Key performance indicators or KPI’s is an essential in achieving progress, the corporation way. When we compare small business with global business, KPI’s are one of the differences. So, what are key performance indicators? And how do you start making use of them? Are they specific to some types of businesses or all types of businesses? In this article, we look at key performance indicators.
When I look at small business vs big global business, it is always interesting to find organised solutions to be able to not only accomplish big business results but to continue and grow them.
One of those trends is key performance indicators and as the name suggests, KPI’s are essentially important indicators at performance. They allow us to delve into the past, delve into now and in the future and keep a measurement of performance in key areas. Knowing this information allows us to move forward progressing and setting certain minimums that we know we need for our organisation.
What are the essential key performance indicators to use? For every business, KPI’s can be different, however there are some marked common keys we can use. For all organisations, sales and amount of sales are two vital indicators. They signify the lifeblood of the continuation of the organisation. However, these are effects and not causes.
The main aim of having a KPI is to be able to excel progress and so results. Sales are great, but sales only come as a result of other actions.
If we take for example a manufacturer of widgets, we can see some essential KPI’s. Let us look at this further.
A manufacturer will have certain areas such as Research & Development, Product Development, Operational Management, Quality Control, Advertising & Marketing, Sales, and Post Sales after care such as customer services.
Knowing these areas, we can then look at key performance indicators. For example, if you are manufacturing goods, you have a need for products. If you want to be a world class organisation, you can’t simply rely on past products or current advanced state of a product. Improved recipes are needed, new products are needed.
KPI’s also have a time factor. It may be a daily process such as in operational management, we produced 100,000 widgets today or it may be as in the last example a longer time frame such as new products and lines developed.
It is starting to be seen how KPI’s have a big impact and why they are called key performance indicators. If we consider that having a new product line can have a big impact on the bottom line, we start to see how KPI’s are an essential in business.
If we consider the operational management aspect of how many items manufactured today or how many staff or machinery do we have? What is the maximum that can be produced today, we can use those indicators to better know future outcomes.
If your organisation is a blue chip organisation such as Sony or Vodafone or Microsoft, these KPI’s are essential so that at the end of the year you haven’t pilled up on a product. You could see where the scenario heads and make adjustments in sales and advertising & marketing so that production and sales work in synergy.
The last thing any manufacturer especially of a technological product that loses relevance often within months wants is a major stockpile that might not sell before a change is needed.
This is the beauty of KPI’s, when we know the key indicators that drive performance, we can then look through the chain to be on top of any bottlenecks in other areas and it enables us to be good managers or executives.
Everyone can make use of KPI’s. KPI’s are not limited to C level management and executives. It can benefit managers and supervisors and it can help staff. It can also be used in personal life such as how many people you know for networking with or how many accomplishments did you have today.
Over the long term, KPI’s have been historically important. Take for example stock/share prices, volume of stocks/shares bought and sold on exchanges or the speed that a major runner completed a run at the Olympics. These are essential indicators that constantly need to be kept track of. The athletes themselves will have their own KPI’s that enabled them to achieve a result.
Everywhere you look and see major results, key performance indicators have been there enabling that success, enabling seeing bottlenecks before they happen and otherwise keep organisations to be flourishing organisations today and tomorrow.