Discussions about organizational success inevitably include the topic of growth. When we say we want our organizations to grow, what do we really mean? And how do we make sure that growth is smart and sustainable? What is growth? Some of the most common metrics relate to gross sales, profitability, net income, asset size, number of employees, number of locations, market share, number of customers, customer satisfaction, quality, community support, employee engagement, stock price, and efficiency. We can’t focus on them all.
Defining Metrics and KPIs
A metric is any piece of measurable information. Key performance indicators (KPIs) are the handful of metrics of focus that we share and discuss regularly . KPIs are critical in our over-saturated and over-informed worlds – it is impossible to do 80 things well at the same time. Ultimately it always comes back to people. The people who are working to produce results will perform better when everyone understands, in a really explicit way, what is most important.
To illustrate: one organization tracks “number of customers” as a KPI on a monthly basis. They don’t devote much effort to evaluating return on marketing costs or customer profitability. To contrast, another organization tracks “per customer profitability” as a KPI on a weekly basis. They do spend a lot of time with marketing and sales expense related metrics.
These different KPIs make sense given these organizations’ missions and strategic goals. (One is a nonprofit that aims to expose as many people as possible to their educational facility. The other is a privately owned retailer with tight margins.) Both KPIs are customer focused. Each organization uses very different metrics and strategies to achieve success.
This is article 1 in a series on metrics. If you are interested in a certain metric please post a comment and I’ll include that in the series.
Numbers can say different things and exactly as illustrated in this article your KPIs need to make sense to YOUR organization and to EVERYone in it. Done appropriately they are powerful and telling.
Thank you for your reply Dawn, I completely agree with your emphasis on making sure the numbers are right for your organization’s strategy. The metrics should be quite different for a company that differentiates on high quality compared to a company that differentiates on low price.