Most successful businesses have a huge list of key performance indicators, most of the time categorized based on departments.
Now, these companies are running successfully because they do not just have these indicators on their list, but they measure them thoroughly.
As the name suggests KPI’s are indicators that help you with the data of whether things are going well in your organization. Technically, they are metrics that managers use to track the factors considered crucial to the success of the organization.
Measuring and analyzing these numbers are important. Because if you can’t measure it, you can’t manage it.
Leading indicators and lagging indicators- What are they?
Leading indicators point towards your future and helps you to predict growth trends, whereas lagging indicators helps you understand a pattern that is in progress. Both of them are totally dependent on each other. Lagging/trailing indicators are very much required to plan your leading indicators and leading indicators depend on the desired lagging indicators you want to achieve.
Let’s just make this a little less complicated by citing an example. Your company’s profit is your lagging indicator. Profit is dependent on sales. So what comes before sales? Leads, which are a leading indicator for the sales team to measure the effectiveness of sales.
Similarly, sick days or late deliveries of raw materials may be a leading indicator of quality issues in your operations.
What is too many KPIs?
More is not always better. So, a KPI overload is not good for your organization. You will have to ignore many of them eventually as you won’t be able to concentrate on all of them. When we are trying to pay attention to too many things, we end up not paying attention to anything. It’s human nature. For this reason, I would encourage companies to focus on 5 to 10 KPIs to start with and generally not go much over 15 KPIs for the top management team.
How often should we review the KPI’s?
For smaller companies with a couple of hundred people, watching weekly numbers is the best balance between making quick adjustments and micromanagement. But not all parameters can be mentioned this way. For example, profit is a number that cannot be measured on a weekly basis. In those cases go for a monthly review. In fact, you can divide the KPIs to be measured on a weekly, monthly, and annual basis on various factors like urgency, cost, and accuracy.
Your Key Performance Indicators should always be measurable and should always be in terms of your company’s goals and aims.
Moreover, listing your KPI’s alone does not give you any benefit. But revisit and revise them from time to time.
Let’s Build Key Numbers Into Your Management
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