Key performance indicators, otherwise referred to as KPIs, are a bit of a buzz word for businesses. So what’s all the buzz about? KPIs are an important measure in business that help you achieve your goals. If you have ambitions for your business, you’ll need a plan for turning those ambitions into a reality. Goals come in all different shapes and sizes. There’s long term goals, challenging goals, unrealistic goals, personal and professional goals. Of course, that’s just a snapshot of what kind of goals we can have, but chances are you’ve got some goals and KPIs can help you achieve them.
Goals can be daunting, and so can the process of figuring out how you’re going to get there. However, it doesn’t have to be. Once you can use the process of setting up and tracking KPIs, goals become a lot more attainable.
1. Write down your goals
First things first, you need to establish what you want to do and define your goals. Use SMART goals — this means ones that are specific, measurable, attainable, relevant and time-based. Once you have made it clear what you want to do, you’ll go into the next stage of developing your KPIs.
2. Choose leading or lagging indicators
Lagging indicators measure results that you have attained. Lagging looks at outputs and measures these. This could look like the amount of inventory stock you sold in a quarter. If you were looking to sell more 25% more wetsuits this winter, you would use a lagging indicator to measure your wetsuit inventory stock that went off the warehouse shelves. However, it’s important to note that lagging indicators are harder to change.
Leading indicators are generally harder to measure, but in comparison they are easier to change. These indicators look at the actions that give you results. This could be the amount of website traffic that you get on wetsuits, that then leads to the result of sold inventory stock. This leading indicator leads to the result of a lagging indicator.
3. Choosing which KPIs to implement
You’ll want to take a step back and see how you can measure the goals you’ve picked.
KPIs are dependent on your business type and whether it’s growing or very established. If you’re a start-up, your KPIs will focus more on formative, shaping results such as brand-awareness and qualitative feedback. If you’re past the start-up stage but still growing, you’ll be interested in customer satisfaction, return customers and renewals.
Regardless, it needs to relate to your strategy. If your focus purely your financial, then you’re KPIs will likely reflect that measure. If your council or community organisation, your dominant KPIs would likely be mission-centric. An eCommerce company might find unique visitors and time on site to be their important measures. KPIs have to be measurable and correlate to a result. If they don’t do this, they aren’t KPIs.
4. Less is more when it comes to KPIs
Bombarding yourself and your staff with an excessive amount of KPIs can become more overwhelming than the goal itself. When it comes to selecting KPIs, pick a few strong ones that align with each goal.
5. Bring it together
Once you’ve down your brainstorming and decided on some KPIs for each goal, take a step back and look at the bigger picture. Chances are, you’ll have come a long way. Not every KPI will be perfect, but you have created stepping stones towards reaching your goals. Evaluate your KPIs regularly and look to create new ones once your goals have been reached.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.