We continue to describe in greater detail the characteristics that make a good Key Performance Indicator. To review, a KPI should reflect your business' goals and should be derived from your business' critical success factors. Today let's discuss making your KPI measurable. It may sound simple but there is a bit more to it than meets the eye at first glance.
In fact, you should establish in writing four things about each chosen KPI:
* a name for it
* a definition of what it involves
* the method you will use to measure it
* your goal or target for the KPI
A KPI itself is not about doing anything. It is a measure rather than a desired outcome. What is important is that you decide upon a definite measure and stay with it. Changing what you include in your KPI or the way you measure it will mean that figures cannot be compared from one period to another or to your target. In other words, they will not be useful to you.
Remember, what you can measure you can manage. Next week we'll discuss the final characteristic of a good KPI. In the meantime, please call a Simons Bitzer team member at (317) 782-3070 to discuss establishing a set of measurable KPIs for your own business.
Monday, July 26, 2010
Tuesday, July 20, 2010
KPIs Should Derive From Your Critical Success Factors
Let's pick up where we left off last week. Looking again at the mall cafeteria example, customer turnover rate is the critical success factor which needs to be measured because that drives profitablility in this business. To measure turnover rate, the appropriate Key Performance Indicator would be the number of customers per table per opening period.
On the other hand, for the more relaxed dining establishment that we discussed last week, repeat business and customer satisfaction are the critical success factors. A suitable KPI for this business might be the number of customer complaints received during an established time period. It then becomes important to look at trends. Are complaints decreasing by providing excellent customer service?
In each case the KPI derived from a factor that was critical to the success of the business. Of course it would be important for each business to have a clear business plan that dictates their business goals. Without knowing what is really important to your business and where you want it to go, it will be difficult, if not impossible, to establish your success factors. You could end up measuring irrelevant factors, in other words factors that are not truly critical success factors at all.
Stayed tuned next week when we will discuss the third and final characteristic of a KPI: measurability. In the meantime, with questions about establishing and measuring your own set of Key Performance Indicators, please contact a Simons Bitzer Team Member at (317) 782-3070.
On the other hand, for the more relaxed dining establishment that we discussed last week, repeat business and customer satisfaction are the critical success factors. A suitable KPI for this business might be the number of customer complaints received during an established time period. It then becomes important to look at trends. Are complaints decreasing by providing excellent customer service?
In each case the KPI derived from a factor that was critical to the success of the business. Of course it would be important for each business to have a clear business plan that dictates their business goals. Without knowing what is really important to your business and where you want it to go, it will be difficult, if not impossible, to establish your success factors. You could end up measuring irrelevant factors, in other words factors that are not truly critical success factors at all.
Stayed tuned next week when we will discuss the third and final characteristic of a KPI: measurability. In the meantime, with questions about establishing and measuring your own set of Key Performance Indicators, please contact a Simons Bitzer Team Member at (317) 782-3070.
Wednesday, July 14, 2010
Key Performance Indicators Should Reflect Your Business' Goals
Last week we discussed an overview of the characteristics of good Key Performance Indicators. As promised, we will delve into each characteristic a little more thoroughly.
First, your business goals should determine what things you will measure. Here is an example:
A local mall cafe providing lunches to workers in the surrounding office buildings will need to serve its customers promptly and efficiently to meet its overhead as well as make a good profit. They choose not to encourage customers to linger at their establishment. Customer turnover is an important goal in their business plan.
On the other hand, a street front restaurant in the local shopping center may decide that high customer satisfaction will bring in repeat and higher-spending customers it needs. In this instance the goal is to encourage repeat business by eliminating any reason for customers complaints.
In each case the choice of the KPI to monitor will need to reflect the goal of the particular establishment. To determine what that KPI might be, we will need to look at the critical success factors that would drive achievement of that goal.
Come back next week to learn how your KPIs should be derived from your Critical Success Factors. In the meantime, please call a Simons Bitzer team member at (317) 782-3070 to speak to someone personally about establishing and monitoring your own indicators.
First, your business goals should determine what things you will measure. Here is an example:
A local mall cafe providing lunches to workers in the surrounding office buildings will need to serve its customers promptly and efficiently to meet its overhead as well as make a good profit. They choose not to encourage customers to linger at their establishment. Customer turnover is an important goal in their business plan.
On the other hand, a street front restaurant in the local shopping center may decide that high customer satisfaction will bring in repeat and higher-spending customers it needs. In this instance the goal is to encourage repeat business by eliminating any reason for customers complaints.
In each case the choice of the KPI to monitor will need to reflect the goal of the particular establishment. To determine what that KPI might be, we will need to look at the critical success factors that would drive achievement of that goal.
Come back next week to learn how your KPIs should be derived from your Critical Success Factors. In the meantime, please call a Simons Bitzer team member at (317) 782-3070 to speak to someone personally about establishing and monitoring your own indicators.
Tuesday, July 6, 2010
What Makes a Useful KPI For Your Business?
So what would make a useful Key Performance Indicator in your business? Some apply to almost all businesses, such as various financial ratios. But in deciding others that would be useful to your particular business, there are a number of things to consider. To be worhtwhile monitoring, the KPI should have these characteristics:
* Reflect the goals of your business
* Be critical to the success of your business
* Be measurable
* Point to the activities you might need to alter if things start to go off track
Stay tuned to future posts as we will be discussing each characteristic in further detail as well as sharing some examples. For more information about establishing your own Key Performance Indicators, please contact Simons Bitzer at (317) 782-3070 or visit us on the web at www.SimonsBitzer.com. We're passionate about your success!
* Reflect the goals of your business
* Be critical to the success of your business
* Be measurable
* Point to the activities you might need to alter if things start to go off track
Stay tuned to future posts as we will be discussing each characteristic in further detail as well as sharing some examples. For more information about establishing your own Key Performance Indicators, please contact Simons Bitzer at (317) 782-3070 or visit us on the web at www.SimonsBitzer.com. We're passionate about your success!
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