If you’re a regular reader of this blog, you’ll know that using KPIs to drive real improvements in business outcomes is a passion of mine. Metrics have always been important to me.
However, in the last few years in particular, I’ve been investigating how various organisations use KPIs (and when they don’t). I’ve also studied the behaviours and cultures around KPI usage, and strategies for their implementation. And I’ve seen some ineffective strategies around.
Looking at the entire sales chain
Quite often, I’ve seen businesses use metrics to measure targets, such as profitability, stock return rates and staff retention, without considering the metrics that might drive those outcomes.
To me, this shows a lack of understanding about how to develop effective business strategies—strategies that have structure and forethought likely to produce the intended income as opposed to just a measure of the result.
For example, the process of measuring sales outcomes is quite well defined. Yes, everybody looks at sales revenue and net profit. However, we analyse the entire sales chain.
Savvy managers also look at metrics such as the number of leads generated, conversion rates, time to close etc. By using this well-defined business process, professionals have learned to measure the metrics that drive the outcome, not just the outcome itself.
Unfortunately, I don’t always see this type of methodology used elsewhere.
How metrics drive your stock returns
Let’s look at another example—stock returns. Anyone who sells merchandise knows there’s a high cost associated with returned stock. In some industries, a single returned item might cost the organisation the equivalent margin of 10 or more sales!
So let’s think about the types of metrics that might drive a particular stock return level.
- the wrong products are being shipped
- the addresses are incorrect
- the products have a higher-than-expected failure rate
- the products aren’t meeting the customer’s expectations.
Depending on the product, dozens of factors could be driving a high or low return rate. Yet many organisations don’t monitor these metrics effectively enough to determine the core causes or, just as importantly, help them drive change.
Another example is staff retention rates. However, I’ve saved this one for next week’s article, so keep an eye out for it.
What’s your strategy?
If you want to improve your organisation’s performance, you need to start developing a strategy to improve it and, of course, measure it. Because any strategy without metrics is usually ineffective.
Just a few things for you to think about…
Here are some questions I’d like you to ponder:
- Have you used dashboard technology in your business?
- How useful did you find it overall?
- Did you feel like you were across your business?
- Did you have time to look at all the information you collected, let alone use it to improve business?
- Why do you need so much information anyway?
- How did it all get so complicated???
It’s official – we’re suffering from information overload. All day we’re bombarded with ads, social media, blogs, newsletters, emails and more. With all these competing distractions, we’re supposed to be across every aspect of our business. And, often, it’s not until disaster strikes (like a flood!) that we realise the truth – we’re not.
So, in recent times, we’ve implemented dashboard technology to give us all the information about our business that we could need – graphs, stats, trends and pretty colours. Except now we don’t have time to look at it, so we’re still no clearer on whether the various aspects of the business are doing ok at any given moment. Something isn’t working.
When I started out in business, it was pretty easy. If I had money in the bank and work to do, I knew everything was good. But it’s just not that simple anymore.
Now I have a massive number of KPIs to measure, including sales pipelines, websites and IT systems, customer satisfaction levels, telephone call response times, Google ad campaigns, building and network security systems, staffing levels, production rates, machine maintenance, currency exchange rates, stock values, spoilage rates and many more…
No wonder business owners are more stressed than ever. (It’s true – you can read all about it here.)
The KPI burden
The other problem for business owners is the cost of getting all these KPIs. Someone has to write a report and run it, or calculate a figure or check on a machine.
KPIs then need to be collated for management, and presented and reviewed. And most KPI reports contain not just the key metrics, but all the supporting details as well.
This ‘KPI burden’ has caused organisations to abandon many measurement practices, and managers to stop analysing their reports and dashboards. In the last month, I’ve read at least two columns about how to prioritise and cull your KPIs down to only a handful to make them more manageable.
This isn’t the solution!
How I solved all this
Well, the solution wasn’t to give up measuring my business just because I didn’t have time. In the end, I solved the problem by inventing something brand new. (I’m in IT – it’s what I do!)
I invented a business monitoring system that could monitor hundreds of KPIs across my business BUT take me less than a second to confirm that everything’s ok. I can get more information if I need it and reassurance if I don’t. The collection processes are all automated and, no matter how many KPIs I add to it, I still have still one single indicator to check on.
It’s so vital that I measure what’s going on in the business but I don’t need (more) reams of paper on my desk. I don’t want each new KPI to add more time to my day or another page to a report.
I want to know basic, but very important, things. Where are we now? What is the trend? Is everything ok? And I want to be able to check any machine (desktop, notebook, office space, tablet computer, mobile phone) to find out.
Don’t worry, you don’t have to go out and hire an IT expert to invent something like I did. I’m so proud of Bizeo that I want everyone to use it. Don’t suffer death by dashboard anymore – let Bizeo take the stress out of your business!