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Understanding and Choosing the Right KPIs

Why KPIs are Important?

Confucius once said; “Study the past if you would define thefuture.”  He could have been referring toKey Performance Indicators (KPIs) and how we select and use them.   KPIs can show you when you are performingeffectively and also when you are not doing well.  Evaluated correctly, with the appropriateaction, indicators can provide a plan for success.

What Makes Business Performance Indicators-  Key?

Evaluate carefully which metrics you define as Key.  Different sets of metrics are important for different businesses. Targeting on the influential metrics can alert you to problems or confirm you are on the right track. Here are some considerations to use in choosing your KPI’s  
  • Where are you in your business cycle?
  • Include both short and long term goals 
  • What are your industry’s key benchmarks? 
  • What is your competition doing?
  • Align indicators with strategic goals 
  • The size and location of the business 
  • Select indicators you have control over
  • Use both quantitative and qualitative metrics 
  • Keep them simple and relevant
  • Start with the end result in mind 

Develop an Action Plan and Share, Share, Share

Dale Carnegie said “knowledge isn’t power until it is applied”.  It may seem a little obvious, but a lot ofcompanies incur the expense of designing metrics and buying expensive tools,and then do nothing with the results.There are many reasons why this information is not utilized.  One of the most common is too many metricshave been set.  Keep the number of KPIsto a manageable amount so everyone can focus on what is important for theimprovement of the company. Your car isoutfitted with dashboard displays that show KPIs about your journey and thefunction of the vehicle.  But if you pass a sign saying “last fuel for 100miles” and you’re paying attention to your speedometer instead of your fuelgauge, you’re not going to get the results that you expected.

The main purpose of a KPI isto assist the business in the improvement process.  To fully implement this, make sure youdevelop a comprehensive action plan in conjunction with the KPIs and yourstrategic plan.  Once the action plan isdesigned, incorporate your entire team into the strategy, so that everyone is focusedand clear on the direction the company needs to move.

KPIs are Not Static

The one constant in business is that it is ever changing.  KPIs that were highly relevant six monthsago, may not have the same relevance today.Set up a timely review of these indicators and make any necessarychanges as the company evolves.

Not Having KPIs is Not an Option

We’ve all heard the saying -- you can’t manage what you can’t measure?This is true for companies of every size and in every field. Without theright metrics you won’t know if the decisions and initiatives you’ve initiated arehaving the desired effect.  According toa recent survey 77% of businesses are incorporating KPIs into their businessmodel.  That means more than likely yourcompetition is using them, so today would be a good day for you to start too.

“Youcannot change your destination overnight, but you can change your directionovernight.”  ~ Jim Rohn

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Scott Stickel is the CEO of Profit Street.  Mark Stickel is the CAO.  Profit Street is an online software analyticscompany specifically designed for franchises. They are focused on automatingbusiness informational processing via predictive analytics and prescriptivesolutions to help increase franchisee profit margins.  They can be reached at or 1-888-930-5655.

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