Deciding which key performance indicators to measure
How to decide which key performance indicators and metrics to measure for optimal business success and profitability.
Key performance indicators (KPIs) help you measure your business performance and focus on what drives success and profitability. There are many KPIs to choose from, so it is important to select the ones that matter most to your business.
Identify key business drivers
Start by identifying the main factors that drive success in your business. These may include:
- profitable customers
- high sales volumes
- improved productivity and efficiency
Review your core activities, products and customer needs, and look for areas where you can improve performance or grow your business.
Evaluate core activities
To assess your core activities, look at what you do, the products you make, or the services you provide. Identify what works well, where you can improve, and whether you can develop new or complementary products or services.
Understand customer needs
Review how well your products or services meet customers' needs. Identify which products and services perform best and contribute most to sales and profit. Use this information to improve or discontinue low-performing offerings.
Identify problems and opportunities
Review key business areas such as pricing, marketing, sales, customer service and operations. Focus on quick wins first, then plan longer-term improvements.
Review financial performance
Regularly assess your financial management, including costs, pricing and profitability. Look for ways to reduce costs, improve efficiency and negotiate better supplier contracts. To find the right measures for your KPIs, focus on the areas of your business performance that contribute most to your success or profitability.
Use KPI tools and templates
You can download our KPI assessment template (DOC, 18K) to help you define and evaluate your KPIs. This helps you:
- track performance clearly
- align KPIs with business goals
- focus on the most important metrics
By presenting the information in a KPI assessment template, you or your staff should be able to easily manage your KPIs and concentrate on achieving the most important or profitable ones.
Track performance effectively
There are many ways to track KPIs and other business metrics, including using certain standardised performance frameworks such as:
- balanced scorecards - for an overall view of performance
- industry dashboards - to display key metrics visually
- traffic light systems - to highlight performance issues quickly
Choosing the right KPIs tailored to your business needs will help you improve performance effectively. See how to use KPIs to assess business performance.