One of the many things modern business owners can be thankful of is accessibility to data. Countless analytics tools – both paid and free – are readily available for marketers who wish to determine the success of their businesses.
In the old days, managers and executives needed to scrimmage against piles of papers and charts to organize their business numbers. So we should be thankful we don’t need to do that anymore.
However, there is a disadvantage with this easy access to software tools. Sometimes, when we have too much data in front of us, we struggle to see which ones are really pivotal to business growth. When you look at the eye-scorching numbers on an Excel sheet, do you sometimes wonder what exactly all of these statistics do to help move your business forward?
“This is where Key Performance Indicators (KPI) come in,” says Andrew Rogers, President and COO at Business.com.
“Data, and its proper use, is the single biggest arbiter between business success and failure. If you aren’t managing your business based upon facts and figures, you’re not only sub-optimized, you’re likely headed for ruin,” he adds.
Below is a mini-guideline, proposed by Rogers, in considering which KPIs to be used in your business.
1) What qualifies for KPI status?
- It must be quantifiable: Often, companies will establish KPIs that they cannot accurately measure. If you can’t report on a KPI with absolute confidence, remove it until you’ve solved your data reporting challenge.
- It should illuminate performance that is actionable: If a KPI doesn’t allow you to dig further and/or take corrective action, it isn’t worth including.
- It needs to tie to initiatives that are core to your success: An easy question to ask when selecting KPIs is this: “If this indicator moved significantly in either direction, would it have a meaningful impact on the business?”. If the answer is “no”, move on.
- It should have an established goal: Simply identifying a numerical increase or decrease isn’t enough… it’s the magnitude that truly matters. More importantly, the goal should also map to the overall company budget.
2) How many KPIs are appropriate?
- The fewer the better. Period. Most companies allow for KPI creep, whereby their KPI dashboard becomes a series of spreadsheets that create a “deep in the weeds” discussion, rather than a high level exercise of identifying areas of focus and action.
Read the full post at Business.com