100 points to know about...
Inclusive project management

A company without clear goals is like a ship with no destination, it may roam at sea but it might never reach the shore. This is why the following lesson will address how to establish key business goals and the mechanisms that help achieve them. Therefore, we will talk about KPIs.

What are KPIs?

KPIs or Key Performance Indicators help companies measure their progress toward business goals. They are the quantifiable measurements that demonstrate how effective a company is at achieving its key business objectives. In other words, the strategic measurable values that help attain success towards what is key to the business.

Every company is different and has unique KPIs. A company could establish KPIs to track, for example, quality, timeliness, behaviours, finances, personnel performance or resource utilization, among others. To give you a better picture, here are different types of KPIs:

• Financial KPIs: focus on revenue and profit margins. For example, gross profit margin or revenues minus certain expenses.
• Sales KPIs: tied to tracking opportunities, closed sales and/or the volume of sales in a company. For example, sales by region or average monthly transportation costs.
• Customer KPIs: track customer satisfaction and customer retention. These should also include metrics related to employee performance and finances. For example, customer-support response times.
• Process KPIs: they track operational performance across the company. For example, the efficiency or quality of specific processes used to produce a product.

Why should companies track them?

KPIs provide objective information on progress toward an end goal that helps make more informed decisions. They support a company's business strategy and improves employees performance by helping them focus on what is important.

How to determine KPIs?

To reach business goals it is necessary to have a strategic focus and resist the urge to measure everything. This is one of the most important aspects of the KPI definition. Consequently, here are some best practices for developing the right KPIs.

Follow these general steps to determine them:

Remember KPIs are measurements of success.
Step 1: Identify goals and intended results.
What is it that you are trying to accomplish? Managers should remember that KPIs are measurements of success, therefore they should analyse how the company's goal(s) translate into positive and negative outcomes.

For example, a company's goal is to improve customer satisfaction and get good customer feedback. The established KPI is "Reduce customer service call periods to 5 min. on average". The intended result is to reduce waiting time for upcoming calls. Now, having the customer service representative reduce its call time may not be the best solution to achieve customer satisfaction.

Step 2: Clearly define the KPIs.
Once the analysis is done, managers should choose metrics that have meaning and relevance to the company's goal (established as Step 1 suggest). Then, define the level of performance/fulfilment they would want for each of them.

As a side note, there are many readymade templates online that can help managers define their company's KPIs. Although they should be mindful that KPIs must be catered to the company's strategy so, they ought not to rely solely on them.

Now, a good way to set strong KPIs is to use the SMART formula. This is, to set KPIs that are Specific, Measurable, Achievable, Relevant and Time-bound. For example, First call resolution determines how efficiently a customer service representative resolves an issue on a customer’s first call. Therefore, if the key business goal is to improve customer satisfaction, increasing first-call resolution may be a better strategy than reducing call time. So, a SMART goal could be "Increase first call resolution to 10% in the next 6 months".

Step 3: Visualizing KPIs
Numbers are hard to understand hence using appropriate graphs, charts, and tables allow data to be analysed, reported, shared and understood by everyone.

Step 4: Adapt when it is needed and Iterate.
A careful assessment of performance should be done periodically. Managers should keep their KPIs current by revising them and publishing any changes made to them so that teams and employees are always up to date.

How to measure progress using KPIs?

Once the KPIs are set and the process of data collection has started. It is time to determine how the data will be analysed for it to tell a story. Therefore, here are ways to help managers measure progress.:

• Actual performance (it measures how much it has already been achieved)
• Plan / Target performance (how much it needs to be accomplished)
• Forecast performance (how much is it going to be achieved at the end of a period, based on the actual performance)

Even though this seems complicated, in fact, there are many tools that can help managers track progress. Hence, in the next lesson, we will expand on this particular topic.