The measure of a man might be based on height, pounds, income, or other socially-determined factors. The measure of a business is based upon a complex array of variables, from total cost of operations (TCO), to overall operational efficiency (OOE), to year-over-year growth in various verticals. These measurements are commonly referred to as KPIs – key performance indicators. KPIs tell a company critical truths about itself, because they are impartial (unless the data is skewed). Having KPIs at your disposal is therefore crucial to accurately assessing your company’s performance and creating strategies to improve that performance.
How’s Our Driving?
KPIs often take the form of a question. What is our accident rate year-over-year? How many of our team members have passed the last round of OSHA trainings or certifications? How well did we do on the last audit? Another way of looking at KPIs is like an aerial photograph (or high-level snapshot) of one or multiple verticals, often in the form of spreadsheets, reports, charts or other graphic representations of the performance of multiple variables. More specific examples of KPIs include:
- Global and regional sales and trends
- Real-time supply-chain information
- Personnel stats and trends
Comparison is a common theme in KPI analysis or business intelligence (BI), and having a BI platform that enables you to see the multitude of variables at play, how they are progressing, their proximity to organization-wide goals, where inefficiencies are occurring, or could occur (predictive analytics), in real-time, across multiple levels of your supply chain, is de rigueur for a company to become or remain competitive (Source). To create or build your KPIs, we offer a summary of the fundamentals.
First, define your company goals (e.g., performance levels in certain verticals, such as revenues, asset management, safety, and spending). Without clearly defined company goals, you could find yourself drowning in a sea of data, and more importantly, you will not be able to realize the full potential of analyzing KPIs – capturing the information that is most relevant to measure true success or room for improvement.
Next, put a number on it. What are the numbers you’re looking for – increased revenue, new customers, decreased job-related accidents, organic search traffic to your site, etc.? Getting specific, or making a commitment to a specific target performance level, is part and parcel of making your KPI analysis meaningful – as it will not only show where you are, but also how close or far away you are from where you want to be.
The next step is to measure your growth or progress to-date. This is where you consider the curve of your company’s growth – and assess what you may want to continue, discontinue, or adjust. What change – in percentages – do you want to realize? The before-and-after picture KPIs provide can help you figure this out.
Finally, how often do you need to review your KPIs? Depending on the vertical reviewed, you may want to review a KPI (say site safety stats) monthly or less-frequently (as in the example of profits, which might be best analyzed on a quarterly basis). Your KPI dashboard can be set to generate vertical-specific reports at pre-set intervals, saving you the unnecessary headache of calendaring them (Source). Having a schedule of reviewing these over time, enables executives to make business-critical adjustments as they are needed, rather than doing damage control at the end of a quarter. The key to getting the most from KPIs is to use them strategically, tailor them to your particular organization’s goals, and review them frequently.