Key Performance Indicators, or KPIs, allow your business to function effectively in the financial world. KPIs are used to measure a business’s effectiveness, and to see whether it is meeting its predetermined goals on an ongoing basis. Every business has particular goals they hope to meet and improve, and this is where KPIs come into play. When looking to improve financially, the first place where businesses should look is at the KPIs relevant for its business.
KPI’s have been around for centuries, although not exactly in the medium that we understand them as now. Historians have discovered that some of the first performance appraisals were done in the third century AD, although the precise origin is not known. In China, during the Wei Dynasty (221-265 AD) the emperors would rate the performance of the official family members.
Prior to the Digital Revolution of the late 1990s to early 2000s KPIs were done sporadically, if at all. Often they were done at the manager’s discretion. If the manager was particular about seeing improvement in their business, then they would sit down to do these KPIs themselves. Before the advent of fast, high-powered computers, KPIs had to be done manually. This in itself led to a business culture averse to the idea of KPIs despite the measurable levels of improvement.
These are some questions which need to be asked when looking at setting up KPI’s
Are your business goals clear?
Without clear goals set for your business then the whole purpose behind KPIs is lost. The main emphasis being on clear. Each business has its own unique footprint and identifiers to the rest of the business world, KPIs need to be linked back to that footprint. To be truly successful, a business needs to match its goals and team goals with its KPIs. It’s all well and good to say that your business is going to beat sales for last year, but if your choice of KPIs don’t match those goals then there needs to be realignment.
Do your staff understand what KPIs are?
If not, then teach them. It doesn’t take long, and when you have your entire staff on board then you are all able to work towards the same goal. When people don’t understand something they either don’t do anything or revert back to the way they did it before. The second one is more common than most managers realize and it can cause major issues in the procedures. You have two goals at odds with each other. Ensure that your staff understand the purpose behind using these KPIs.
Once you have answered these questions you are starting on a path towards improvement.
The advent of digital accounting and management has changed the way in which we view KPIs. The entire philosophy of business has changed, and the way in which businesses measure success has also changed. Business opportunities are more highly contested than ever, and to guarantee your future and the future of your business, it is important for you to understand what KPIs are and how they can boost your company ahead of the competition.
Here at Out There Business Solutions we are breaking out of the old mentality and offering a fully integrated system which allows for the easy and effective maintenance of your KPI’s. We offer you a baseline of the most commonly used KPIs with the potential for adaptation based on your specific business needs. We are hoping to change the entire culture around how business is done starting with our software solutions.