Deciding which key performance indicators to measure
How to decide which key performance indicators and metrics to measure for optimal business success and profitability.
Key performance indicators - or KPIs - provide important insights into your business operations. They help you focus on areas that drive success and profitability. There are many possible KPIs to track, so choosing the metrics that matter most to your business is important.
How to choose key performance indicators for optimal business performance
When considering KPIs and business metrics, a good place to start is looking at key success drivers in your business. This could be, for example, profitable customers, a high volume of sales or productivity efficiencies. You can find your success drivers by assessing your core activities, products and customer needs, and looking at issues and potential improvements across your business.
Evaluate core activities
To assess your core activities, look at what you do, the products you make, or the services you provide. Think about what makes them successful, how you could improve them and if you could launch new or complementary products or services.
Assess customer needs
Determine how well your goods and services meet customers' needs. Identify which products and services are successful and contribute significantly to sales and profit margins. Use this information to improve or discontinue low-performing offerings.
Identify problems in your business
Review areas such as pricing, marketing, sales, after-sales service, design, packaging, and systems. Focus on quick wins initially, then address areas requiring comprehensive improvements.
Look at your financial management
Do you need more frequent financial reviews? Do you manage direct costs, overheads, and assets effectively? Explore ways to reduce costs, such as using new materials or negotiating better supplier contracts.
To find the right measures for your KPIs, focus on the areas of your business performance that contribute most to your success or profitability.
KPI assessment
You can download our KPI assessment template (DOC, 18K) to help you evaluate your KPIs. The document allows you to list information on your proposed KPIs, how they affect the business, and how you can ensure you meet the targets.
By presenting the information in a KPI assessment template, you or your staff should be able to easily manage your KPIs and concentrate on achieving the most important or profitable ones.
Tracking performance measures
There are many ways to track KPIs and other business metrics, including using certain standardised performance frameworks such as:
- balanced scorecards - providing a view of an organisation's overall performance
- industry dashboards - visually displaying key metrics and performance indicators
- traffic light systems - colour-coding problem areas against normal operations
Choosing the right KPIs tailored to your business needs will help you improve performance effectively. See how to use KPIs to assess business performance.