What are KPI s?
There are three indicators
KPIs are Key Performance Indicators. They are one set of three powerful indicators that are found in every business, and every industry, regardless of the size of the company.
Results Indicators are measure things that have happened in the past, days, weeks, months, year or even years. If everything stays the same, these past results would repeat themselves in the future. For example, these could be sales, number of sales calls, revenue, profit and percentage growth. By knowing what the results were in the past, you can predict what will happen in the future if you continue to do the same activities in the same business environment.
Performance Indicators measure the performance of specific activities, team members, or functions. Examples are number of calls, amount of time on each call, number of leads generated, number of referrals generated, and percentage of leads that convert into customers. So all of the data, all of the numbers that relate to the activities in your business are performance indicators.
Key Performance Indicators
Key Performance Indicators are the specific to each individual business and are the one to ten, most often three to six KEY performance indicators that when you monitor and measure them, are the best predictors of future performance, or of current challenges in your business.
The ONE number you must know
A great example is Southwest Airlines. Southwest has distinguished itself in the airline industry by being profitable every year for 40 consecutive years! Doing this is no accident. Yet the “C” level executives only track one number. However, every other team member, from the pilot, flight attendant, ticket counter, baggage handler, mechanic, everyone has their own unique Key Performance Indicators that are designed to assure that each and every flight is profitable. With the entire team focused on making every flight profitable, the “C” level executives have only one KPI they need to be concerned with, “Flights in the Air.” Their job is to make sure the number of flights in the air is increasing. They may need more planes, more gates, or more airports. That is what the executives focus on.
If the number of flights in the air decreases, that means there is a problem. It could be temporary, such as weather. Or, it could be more serious, such as equipment failure, booking or marketing problems. They don’t need to micromanage to tell if there is a problem. That one simple number, flights in the air will tell them. They can do this quickly, in real time.
Tracking your KPI enable you to predict
This same principle works for every business. Most businesses have between three and six KPIs. You must look at all of your performance indicators and identify which are the key ones. Or, the key numbers may be a combination or a ratio of performance indicators. KPIs are often unique to every business. Even in the same industry and in the same market, there are often different KPIs for each business.
You must track all of your data. Then analyze what must be tracked that can directly generate growth in your profitability, revenue, profit margins. By tracking these numbers you can actually develop the ability to predict and improve your future results and performance.