There is a primary problem with measurement.  You can measure a million different things.  Measure too much and you’ll drown in a sea of meaningless data.

Some measurements are more important than others.  Key Performance Indicators (KPIs) are measurements of the critical parts of a system.  Measurements that don’t help you make improvements to your system are worse than worthless:  they’re a waste of your limited attention and energy.  You don’t have time to pay attention to everything – just a few key measurements that actually matter.

It’s easy to fixate on things that are easy to measure instead of things that are actually important.  Many of my clients think that their business’ revenue is pretty important.  It is, but only to a point: revenue is important only because it’s a key component of profit.  It doesn’t matter if you collected $1,000,000 in revenue if you spent $2,000,000 to make it.  Alone, revenue is not a Key Performance Indicator.

Here are a few questions to identify a businesses’ KPIs:

Value Creation:  How quickly is the system creating value?  What is the current level of inflows?

Marketing:  How many people are paying attention to your offer?  How many prospects are giving you permission to provide more information?

Sales:  How many prospects are becoming paying customers?  What is the average customer’s lifetime value?

Value Delivery:   How quickly can you serve each customer?  What is your current returns or complaints rate?

Finance:  What is your profit margin?  How much purchasing power do you have?  Are you financially sufficient?

Any measurements directly related to these questions are probably KPIs.  Anything that is not directly related to a core business process or a systems’ throughput is probably not.

Try to limit yourself to only three to five KPIs per system.  If you overload yourself with too much data, you’ll be far less likely to see changes that are critically important.  You can always dig deeper into the data if needed.

Find your system’s KPIs and you’ll be able to quickly get a sense of where your business is and in what direction it is headed.

Need help determining the Key Performance Indicators in your business?  Call and schedule an appointment 931-456-4910.  I’d be happy to help you determine what they are for your business.