Choosing the Right KPIs for Modern Business Success

Posted by The Align Team on Apr 4, 2017 9:45:39 AM

Every company needs to track and measure how well it is doing compared to its stated goals. But how can your company identify which metrics you need to monitor? The specific targets you set and Key Performance Indicators you measure will depend on your organization’s industry, but the types of metrics described below can help you define your KPIs and get tracking.

Choosing the Right KPIs for Modern Business Success

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For reference, Key Performance Indicators or KPIs are simply the metrics an organization uses to compare its current progress to its original business objectives.

 While the individual metrics you choose to track will vary, it’s incredibly important to have a diverse set of KPIs for your company overall.

For instance, a company selling a product will be interested in how many units were sold and how the profits have increased or decreased. But, that shouldn’t be all that their team members measure.

The marketing team will look at SEO rankings, the number of visitors to the website, etc. while your financial team will need to analyze the cash flow and net proceeds. And that’s not even including external measures like customer satisfaction or percentage of the market share.

There’s a lot of data out there to measure. But choosing the right metrics to measure doesn't need to be a headache-inducing affair. 

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If you identify KPIs from the following key areas, you’re likely to give your organization a comprehensive look at how it’s doing so far.

There are two main categories of KPIs your company should focus on for modern business success: Relationship and Process Metrics.

Relationship Metrics

This first set of targets focuses around the people of your organization, including your team members, customers, and other stakeholders.

As Scaling Up author Verne Harnish points out, the people who surround your business can greatly affect your entrepreneurial success.

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These people are immensely important, and that’s why you need to track key stats on them. The following are just an example of some of the KPIs you can develop based on the people in your business. Check out these ideas to get started:

Employee Metrics

  • Employee Satisfaction Score
  • Employee Retention Percentage
  • Professional Development (CE Credits, Hours of Training, Certification Levels)
  • # of One-on-one Meetings with Supervisors
  • Percentage of “A” Players
  • Open Positions
  • Talent Pipeline

Customer Metrics

  • Revenue/Gross Margin
  • Customer Satisfaction Score
  • # of Customer Connections by Leadership
  • Repeat Orders/Recurring Revenue/Subscription Renewals
  • # of Customer Referrals
  • Online Reviews (Amazon, Yelp, etc.)

Stakeholder Metrics

  • ROI/Net Income/Equity
  • Shareholder/Stockholder Satisfaction
  • Key Partner/Vendor Satisfaction
  • Leadership Communication (Annual Reports, Board Meetings, One-on-One Meetings)

To start inputting your targets right away, begin a free trial of our Align software to help you measure progress and update your KPIs instantaneously. 


Process Metrics

While the people involved in your organization are immensely important, it’s essential to identify process-related KPIs too. These are the targets that help you identify ways to improve your productivity, limit costs, and maintain positive net revenue.

Make-Buy Metrics

  • Productivity Measures (Throughput, Widgets/hour, Labor Efficiency)
  • Costs of Goods Sold/Gross Margin
  • Direct Labor Costs/Management Labor Costs
  • Quality (Defects, RMA’s)
  • On-time Delivery %
  • Days of Inventory

 Marketing/Sales Metrics

  • # of Leads Generated
  • Web hits, SEO Ranking, PR Hits
  • Tradeshow Attendance
  • Sales Amount ($ Amount of Quotes, $ Amount of Closed Contracts)
  • Sales Activity (# of Quotes/day, # of Meetings with Decision Makers, Pipeline)

Record Keeping Metrics

  • Accounts Receivable (Amount > 90 Days, DSO)
  • Accounts Payable
  • Cash Flow (Days of Operating Capital, LOC Balance, Debt Levels)
  • Budget Controls
  • Governance/Compliance

 Now, that’s a lot of data to keep in mind.

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These are just a sample of some of the targets you can set to keep track of how well your company is doing in these areas. For the most part, your organization will need to carefully consider which stats really hit home for you, and which are less of a priority. We recommend brainstorming the most important metrics with your leadership team and identifying 12-16 targets to focus on in particular.

Other advice to keep in mind when choosing your targets:

  • Try to select a mix of leading and lagging indicators
  • Consider counter-balancing targets so you don’t focus too much in one area
  • Only set targets that you can measure and report on a regular basis
  • Avoid targets outside of the control of your team
  • Decide if it’s better to measure financial targets as a percentage (%) or dollar ($) amount
  • Identify at which intervals you’ll need to measure different KPIs

Once you’ve got your key metrics in mind, make sure everyone on your team can access them, either on a company dashboard or similar platform. If you don’t have alignment to your goals throughout your organization, your team members won’t know when they’re falling behind on key targets.


For more information on identifying the right targets to scale up, check out some related posts:

4 Tips on How to Define KPIs and Visually Track Your Progress

How to Identify Your BHAG

To start inputting and measuring your progress right away, we’re offering a free 45-day trial of our Align business management software. Learn how to set targets, track your progress, and communicate KPIs company-wide. Click below to sign up and get started!

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Topics: KPI, business planning, track progress

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