Business Metrics and KPIs
Why Metrics and KPIs are Important for Business
A recent study about small to midsize businesses in the United States revealed:
- 50% of companies that track metrics in real-time met all their goals in the last 12 months compared to only 24% of companies that did not track in real-time.
- 92% of companies that tracked their metrics in real-time met some or all their goals in the last 12 months – compared to 64% of companies that did not track in real-time.
- Only 14 percent of SMBs are monitoring their KPIs in real-time.
It is concluded that small to midsize businesses that track and monitor their metrics in real-time are twice as successful as those businesses that do not.
All KPIs are metrics, but not all metrics are KPIs. Metrics and KPIs are sometimes confused and used interchangeably, which is understandable because they are similar. However, the difference between the two is within the creation and implementation of an organization’s strategic plan.
What are KPI’s?
KPIs, Key performance indicators, are a set of quantifiable measurements used to evaluate a company’s overall long-term performance. KPIs specifically define the strategy and help determine if a company is meeting their specific strategic, financial, and operational goals.
KPIs Commonly Track:
- Financial- revenue and profit margins
- Customer Service- customer satisfaction, customer lifetime value, customer acquisition cost
- Performance- overall efficiency, processes, operational performance
- Employment- employee turnover, vacancies, employee performance
Like KPIs, metrics also track and provide data about a company’s standard business process, but they are less critical in the comparison and measurement of performance against the strategic goal. Metrics are important in reaching an objective, but it is just a data point that does not clearly relate to the objective. Metrics track process and KPIs track reaching the target or goal.
Why KPI’s and Metrics are Important for Businesses
- Measures financial performance
- Increases profitability
- Increases business growth
- Focuses goals and strategies
- Provides a way to see if your strategy is working
- Focuses employee’s attention on what matters most for success
- Helps analyze performance
- Monitors company health
- Highlight any issues that might otherwise go unnoticed, meaning that efficiency and productivity are given a boost.
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