The Importance of Key Performance Indicators

Key Performance Indicators (KPIs) are a set of critical measures that an organisation uses to gauge its progress towards an intended result. What’s so important about the concept of KPIs? As management “guru” Peter F. Drucker famously said, “what gets measured, gets done.”

KPIs generally sit within a broader performance measurement system which enables managers to define and track performance of strategic objectives and make more informed decisions.

In order to maximise the impact of a performance measurement system, consider the following:

  • Engage key stakeholders in the determination of KPIs eg employees
  • Clearly define the KPIs and set achievable milestone dates to meet them
  • Set an appropriate accountability and rewards system which is then communicated across the business
  • Find balance between lagging (historical) and leading (future focus) indicators
  • Regularly report on the progress against KPIs
  • Continually review and adjust where required

To expand on the concept of lagging and leading KPIs, here are some examples of each:

  • Lagging: gross margin, EBITDA, consumer confidence
  • Leading: customer satisfaction, % growth in new markets, number of website views

As your trusted advisor, we can help you implement a KPI framework and work with you to help ensure success in meeting your business goals.