Metrics and KPIs (Key Performance Indicators) help you evaluate the performance and progress of your business, but you need to set and monitor them in the most efficient way possible if they are to work well.
The basics: what are metrics and KPIs?
- Metrics are the measures used to monitor each individual area of your business. So it might be conversion rates on an email campaign or leads from social media followers per month.
- KPIs are a specific way of evaluating those metrics – by checking on their development and aiming to improve them. They are the metrics that matter most and what you need those metrics to measure up to.
Why metrics and KPIs are so important
Productivity and efficiency are important in every business, and tracking your metrics and KPIs gives you a way of monitoring both. You can measure financial performance, reveal bad practices so you can fix them, and examine the overall performance of your business, as well as each department and every individual employee.
And all of this improves your ability to improve strategies and processes and achieve your business goals.
How to select metrics and KPIs for your business
The metrics you choose to measure with should be things that are essential to the continued success of your business. You can then set KPIs that measure your chosen metrics, and aim to improve the processes surrounding them.
We can’t tell you what KPIs to set: that’s down to your individual business and its specific goals. But be sure to narrow it down to your most important business goals – in terms of growth and maintaining your culture – and then look at how you can measure them. Maybe work backwards from a desired outcome to the necessary numbers or achievements that will get you there.
When you set KPIs, you should naturally be looking to improve the metric, so set targets that relate to them and keep your employees in mind. Their KPI targets shouldn’t be too easy to achieve, but they should be achievable or they’re likely to demotivate employees.
In other words, know the difference between realistic ambition and setting yourself up for failure.
The SMART model for setting KPIs
SMART goals are achievable goals:
Specific – KPIs need to be specific in order to be able to measure them successfully and know when you’ve achieved them.
Measurable – Your aim is to see an improvement, so they need to be measurable.
Achievable – As already mentioned, unachievable KPIs will demotivate employees.
Relevant – All KPIs need to be relevant to your organizational goals and strategies.
Timely – Without giving time constraints to KPIs, you risk never achieving them.
Let’s take expense payments as an example. You could set a KPI surrounding the total days taken between expense claims being received and reimbursement to the employee. Using Turbine to record, review and manage expenses online means you have a way to track this information, so you have the metrics to measure the KPI against.
In terms of ambition, your aim could be to reduce the time between receipt and reimbursement by 10 days. That’s a lot though – too much to aim for in one go. So set your initial KPI at, perhaps, three days below the current average and set a time to review the metrics, for example two months time.
You should then measure, review and alter your KPI until you achieve your objective for that metric, then keep it at the ideal figure to maintain your achievement.
Implement this idea across all the key areas of your business and you’ll soon see efficiency and productivity improve and your business blossom.