What are KPIs and how to set great KPIs?
What are KPIs?
Key Performance Indicators (KPIs) are metrics that one can use to measure the performance of a business. KPIs can be used at multiple levels in an organization – low-level KPIs for departmental progress and high-level KPIs to measure the overall performance of an organization. KPIs are not random numbers; rather they describe a well-thought strategy that holds an important role in a business. A KPI should be able to describe or tell a lot about the business model. In brief, one sets a target and analyzes the performance/progress against that target through a KPI.
Why KPIs are important?
It’s not an exaggeration to say that KPIs define your business and help you remain focused on what matters to your business. KPIs don’t measure the unnecessary stuff. Of course, everyone wants to improve every metric of their business but it doesn’t mean that they should. Everything is important means that nothing is important. KPIs ensure you stay focused on the important targets of the business.
Setting up KPIs for your start-up in 4 simple steps
The 4 main things that one needs to consider while setting up a KPI is Objective, Measurement, Influence, and Timeframe. Let’s understand these in detail:
- Objective – One should have a detailed understanding of what objectives an organization is trying to achieve and the expectations from each person in the organization to identify the KPIs to be measured and the results to be achieved. Even though there is a certain set of KPIs that are considered as the basic ones suitable for every business, yet each business has a unique set of KPIs that identify a particular objective of a particular business.
- Measurement – Making your objectives measurable. How are you going to measure your KPI? What will determine the success or failure of your KPI? Once you are clear with your objectives, it is easy to understand the metric that one needs to measure to keep track of the KPI. For example: If your business objective is to increase brand value, then the metric you are looking for is the number of visits to your website or the number of views on your social media post and you will focus on how to increase it.
- Influence – The meaning of “influence” here is to enable to take action to achieve the objectives depicted by the KPI. KPIs are always needed to be shared with the stakeholders of the organization – the people who are responsible for achieving the metrics as well as those who are going to be affected by those metrics, and in the right manner – because everyone speaks a different language of business. Don’t forget to consider the suggestions from your stakeholders to improve the KPIs.
- Timeframe – It gives a deadline for any KPI because every goal has a timeline within which it has to be executed to be able to measure the efficiency and to be able to meet the business goals in time. Timing is a very important factor in any business. One should keep reviewing their KPIs (usually done on a weekly or monthly basis) to readjust and progress. KPIs can also be short-term or long-term, depending on the timeframe for which the KPI is set. Often, the long-term KPIs are used to set the timeframes for short-term KPIs.
One of the methods to set a KPI is a SMART approach i.e. making the KPIs Specific, Measurable, Attainable, Relevant and Time-bound. We can also make them SMARTER by Evaluating and Re-evaluating the KPIs. Analyzing the KPIs and updating it according to changes in the outside world and the changes in the objectives need to be done often.
Obsolete KPIs are no good for the business. Need further guidance in setting up KPIs for your startup? Feel free to post your queries at https://forums.happychases.com/.
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