The 16th century English philosopher, Francis Bacon, coined the phrase ‘Knowledge is Power’. Whilst some may consider it a cliché, the statement is just as true in 21st century business as it was during the English Renaissance.
Without knowing what is happening within a business and knowing how to improve, leverage opportunities and grow, a business is likely to stall, or worse, fail. Businesses can be complex, and with complexity comes the challenge of deciding what information an owner needs to prioritise their focus and resources. Key Performance Indicators, or KPIs, can make this challenge somewhat more manageable.
Key Performance Indicators are the measures used to determine how the business is performing in relation to its strategic objectives and business goals. KPIs go above and beyond simply understanding the revenue figures, or measuring a sales pipeline. When used effectively, KPIs allow an owner to delve deep into the business to understand what is happening, when it’s happening and whether or not the business is on track to achieve its goals. KPIs will not tell an owner why things are, or in some cases, are not happening, but they do provide the data required to facilitate such a conversation.
Our 3 top tips
Understanding and utilising KPIs are important for a host of reasons, but here are our top three tips:
- To learn from and therefore improve performance; by understanding and sharing the data behind the performance of a business you can create the opportunity to learn what is working and what isn’t, and improve performance accordingly.
- To satisfy external reporting and compliance requirements; the regular monitoring of KPIs can allow for reports such as compulsory annual financial statements, or regulatory reports to be compiled in a timely manner, ensuring that the business complies with all regulatory and stakeholder reporting requirements.
- To guide and monitor the behaviour of your people; creating the right culture which breeds success within a business can be a challenge. Your employees will be increasingly engaged by making KPIs transparent and allowing individuals to understand how their contribution impacts performance.
With the key points above in mind, it is clear that KPIs go far beyond simply measuring and reporting numbers. Key Performance Indicators are critical to understanding, in detail, what is happening within a business. The owner can in turn use this knowledge to make informed decisions about which ‘levers’ to pull to drive the business forward; KPIs are a barometer of success; as Francis Bacon said ‘Knowledge is Power’.
If you would like to find out more about how Key Performance Indicators can help drive your business forward or discuss any of the topics covered above, please contact us through the Tectona website or call Mark Nicholls on 07818 407061.