Measure What You Want To Improve!
It is clear that status quo is not an option and if a company goes off track it must reinvent itself by unlocking new breakthrough opportunities that must promptly be brought to life – through formulation of new business concepts aimed to continually drive growth and competitive advantages.
For every key business indicator there must be set target and goal. The key performance metric system helps to create long-term focus and to be on right track with the sales volumes and profit objectives. The KPI system must be aligned with the company strategic targets and goals and built into the daily work routines enabling sales to take corrective actions and on time if sales or profit targets goes off track. The sales team reviews the daily sales targets against plan in real time measures. In addition, the whole team attends daily, weekly and/or monthly sales meetings to guarantee successful delivery of the planned sales targets and goals.
To ensure the company is on the right track, according to plan, there must be an active key performance management review in place. If the performance is below planned expectations, the key performance metric system will help identify the appropriate action to be taken, to set the company back on track in time. In large companies it is not necessary for the board of directors and CEO to review all the detailed departmental key performance indicators. Senior management needs to select the critical few key business indicators that reflect and summarize the company’s performance as a whole.
A sharp focus can drive massive competitive strength and flexibility. Looking hard there are up to 200 active metrics a company can measure to evaluate its business performances. The number is of course depending on the business industry. However large hands-on sales and production companies measure regularly around 50 very active KPI’s to follow upon and track overall business performances down to departments and individual levels. Top management generally highlight between three and five indicators as being core measures for the business and additionally they determine other five to ten as being the core critical success factors to focus on at each point in time.
It is not unusual for top management to focus on between eight and fifteen key performance indicators, as a part of the business metrics system. These typically could include: profits, sales revenues, market share, cash-flows, return on investment and headcount. This is convenient because all these factors are easily measurable and they are strictly revenue and cost related and many of the information are available in the company accounting system, real time.