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.