Business Productivity

Five top tips for setting KPI’s

- June 13, 2014 2 MIN READ

What is a KPI?

If you were an employee once, you were probably very familiar with the concept of KPI’s or Key Performance Indicators. They’re a tool used by managers or supervisors to measure and monitor job performance.

Why are they important?

As the owner of a small or micro business, the scene may have changed, but the rules remain the same: the success of your business depends on how well you execute key activities according to the gauge of your business KPI’s.

As explained in my introduction, I frequently see small business owners measure their KPI fulfilment according to whether they achieve their business targets, but this is a recipe for confusion between KPI’s and goals. Instead, KPI’s have their own distinct role to play as part of the process for generating profitable sales.

KPI = A metric or unit of measurement used to gauge the level of performance, e.g. cost per order.

Goal = A target or objective intrinsic to your business strategy, e.g. increase sales to $1m per annum.

With this in mind, I have put together my top tips for setting KPI’s in your small business.

Want more articles like this? Check out the measuring success section.

Five top tips for setting KPI’s

1. Ascertain your business goals.

Your KPI’s must be linked to your goals.

2. Use a flow chart.

Map specific operations of your business and identify any processes that need refinement. Ask yourself what steps need to be taken to ensure your business achieves its goals.

3. Set the KPI for each process.

Each process should have a set KPI, for example, deliveries should arrive within one hour of dispatch.

4. Tell everyone involved about the KPI.

Staff or contractors involved in that process must know what is being measured, how it is calculated, and more importantly, how their role contributes to achieving the KPI.

5. Regularly review.

Always monitor your KPI’s to make sure they are successful.

Remember: If you can’t measure it, you can’t manage it!

By following these five steps and circling back periodically to review and repeat as necessary, you’ll be well on the way to meeting more of your targets and achieving overall success.

What are your thoughts on measuring KPI’s?