Measure What Matters: Identifying the Right KPIs for Your Business

Article by Joe Galvin, Vistage Chief Research Officer
See original article here.

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While most businesses track key performance indicators (KPIs) to some extent, the question to ask yourself as a leader is whether you are tracking the correct metrics. Are your KPIs giving you a general report of the health of your business, or do they pinpoint progress in a specific area that is critical to growth?

Once you have the right data, the cadence for reviewing and sharing these metrics is key to using them to take action. Formal processes around reviewing and sharing KPIs communicate progress toward goals. More importantly, they can signal things are getting off track.

Top KPIs for Vistage Members

The Q3 2018 Vistage CEO Confidence Index survey asked Vistage members to share the top five KPIs they use to measure the health of their businesses. Respondents provided more than 1900 unique KPIs.

Unsurprisingly, the following KPIs topped the list:

1. Revenue

2. Sales

3. EBITDA (earnings before interest, tax, depreciation and amortization)

4. Gross margin

5. Profitability

Many of the KPIs represented variations on specific themes. For example, there were 110 variations of measures related to profits. However, the majority of KPIs reported were unique. This is expected, since 58% of members said they use company-specific KPIs.

Questions to Consider

Are your KPIs and business goals closely linked? If you are trying to grow your business in a specific area, make sure you have KPIs that can measure that progress.

How often do you measure KPIs? Research indicates that most Vistage members measure their KPIs on a monthly basis. However, depending on the nature of your business, you may need to measure them more frequently (e.g., daily or weekly).

Who sees the KPIs? Consider whether you’re sharing your KPIs with the right people in your organization. For example, do your frontline employees need to see them?

Are your KPIs easy to collect? If collecting your KPIs is a long and arduous process, you might want to invest in a dashboard that can easily pull reports on a weekly basis.

Are your employees rewarded for meeting KPIs? Align your employee rewards with your strategic goals. To drive sales for a new product line, you might consider compensating your sales team for new product sales, not just overall revenue.

Ensure you measure what matters. Align your strategy with your KPIs so you can track performance regularly. Challenge yourself and your leadership team to review what is measured and how those metrics align with your goals. Once you determine the KPIs, develop a plan to socialize them, and to drive accountability and improve results.