KPI Selection and Reporting
KPIs Made Simple - Part 12
A company may select too many or too few KPIs. It may select KPIs that are inappropriate for the goals it has set.
KPIs must align to the company's goals and help it improve.
Best Practices for KPI Selection and Reporting
1. KPI Characteristics
KPIs should match our goals.
Example:
- A company with good sales but wants to improve margin:set a KPI for higher gross margins, not higher sales
- A company's margins are high but wants to grow sales, not margin : set a KPI for sales growth, not higher margins
KPIs need to be SMART - Specific, Measurable
- Specific and Measurable - the KPI should be quantifiable and we should be able to obtain data easily.
- Actionable - a manager must be responsible to action the KPI and the KPI must be capable of being achieved
- Realistic - the timeframe to achieve the goal must be realistic. Unrealistic goals demotivate employees.
- Timely - clear timelines must be specified.
2. KPI Selection
Often, business owners or managers are tempted to chase every KPI.
Less is more - focus on the KPIs that really matter.
Other selection criteria:
- 🎯 KPIs need to reflect the goals of the business
- ⏱️ Update the KPIs regularly. As the market changes and the business changes, KPIs need to adapt.
- 📈 Combine leading and lagging indicators.
3. KPI Reports
KPIs are measured in order to achieve the goals of the business.
Regular and accurate reporting is vital to achieve this.
Toolbox:
- 🔍 Check accuracy of data. Inaccurate data destroys confidence in the reports.
- ⏱️ Produce reports on time, at the expected rythm - e.g. 15th of each month.
- 📈 Easy-to-follow intuitive reports - green for good, red for bad.
