KPIs to focus on. For example, if a software company’s goal is to have the fastest growth in its industry, its main performance indicator may be the measure of revenue growth year-over-year.
CPM Solutions and KPI Analysis
A Corporate Performance Management (CPM) solution allows companies to make better business decisions by enabling access to information whenever and wherever possible through a centralized location. CPM solutions can be used to calculate KPIs and automate processes that otherwise are performed with spreadsheets. Having real-time data well-structured in a CPM solution improves the analysis process, decision-making time and optimizes productivity.
KPIs will allow you to measure specific goals designed to meet your business objectives. You must start knowing your objective, determine your goals, and finally use KPIs to measure how successful you are in meeting your goals. Different businesses have different KPIs depending on their respective performance criteria or priorities. At the same time, the indicators are usually following industry-wide standards.
Characteristics of KPIs
Quantitative: Can be presented in form of numbers. Quantitative KPIs can be measured accurately which makes them reliable sources of information
Qualitative: Reflect how far you achieved your business objectives. Qualitative KPIs are very reliable since they are directly linked to your business objectives. They can instantly tell you how successful you are in meeting your branding and/or sales objectives
Practical: Integrate well with present company processes
Directional: Help to determine if a company is getting better
Actionable: Can be put into practice to affect desired change
How to Choose KPIs
- Define clear business model and processes
- Set up requirements for your business processes
- Determine variances and adjusting processes to meet you short-term and long-term objectives
- How to Use Key Performance Indicators
Once an organization has analyzed its mission, identified all its stakeholders, and defined its goals, it needs a way to measure progress toward those goals. Since KPIs reflect the “critical success factors” of an organization, they’ll be different for each organization. Management teams need to consider how KPIs are collated and reported internally – whether they make sense when aggregated and reported at a group level, or would be more usefully reported at business segment level.
Productivity is the cornerstone of business success. CPM solutions will allow you to have more time to focus on the critical issues that drive the company’s profit. Productivity can be enhanced through technology, automation, and improving business processes. KPIs will give you the ability to adapt to changing situations. Nothing ever goes as planned. The world of business is full of surprises and unforeseen events. Using different indicators will allow business owners to respond to circumstances with the ability to change course and act with confidence.