Turn data into decisions with business performance indicators
As management expert H. James Harrington wrote: "Taking action is the first step towards control and improvement. ".
Data is a precious asset for any organization. It enables us to gain a more detailed understanding of our situation, so that we can control it more effectively. Because without control, there can be no improvement.
That's why it seems impossible today to manage activities without relying on corporate performance indicators. Like compasses, these KPIs support you in reaching your finishing line: your business objectives.
But as these metrics encompass many realities, we're here to help you see things a little more clearly. What are the most commonly encountered business performance indicators ? What type of activity do they measure?
Follow the guide 👇.
Why are business performance indicators important?
Making informed decisions
Every entrepreneur wants to prosper and lead his or her business to success 🚀. But to achieve their various objectives (increasing the number of customers, penetrating a new market, increasing loyalty, etc.), they still need to rely on reliable data!
Business performance indicators, also known as KPIs, are used to assess the health of an organization and then make decisions in line with the actual situation. They make it possible to exploit precise information relating to various areas of the business, with the aim of identifying potential areas for improvement and re-qualifying processes accordingly.
Today, it's essential for any ambitious company to adopt a data-centric mindset.
💡 Good to know: technological developments favor this orientation, since it would seem tedious to collect and then process all this data by hand.
Fortunately, software is available to automate these operations. Business intelligence solutions such as MyReport come to mind. Such a tool is capable of collecting all your data from a variety of sources, centralizing it and then rendering your KPIs via dashboards. Saving time, reducing errors... these platforms are an invaluable aid to the widespread monitoring of corporate performance indicators.
Positioning in relation to competitors and the market
By analyzing all this data, you can pragmatically compare your practices with those of other companies, as well as with industry standards.
By determining where you stand in relation to industry averages, you'll be able to identify areas for improvement, and above all, you'll be able to draw inspiration from the best of the best to move forward!
Stimulate employee motivation and commitment
Performance indicators not only help you measure your company's success, they also motivate your staff!
To begin with, they serve to clearly define the organization's expectations of them. And when uncertainties are eliminated, employees are more focused on achieving their objectives.
What's more, KPIs guarantee the objectivity of performance monitoring, and form a solid basis for triggering recognition and reward (the awarding of bonuses, for example). And this clearly contributes to employee commitment.
Defining KPIs: what about the SMART indicator?
However, to reap the benefits previously mentioned, it's important to identify precisely which corporate performance indicators to monitor as a priority, as it's difficult to observe them all with a magnifying glass 🔎!
💡 To select the most relevant KPIs, we recommend using the SMART method. This involves selecting metrics that are both :
- Specific: they describe exactly what is being measured, leaving no room for ambiguity;
- Measurable: they quantify progress in such a way as to verify objectively whether it has been achieved;
- Achievable: they are realistic and achievable with the resources and time available, with the aim of motivating employees without discouraging them;
- Relevant: they are aligned with the company's strategy and have a direct impact on its success;
- Time-bound: they include a deadline for achieving the objective.
The 5 different types of corporate performance indicators
What are the main key performance indicators?
Every company has its own specificities and ambitions. Consequently, it will not track the same KPIs as its neighbor. Nevertheless, here are those most commonly found, classified into broad categories.
Financial performance indicators
These indicators enable you to assess your organization's financial health, with a view to profitability and future projections. They are key data not only for managers, but also for partners and other investors wishing to assess the company's value.
KPIs related to accounting and cash management are also included.
👉 Examples of financial performance indicators:
- sales ;
- net cash ;
- working capital requirements ;
- overall net working capital ;
- break-even point ;
- gross margin ;
- sales margin ;
- gross operating surplus ;
- cash flow ;
- EBITDA, etc.
💡 More details in our article dedicated to financial indicators!
Sales and marketing performance indicators
These indicators are essential for assessing the effectiveness of the sales and marketing strategies deployed within the company. In particular, they provide information on campaign performance, customer engagement and the profitability of products or services sold.
Today, these metrics are increasingly linked to the digital space, in which much of a brand's activity takes place.
👉 Examples of sales and marketing performance indicators
- customer acquisition cost ;
- customer transformation rate ;
- customer retention rate ;
- attrition rate;
- CLV (Customer Lifetime Value) ;
- marketing ROI ;
- NPS (Net Promoter Score) ;
- cost per click ;
- click-through rate;
- average session duration, etc.
💡 More details in our article dedicated to sales performance indicators!
Organizational/HR performance indicators
These indicators, steered by the Human Resources department, are traditionally defined with a view to controlling payroll costs and productivity.
However, considerations relating to employee well-being and commitment are becoming increasingly important. It is now accepted that a happy employee is more effective in his or her tasks. What's more, over-hiring due to staff turnover can be costly!
☝️ Note that these KPIs can be grouped into sub-categories, as HR encompasses so many realities: recruitment, skills development, social climate, etc.
👉 Examples of organizational/HR performance indicators:
- turnover rate ;
- absenteeism rate ;
- average cost of recruitment ;
- average recruitment time;
- retention rate of new employees ;
- employee satisfaction rate;
- employee commitment score;
- internal promotion rate;
- return on training investment;
- average seniority, etc.
💡 More details in our article dedicated to HR indicators!
Supply chain performance indicators
In production and/or distribution activities, stock management and transport are key components of your profitability. By way of illustration, it's well known just how costly over-stocking can be!
What's more, the supply chain crystallizes a number of issues relating to customer relations and satisfaction. In today's increasingly competitive economic environment, late deliveries and stock-outs don't look good...
Finally, mastering your supply chain means anticipating the fluctuations of an increasingly fluid market!
👉 Examples of supply chain performance indicators:
- total cycle time ;
- transport cost per unit ;
- inventory turnover rate ;
- average stock ;
- percentage of orders delivered on time;
- storage time;
- supply chain costs as a percentage of sales;
- return rate ;
- order fill rate;
- supplier satisfaction index;
- total replenishment time, etc.
💡 More details in our article dedicated to logistics KPIs!
IT performance indicators
In the age of digital business transformation, IT is perfectly integrated into everyday processes, even when business isn't particularly online.
For example, most organizations now use business software to automate their daily tasks. The efficiency of IT infrastructures therefore needs to be closely monitored.
Add to this the challenges of IT security, and you'll understand the value of IT KPIs in ensuring that the technologies used are aligned with the organization's overall objectives.
👉 Examples of IT performance indicators:
- system response time ;
- network availability ;
- backup success rate;
- number of security vulnerabilities detected;
- average incident resolution time ;
- resolution time for critical problems;
- percentage of critical systems uptime;
- number of open VS closed support tickets;
- total cost of ownership of IT equipment;
- return on investment for IT projects, etc.
Performance indicators and dashboard
Focus now on the dashboard, the indispensable tool for effectively tracking your corporate performance indicators 📊.
This device synthesizes all selected KPIs within a single document, for greater visibility. In other words, it transforms raw data into actionable information, even for non-data-savvy staff.
Typically developed using software such as the BI solutions mentioned above, these dashboards are able to provide real-time data updates, helping executives and other managers to quickly understand where the company excels and where improvements are needed. In short, they promote proactivity.
💡 Worth knowing: building a good dashboard follows certain rules:
- limit the number of KPIs to those most relevant to the company's strategic objectives ;
- design a dashboard that is visually clear and easy to understand, to avoid information overload;
- use appropriate graphics for quick reading of key data;
- update regularly.
Business performance indicators: what to remember?
By now, you're familiar with many examples of corporate performance indicators. As you've seen, there's something for everyone, from sales management to financial management, HR, supply chain and IT.
Faced with this vast choice, you need to choose the most relevant ones, based on the SMART methodology, among other things.
Of course, once you've selected your KPIs, it's time to analyze them, which is essential for rapidly identifying trends: what are your strengths, which you can capitalize on? And your weaknesses, which need to be addressed?
Finally, all this work is meaningless if you don't take corrective action. This is the ultimate goal of indicators: to transform data into decisions and then into concrete actions, propelling the company towards lasting success.
Article translated from French