Do you set goals, KPIs or monthly indicators that allow you to track your progress throughout the year?
Well you should.
Here are some reasons I believe you should be looking at Key Performance Indicators (KPIs).
What are KPIs?
They’re indicators or measurements that businesses use to analyse the movement within their business and the track the performance of the business. They will show your movement in sales, leads versus closing ratios, marketing expenses against your return on marketing, the costs of doing business, average number of days it takes debtors to pay and they measure the year to year movement of expenses to track if you’re spending too much in certain areas.
To be effective your KPIs must be linked to your business objectives within your business plan. The KPIs you set for your business should underpin your strategic plan or business model. The main concern is that any KPIs used need to be specific to your type of business.
KPIs will vary for each business but generally speaking there are two types of indicators – lagging and leading.
Financial measures such as profit margin and return on capital are classified as lagging KPIs because they are calculated from the previous years’ financial results. On the other hand, drivers of business growth such as business development, customer service, human resources and internal business controls are classified as leading KPIs because they’re based on what’s coming up in the next 12 months. KPIs, cashflow forecasts, business planning and goals are all things every business should address at that start of the year.
Think of it as your new year’s business resolution. You need to sit down and formulate a move forward, just like in a game of chess, you need to be formulating with your next move.
Once you’ve set your KPIs, let your staff know. They’re the people that are going to get you there. Make sure they’re aware of what you want to achieve and what’s in it for them. Key staff members should also be given an incentive to meet these targets by way of a bonus, extra holidays or just some general flexi-time.
Goals are another form of personal KPIs and can be financial, reputational, cultural, customer focused or even community-based. Your objectives should also be SMART goals:
- Specific- easily understood, clear and concise, formulated to achieve the company’s vision and mission;
- Measureable – so they can be tracked and judged whether they have been achieved;
- Achievable – given the company’s resources;
- Realistic – within reach; and
- Time specific – goals should be set with a timeframe for achievement in mind.
Remember you should be working on your business and not in it. Take the time at the start of the year to map the road ahead. This will make those unexpected speed humps much easier to overcome.
Always be focused on the bigger picture.