Key Performance Indicators

What are key performance indicators?

• Key performance indicators (KPIs) are the few (six to eight) vital measurements that tell you whether your business is going in the right direction or no
• They form a dashboard for your business

How can you identify your KPIs?

• Start by writing down the things that limit your growth, the things that limit your profitability, the things that irritate customers in your industry and the things that prevent your staff excelling.  Try to identify a measurement or ratio that captures each 
• Some KPIs, such as revenue or profit growth, are common across most businesses.  Others will be specific to your industry, such as billable hours for professional services firms or customer churn for a mobile phone operator.   Find out how others in your industry measure their performance
• Review the set of KPIs chosen and check that they cover the major activities of the business.  They should include both forward-looking and historical measures and reflect your strategic objectives
• You need to be able to measure your chosen KPIs without significant difficulty or expense
• Review KPI performance at your monthly management meeting

Example KPIs

Area	KPI	Remarks
Finance	Revenue growth %	Historical
	Gross margin %	Historical
	Net margin %	Historical
	Return on investment	Historical
Customer	Customer satisfaction	Forward looking
	Customer attrition %	Historical
	Customer lifetime value £	Forward looking
	Average order value £	Historical
	Order book £	Forward looking
	Number of new leads	Forward looking
	Number of active customers	Historical
Process	Productivity	Historical
	Utilisation	Historical
	Defects	Historical
	Cost per sale	Historical
	Non-productive time %	Historical
	Debtor days	Historical
	Billable hours %	Historical
	Stock turns	Historical
Capability	Employee satisfaction	Forward looking
	Employee attrition %	Historical
	Training spend/head £	Forward looking
	Employees qualified to do x %	Forward looking