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Key Performance Indicators: How to Use Cost Data to Analyze KPIs for Your Company

By November 26, 2010 May 30th, 2016 No Comments

Key Performance Indicators: How to Use Cost Data to Analyze KPIs for Your CompanyCompanies that sell services to other businesses—data management, software development or IT consultancies, for example—often track time in order to automate invoicing, but they may be overlooking the other benefits these systems can provide. Real-time access to relevant Key Performance Indicators (KPIs) such as ‘percent billable’ and ‘completed vs. estimated’ can give early warnings of project problems and lead your company to faster growth and more profitability.

What’s a KPI?

A key performance indicator is ‘key,’ which means that your KPI has to be one of a very few things that you are measuring which you believe will make a huge difference to your business long-term. In other words, a KPI measures progress toward a strategic goal. If you have 100 KPIs, then you’re not going to be able to use any of them to drive organizational behavior because your company doesn’t have 100 strategic goals. Ten KPIs can be effective, five KPIs are better, and one KPI is ideal.

Martin Luther King Jr. had a morally compelling vision: interracial peace and equality. Your business needs a morally compelling vision as well if you want to hire and maintain the best people. King had a strategy to achieve his vision: nonviolent protest. In his case, a KPI might have been something like ‘number of violent incidents per protester.’ He would have encouraged his organization to reduce that number over time, which would have effectively measured the organization’s success.

The closer you get to a morally compelling vision, a clear strategy and calculable KPIs, the more successful your company will be, all else being equal.

1 – A Quantifiable Indicator

A KPI must be measurable. “Make customers more successful” is not an effective KPI without some way to measure the success of your customers.

It is also important for KPI definitions to remain stable from year to year. For a KPI of “increase utilization rates,” you need to address considerations like whether to measure by hours or by dollars.

2 – Performance Measurement…

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