What are the top key performance metrics that you regularly track and monitor in your business?
Key Performance Metrics
Answers
At my web-based company it was all about "time on site", "bounce rate", "return users", etc. At my software companies it was more about salesperson effectiveness (e.g. revenue/salesperson, calls/close, etc.) and efficiency (e.g. rev/employee, avg monthly loaded cost/employee, profitability, etc.). It is challenging coming up with the measures that tell the viewer the most. With KPIs, however, I focus on measurability and repeatability. If it's a KPI it should be easily measured (hopefully automated) and trends mean a lot. If it's not trend-able data then you're probably looking at an analysis, not a KPI.
KPIs can be a guessing game with the exec team and the board at times. I decided to go to each exec team member and each board member separately and have a KPI discussion. It's incredible how varied the needs are, and all based on that person's particular experience at prior companies. I will tell you that my exec team and board loved those discussions w/o exception. It was their chance to vote. Just make sure you go to the board members with some suggested KPIs as strawmen b/c they want to know you've thought it through.
The challenge after those discussions is then coming up with board and operating dashboards that combine the most valuable and the lowest common denominator measures that allow you to cover the waterfront but not confuse with a sea of metrics.
I agree with Mark on all points.
The "readers digest" answer is
> KPIs are business-specific (or at least market or industry-specific)
> Approach KPIs at the Board/C-Level to gain some consensus, so you get all oars rowing together
> KPIs ALWAYS need to be compared against trend, benchmarkets, or "targets to be reached"
> Focus on KPIs for your dashboard that the C-Team can be assigned responsibility for, and where it is clear what action needs to be taken to bring the KPI in line if it trends off-target.
> KPIs can cascade down the organization --
While at Magellan Navigation, the Dashboard reviewed at the weekly Exec Team meeting included (usually by Top 10%/Bottom 10% for products, business units, or other breakouts as appropriate):
> Product Sell-through (by product, reviewing top 10% / bottom 10%)
> Inventory Turns
> DSOs by Customer/ Market
> Product Quality (or Customer 'complaints by product line)
> Gross Margin ROII by Product
etc.
Hope this helps
Keith
1
Keith brought up a great point which is all-too-often lost. The
Too often the board and the exec team are looking at the CFO for answers when the numbers are presented. The CFO should know the answers, but the execs around the table own their parts. For example,
Don't let them "shoot the messenger" and don't let your execs get off when it is their responsibility. They should "own" their numbers, you should report them (and help them reach their goals - but that's another story). On the flip side, when things are cranking, it's the other execs who get the glory. Good for them!
Don't get me wrong, I am not advocating for hands-off CFO-ing. Our job is to help and we ultimately "co-own" what the rest of the team does and that is a responsibility that comes with the role.
Great comments on business metrics. All are right on target and give very good direction for using KPIs. Going forward on the thread, lets use the perspective of these comments and get a survey of actual metrics that people are looking at. What specific metrics do you personally place importance on in evaluating the performance of your business?
Corporate-wide metrics are fine, but what about focusing on
1. Average collected balances along with # of overdrafts and related fees (swo you can't cheat the avg. bal.)
2. A/R & A/P collection payment times. ...
As it is pointed out KPI's are numerous and business specific. The best pratice in industry is to identify business objectives or value drivers and tie up KPI's by value drivers. for example.
Reduce SG&A - is value driver
reduce sales outstanding - KPI can be Days sales outstanding
reduce cost of payroll administration - KPI can be Payroll administration cost as % of revenue.
Reduce COGS -
Reduce lost discounts from suppliers - KPI can be loss discount %,
reduce percent of annual product sales sold on promotion- % annual product sales on promotion
Increase revenue - Increase trade promotions resulting in incremental revenues - % trade promo resulting in incremental volume
It could be compliance driven.
reduce SG&A - reduce cost to support environmental compliance - environmental compliance cost as percentage of revenue.
I will be more than happy to share based on nature of business.
KPI's are also used in conjunction with KRI and KCI. Key
A product returned more than 5 times in a month is a KRI.
5 out of 100 key controls failed with significant deficiency - a KCI.
Great perspectives. While there are several indicators and ratios across a business that provide insights into performance - both operational and financial - for the top
These are specific to a particular business model and should be agreed upon by the executive team as the KPIs that are at the top of the list.
Having too many indicators to follow is often a result of confusion about the real business drivers and a creator of white noise.
The Executive Dashboard is a fundamental tool for effective management of a business and I submit that a fair amount of thought should go into crafting and selecting the KPIs. These in turn should tie into the flex-budgeting model to provide top management with a consistent look into business performance.
I was searching on the site for insights for Business Performance metrics and with the developments in cloud computing and SaaS I would be interested in restarting this conversation around the following: What are the current trends in business performance management (corporate performance management) solutions,systems, software, etc.?
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