Measurement and Evaluation should be the vital navigation instruments used by managers and leaders to understand whether they are on course to success or not.
The right set of KPIs will shine a light on performance and highlight areas that need attention. Without the right, KPIs managers are flying blind, a bit like a pilot with no instruments.
The problem is that most companies collect and report a vast amount of everything that is easy to measure and as a consequence, their managers end up drowning in data while thirsting for insights.
Effective managers understand the key performance dimensions of their business by distilling them down into the critical KPIs.
In order to identify the right KPIs for any business, it is important to be clear about the objectives and strategic directions. Remember, navigation instruments are only useful if we know where we want to go. Therefore, first define the strategy and then KPIs are the compass to the objectives.
I believe KPIs have to be developed uniquely to fit the information needs of a company. However, what I have helping companies and government organisations with their performance management is that there are some important KPIs everyone should know about. They will give you a solid base of knowledge. However, there will be other, more specialised measures designed for your specific strategy or industry context. Take for example the network performance KPIs for a telecom operator or the quality indicators for healthcare providers. These will have to be included in your list of KPIs but will not be found in the list below, at least not in their industry-specific format.
The list of 75 KPIs includes the metrics that are generally seen as important and informative and they make a good starting point for the development of a performance management system.
Important warning!: Don’t just pick all 25 – You don’t need or indeed should have all 25 KPIs. Instead, by understanding these KPIs you will be able to pick the vital few meaningful indicators that are relevant for your business Finally, the KPIs should then be used (and owned) by everyone in the business to inform decision-making (and not as mindless reporting).
Measuring and understanding your customers
1. Net promoter score (NPS) – How likely is it that a customer will recommend your business to a friend?
2. Customer profitability score – How much profit do individual customers bring your business, after deducting the costs of attracting and keeping them happy with advertising, customer services etc?
3. Customer retention rate – How many of your customers are going to come back for more? And how loyal are they to your brand, organisation or service?
4. Conversion rate – How well do you translate enquiries, sales calls and web page views into paying customers?
5. Relative market share – How big your slice of the pie is, compared to your competitors in the same market. Measuring and understanding your financial performance.
6. Revenue growth rate – The rate at which you are increasing your company’s income.
7. Net profit – Income minus expenses – the bottom line, but certainly not the only metric you need to worry about!
8. Net profit margin – The percentage of your revenue which is net profit.
9. Gross profit margin – The percentage of your revenue which is gross profit.
10. Operating profit margin – Operating income divided by revenue – another measure of a company’s profitability.
11. Return on investment (ROI) – The revenue generated by investing money into an aspect of a company’s operations, in relation the cost of that investment
12. Cash conversion cycle (CCC) – How long does it take for money invested in the business (for stock etc) to come back to the company in the form of increased revenue.
Measuring and understanding your internal processes
13. Capacity utilisation rate (CUR) – Are you meeting your potential in terms of the amount of work you can carry out, with the resources you have available?
14. Project schedule variance (PSV) – Are your projects reaching completion on time?
15. Project cost variance (PCV) – Are your projects coming in without going over budget?
16. Earned value (EV) metric – Value generated by your company’s ongoing projects.
17. Order fulfilment cycle time (OFCT) – The time that it takes from a customer placing an order, to the product or service being delivered.
18. Delivery in full, on time (DIFOT) rate – Customer orders filled in full, and on time, compared to a total number of customer orders.
19. Quality index – Is the quality of your goods or services as high as your customers are expecting?
20. Process downtime level – How much time is wasted due to downtime, technical breakdown or staff sickness.
Measuring and understanding your employees
21. Staff advocacy score – How likely are your staff to recommend you as a company to work for?
22. Employee engagement level – How does your employee’s behaviour contribute to the business’s overall goals?
23. Absenteeism Bradford factor – How much is unauthorised staff absence costing your business?
24. Human capital value added (HCVA) – The financial value added to the business by individual members of staff.
25. 360-degree feedback score – How staff rate each other – as well as themselves.