KPI & Metrics

KEY PERFORMANCE INDICATORS (KPI)

KPIs are a critical component to your company’s success, as they are tied to a strategic objective. Depending on your business and strategy, KPI’s will vary. Businesses should not confuse a metrics with KPIs. Businesses track hundreds of metrics (marketing metrics, sales metrics, social media metrics, etc.) but they mainly focus on KPIs to keep a pulse on the organization.

Example: If we have a subscription based business, rather than just using a metric, such as ‘number of customers’, two ‘customer KPIs’ may be ‘monthly customer growth’ & ‘customer retention’. Each its own completely separate strategy for success. Making it attainable means we quantify our KPI by expressing we want to see our ‘monthly customer growth’ increase from 12,000 to 16,000, then develop a strategy to get there.

Primary metrics are used for process improvement and generally focus on quality, timeliness, or costs.

Example: A project was initiated to improve the accuracy of customer orders. Thus, decreasing returns.

Secondary metrics are an additional positive result from the improvement of a primary metric.

Example (cont.): A secondary metric was established to measure the ‘number of new customers’ and ‘number of returns’.

Consequential Metrics

As it sounds, a consequential metric measures a negative result of improving a primary metric. Generally, if your primary metric is on ‘quality’, your consequential metrics will be either ‘timeliness’ or ‘cost’.

Example (cont.): Because the project requires the business to ensure order accuracy, the business took longer to get orders out. A consequential metric could be the ‘percentage of orders received on-time’. ‘Number of complaints’ could also be a consequential metric as a decrease in the orders received on-time would increase complaints.

Financial Metrics

Financial metrics follows the money. All projects require a financial obligation whether that is time and/or investments but a financial metrics for a process improvement project measures the fiscal impact of a project.

Example (cont.): The project has the potential financial gain to decrease the number of returns, so the business wants to track ‘Shipping costs of returns’ and ‘value of returned inventory for both re-sale and liquidation’. However, the project could increase in the ‘number of complaints’ which can cause some team members to work overtime, thus ‘Service Department overtime cost’ is now monitored.