One of the most relevant questions in business entrepreneurship, maybe in social engagement as an entrepreneurial endeavor is ‘how do we perform measurement of progress and also represent its outcomes’. How do you show to yourself, and also to others that your organization is growing and against what standards?
After the long talk with a business investor, I’d want to have a coffee with you to discuss your performance over the years. Traction says a lot in investment and beyond every argument, you should be able to prove to yourself and to others that you are performing. This process is a lot critical for self-re-engineering, business functions improvement and system adjustment. This is where Key Performance Indicators, KPI.
This is how it starts. You use KPIs in your strategic planning process. And don’t forget that whatever you input in planning is what you measure against when measuring performance
What are KPIs
We use other words like measures, performance metrics, and your balanced scorecard; so KPI focuses on what needs to be measured. There are three types of KPIs(the basic ways to think about this.)
1. Pick raw numbers, for example, a number of key customers, a number of complaints, number of converted clients, number of stakeholders that attended the meeting etc. This method is what I call Raw KPI
2. Progress measure, and it comes in form of percent complete and it’s project-oriented. What percent complete is the item? What is the percentage of completion is the marketing or the expansion of operational works? Something like that is what I call Percentage measures
3. The last type is a change or directional measure. Increase in sales over last period( last year, last month, last decade and what have you). This type of indicators are called Directional indicators and they are either progressive or retrogressive.
These measures are related to a goal; Key Performance Indicators do not stand in isolation. There are some actions that need to be taken to move the indicators forward or even discover them.
What do you need to think about when measuring?
Source: Do you already have the data or you need to gather them ? The source might be your CRM system, your project plan or P&L or financial system. When you want to generate a performance indicator, you must think source and quality. The quality of your source determines the quality of the data you generate.
Frequency: We can’t get some data every month; how frequently do you want to get the data? Are you considering the monthly, weekly, quarterly, yearly or what?
Target: You must have the end in mind; you must have what you want to hit.
Combining this gives you your company dashboard. If you have your KPI in place and you run a company dashboard, you will keep your company in check.