Key Performance Indicators: Identifying and Using KPI’s - Tips on Implementing KPIs in Small Business  ‘KPI’ stands for Key Performance Indicator. They are measurements used by a business to drive performance. There has been increasing interest from business owners and managers about how to set effective KPI’s. Here are the 5 basic steps you need to take.

1. Map Your Core Business Processes

Before you can drive the performance of your business you need to have a clear picture of the core processes. Draw a flow diagram that shows the major steps you go through to generate revenue.

2. Establish Roles, Responsibilities & Critical Success Factors

You now need to allocate a role to each step in your core process. Who actually completes that step? For instance the Sales Manager might take the enquiry and provide the quote, the Operations Supervisor then orders supplies and so on. You then need to look at what it is that person needs to do successfully in that role to ensure the business is able to achieve its goals.

3. Choose the basis of your KPI 

Once you have completed Step 2 you may have a list of 5 - 10 critical factors that need to be addressed to ensure that role is completed successfully. From that list you now need to select your KPI’s.

4. Set the KPI 

Having completed the analysis outlined above you should arrive at 1 or 2 options. Choose the ones that are most critical for business success.

You may notice that by addressing these KPI’s a number of the other critical factors are addressed in part. For instance, if the enquiry is not handled professionally then initial and repeat orders are unlikely.

5. Set the target and review date 

Your final step is to set the performance levels. These need to align with your business goals but also need to be considered achievable by you team members. Ideally you set the targets in consultation with those people who will need to achieve them.

Once you and your team members have established the targets you then need to set the review dates.

The ideal frequency for review is highly contextual. For instance, it may make more sense to review repeat purchase rates annually rather than monthly depending on the buying habits of your customers.