Working smarter

Setting business KPIs and staying on track

Key performance indicators (KPIs) are the measurements a business uses to monitor progress toward goals.

If implemented correctly with accountability, responsibility and regular monitoring, they’re an important part of a business’ strategy. Measuring the right KPIs and creating actionable items from the data can elevate a business above its competition.

Setting and monitoring KPIs

First and foremost, you must understand where you are, where you want to go, and how you’re going to get there. It‘s only then that you can set KPI strategies to achieve those goals. The best business KPIs specifically relate to broader business objectives such as sales, customer numbers, brand reputation or awareness.

Once you have your KPIs in place, best practice is to review them on a monthly basis via a monthly management report. The reason for your review is to monitor your KPIs. For example, if your goal was to have completed 20 projects but have only delivered on 16, this could affect you achieving your long-term goals as an organisation.

With each review, look at your KPI targets and strategies and identify the gaps that need to be addressed during the remainder of the year.

Above all, your organisation needs to be ready, willing and able to deliver on your KPIs. The real challenge is determining how best to cover any short-term gaps while keeping your team motivated to achieve their goals for the rest of the year.

Managing KPI shortfalls

A KPI gap can occur for any number of reasons. The best way to understand the reason for the gap and determine how to address it is to break down the situation. Here are some examples of business KPI gaps and how they could be rectified:

Gap: you’re meeting your sales targets, but your gross margin is not where you expected it to be. 
Solution: revisit your pricing strategy.

Gap: your sales are falling short. 
Solution: look at initiatives and resources. Consider advertising, marketing, people, pricing, and service or product.

Gap: your profit benchmarks aren’t being achieved.
Solution: review staff, revenue, expenses and service to identify ways to reduce costs.

Gap: your revenue benchmarks aren’t being achieved.
Solution: review your pricing, sales volumes, input prices purchases and other costs of selling.

Set yourself a big but achievable goal. Take accountability and responsibility for it but have everyone motivated and engaged in making it happen. Once you have people’s buy-in you can work towards achieving those strategies and goals.

Staying on track with your KPI business plan

KPIs can be an invaluable form of business intelligence. If you use them appropriately, you and your employees will be able to clearly see the vision, what’s needed to achieve this vision, and what should be done to improve their organisation. This in itself develops a strong team approach to business. 

Even if you’re a business that’s exceeding your KPIs, you always need to keep one eye on success and one on risk management. Often, companies growing at a rapid pace do so with increased risk. You need to make sure you have the right strategy in place to continue to grow successfully and sustainably. 

And if you are easily achieving your KPIs, keep in mind you may not have set challenging enough objectives. If this is the case, consider revising your KPIs to see your full potential realised.

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Michael Derin

Founding Partner and Chairman, The Azure Group

Michael Derin has over 28 years’ experience as a qualified Chartered Accountant and Corporate Advisor across Asia-Pacific with a track record of leading multi-million dollar projects to success.

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