You’re probably wondering: What on earth is a KPI? Well, first off, it’s an acronym that stands for Key Performance Indicator.
KPIs, to put simply, are something that is measurable and shows the progress towards a specific result. All kinds of data can be measured and analyzed to gauge success.
If you owned an ice cream shop and wanted to make a new flavour, you could take note of what flavours are most popular. (Face it, we all know Mint Chocolate Chip is the best). Popular flavours of ice cream mean more sales for your shop.
As you can tell, there are plenty of variables to measure. In the ice cream shop example, you can look at customer satisfaction or the amount of time it takes for your staff to make a scoop of Rocky Road. However, the goal of a KPI is to achieve results or meet a target. That means we want a good KPI that will provide us with information to meet that target. Customer satisfaction would be a good variable because happier customers come back more often resulting in more sales. The amount of time your staff takes to scoop an ice cream cone would be less useful if you wanted to improve sales, but it would be useful if you wanted to reduce the amount of time a customer is waiting. Clearly defining the target is a crucial part of having a good KPI.
So why do you need to know about KPIs? Plenty of reasons! First, they allow businesses to track progress. That information then allows them to make more informed decisions to meet their targets. It also provides a focal point for a business to work on. Going back to our ice cream example, you might notice that your shop sells the most ice cream on weekends, and Mondays are especially low sales. Knowing that you might adjust your store hours to meet the needs of your customers.
Alright, so a KPI is data that helps me understand my business, but what does it look like? In most cases, all of your data is accumulated and put through a program to be visualized. However, you’re often not just looking at one variable like I mentioned at the start, you’re looking at thousands of variables to then compare and find patterns… that’s a lot of numbers. Thankfully, once all the different variables are collected, they are sorted onto a dashboard for you to easily understand. Everyone likes pictures right?
In summary, KPIs are tangible evidence that a company can use to achieve specific goals, and better inform policies and decisions regarding their business practices. Not so scary after all! Hopefully, you have found this article to be of use and are a little less afraid of KPIs.