Well-written and well-developed KPIs or Key Performance Indicators are a simple and effective way to quantify progress on a specific project or goal. Similar to mile markers on a highway, they provide a clear, measurable map of progress on the things that are important for a given project, job, or corporate report.
Metrics are simply the way things are measured. For example, a metric could be a dollar value in sales, time on a project, new leads, or any number of other measurable data points. Think of metrics as the way to measure the progress towards the KPIs.
Developing Great KPIs and Metrics
The key to developing great KPIs is to choose an objective way to determine if an employee, manager, leader, team, or the company as a whole is moving towards their long-term goals.
The choice of a specific metric that can be used to quantify changes in performance toward meeting a strategic goal is important. The metric must specifically track that KPI to be an accurate reflection of change. The more this tracking can be automated, the more accurate the results. At the same time, automation for tracking (metrics) reduces the time the employees and the team require to process the data and creating meaningful analytic reports.
For example, a company could set a KPI for increasing productivity from the current level to X amount. The metric used could include units produced per minute, with the goal to increase by a specific number of units per minute within a given time. Different innovations, strategies, systems, or shifts can be compared to find out the most productive combinations to put in place across the company.
Starting With a Baseline
Having a baseline measurement is essential to determine reasonable KPIs. The baseline is where the individual, team, or company sits at this point in time. In the example above, it would be the production per minute with the current system configuration and processes in place.
This baseline is essential in determining progress over time. KPIs can be set on an annual, semi-annual, or quarterly basis. Some companies may even set weekly and monthly KPIs.
Teams and individuals can use the same process, choosing objective, quantifiable measures to monitor their progress. Sharing KPIs, metrics, and results is an effective way to communicate results to the team or the company as a whole. When the process is clear and transparent, everyone knows the goals, how they will be measured, and what is expected to achieve those goals.
Regular recording and analysis of metrics helps a company see patterns in productivity, sales, and even in customer engagement throughout the year. Knowing these patterns is essential in annual planning to optimize the use of resources and maximize revenue.