The consistency of results it achieves typically determines the growth and success of your company. However, only a team that consistently hits their set targets can realise those results. This article outlines why well defined KPIs are so important to your company’s growth.
What Is a KPI?
A KPI (key performance indicator) is a quantifiable measure used to determine how successfully company goals are reached. Managers outline several KPIs for each project so they can analyse employees’ performances. KPIs should be quantitative, practical, and enable you to determine if the company is heading in the right direction.
The Importance of KPIs
From reviewing employee performances to tracking company progress, there are several reasons why KPIs are essential in assisting your company’s growth. If you’re starting a business, KPIs offer the following advantages to help you hone your leadership skills.
1. You Can Measure Your Targets
Let’s say you’re a tech company that evaluates search engine results. Your client requires an accurate landing page analysis to determine which pages are most relevant to a user’s search engine query. Your KPIs might include the following:
- Employees must produce 90% accurate results daily.
- Employees must get through 1,500 landing pages a week.
- Employees must only report a maximum of three “completely incorrect” ratings a week.
Measuring your targets in such a quantifiable manner paints a clear picture of your lowest and highest performing employees. This information allows you to adjust accordingly.
2. Inform Educational Conversations
The data generated by measuring KPIs can lead to important conversations within the workplace. When you notice an unfavourable reading on a KPI, you should talk to the individual or team involved. These conversations are great opportunities for you to teach the employees how to do things differently and perform better in the future.
Additionally, you can analyse whether the set KPIs are an effective measurement and make relevant modifications if an employee feels the targets are unrealistic.
3. Receive Important Information
Since KPIs provide an immediate snapshot of the overall performance of your company, the information your KPI report generates can be crucial to “beating” your competition.
The real-time data KPI’s provide allows you to make on-going adjustments. This way, you’re not left making frantic changes at the end of each month to reach your goals.
Some companies use KPIs to measure how well they are achieving certain standards not be directly related to their business or profits. For instance, protecting the environment may be a priority for your business. KPIs focused on increasing environmentally friendly behaviours may help to enhance your company’s reputation.
Global pharmaceutical company Pfizer claims it’s committed to enhancing its safety and environmental performance, as well as being transparent through reporting. Pfizer states it will accomplish this by measuring its performance, setting progress targets, and publicly disclosing its efforts. They conclude:
“We use key performance indicators (KPIs)to measure and externally report our global performance. Our strong focus on measuring and monitoring EHS (environment, health and safety) performance data enables us to highlight successes and identify program areas for continuous improvement.”
So, we can see that monitoring KPIs gives Pfizer vital information to help it evaluate its progress.
4. Encourage Accountability
If an employee has punctuality issues or a perceived lack of company engagement, you might assume they are performing poorly. However, to confirm that perception, you need tangible statistics. A KPI could reveal if your assessment is correct — or if the perceived “poor performer” is achieving their goals despite the negative impression. A KPI report also allows you to organise one-to-one meetings with employees to outline why they’re not performing, and to discuss how they can improve.
Ultimately, KPI’s encourage accountability for both non- performing employees and employers setting unreachable goals.
5. Boost morale
A positive KPI report creates instantly positive effects, including a sense of purpose and sustained team focus.
Viewpoint Construction Software emphasises the importance of an effective KPI strategy to ensure employee satisfaction. A professional, industry-accepted survey of company employees, the software often shows supervisors are only utilising 60% of their team’s capability. A good team leader will use information from viewpoint construction software to document employees’ actions and progress and discuss their findings. They can then provide feedback, and ultimately increase job satisfaction by ensuring their team meets forthcoming targets.
KPIs are important for reaching company goals and ensuring growth by allowing employers to make systematic, timely adjustments. However, you must ensure the KPIs you set to achieve those goals are actionable.
For example, you could tell your workforce your goal for the year is to see an increase in retaining customers. However, you’ll find it difficult to create actionable KPIs to reach this goal if you haven’t introduced measurable targets.
However, if you modify the goal slightly by stating you want to see a 20% increase in customer retention, you now have a quantifiable and measurable target. This measurable target allows you to create the appropriate KPIs.
So, always establish specific goals, so you can create KPIs that will improve the overall results of your business.
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