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Establishing Key Performance Metrics to Monitor Business Performance.
What gets measured at your company? Is it primarily sales and profits? Do you use other indicators to monitor performance in key areas? How often do you track those measurements?
Often, in young growing companies, what gets measured is vague and uncertain. As a company grows, it is constantly in a state of flux and change. Your business is dynamic, with hundred of different variables at play each day. each of them has a pull on you and your employees, dictating their behaviours and priorities. But at the end of the day, which are really important variables? One of the most important management tools for growing a company is the development of a clear set of performance indicators that are the criteria from which the business is managed and monitored. These critical measures are most of ten related to financial performance….sales,margins, accounts receivable. However, each company should reflect on what is most important to its business performance, and select a group of key indicators that are tracked on a regular basis.
Performance indicators will be different for each company,depending on the type of business you are in and and what is of particular importance to your success. Indicators should be chosen that represent the companies unique critical success factors for sustaining competitive advantage in the marketplace, as well as tracking the general health of the business. As an example key areas may include the following:
- Customer feedback scores (service rating, or other important customer measures)
- Employee feedback scores (annual surveys measuring morale, engagement, etc.)
- Profit Measures ( key drivers of profitability to determine the most important operational / business functions that impact profitability)
- Cash Management (accounts receivable/payable, cash balances, inventory levels, future projections)
- Sales Revenue growth (indicators, close ratios, etc )
Once the indicators have been selected, you can track them on a daily, weekly, and/or monthly basis.
Strategic planning increases the effectiveness of an organizations growth in at least 10 important ways.
1. Planning forces you to define the future direction for the company in terms of measurable results.
2. Planning ensures that the company maintains a strategic focus.
3. Planning allows time for contemplation and reflection.
4. Planning prioritizes the issues that must be addressed to achieve corporate goals.
5. Planning guides effective decision making and validates allocation of time for each manager and employee.
6. Planning allows you to be proactive rather than reactive and anticipate the right opportunities.
7. Planning provides a tool for monitoring progress.
8. Planning is a means of communication for the whole organization.
9. Planning gets everyone moving in the same direction.
10.Planning facilitates cross functional connections between different areas or departments.