Drew | Business Insights

Checklist: KPIs for decision making in business management

Written by Drew's editorial team | Apr 21, 2022 3:38:00 PM

KPIs or Key Performance Indicators are a series of business metrics that are used to evaluate factors crucial to the success or failure of a business. These indicators play a fundamental role when properly developing a strategy in any organization.

A KPI is designed to show how progress is made on a particular product or process, so it is a performance indicator. There are KPIs for various areas of a company: purchasing, logistics, sales, marketing, customer service, operations, etc. Large companies have KPIs that show whether the actions carried out are giving results or if, on the contrary, progress is not as expected.

KPIs are financial or non-financial measurements used to quantify the degree of achievement of objectives. They reflect the performance of a company and are generally collected from its strategic plan. KPIs are used for business decision-making.

KPIs have a series of characteristics that define them, either to measure performance by area or to measure decision-making in business management.

  • Define objectives: before being able to start with the KPIs strategy, the organization must be clear about what their objectives are, how they could achieve them and who can act to meet each one of them. (Ex: Achieve a high percentage of sales through the online channel at the end of a year)
  • Specific: KPIs are a form of communication, so the clearer and more relevant the information is, the easier it can be incorporated and the more likely it is to generate an action. (Ex: The main online shopping customers should be prospects from email marketing campaigns and activations on social networks)
  • Quantifiable: the indicator must be measurable in numbers because, for example, the morale of the workers is important for the company, but it is very difficult to measure in numbers, so it could not be considered as a KPI. Remember that KPIs must be measured regularly.
  • Correlative: the indicators should be related to each other to lead to obtaining the type of results that are desired in the company.
  • Attributable: Each of the KPIs must be attributable to someone to whom they report directly. KPIs require commitment and responsibility, both on the part of directors and intermediate positions or even other professionals without a subordinate. Likewise, they can be used as a powerful tool associated with variable remuneration.
  • Generate a positive impact: do not forget that KPIs always promote actions that have a positive impact on the company's performance. Avoid situations in which poorly defined metrics lead to dysfunctional behavior in the organization.
  • Comparable: all the defined KPIs must have the same importance for the company, in such a way that there is no hierarchy between them.

 

Advantages of strategic KPIs for companies

A good marketing strategy, for example, based on KPIs for decision making, could not be defined without the use of management indicators that allow measuring and quantifying what is important and controlling deviations from the objectives set. This can be considered the main benefit of this trend, but in addition, there are other benefits to highlight:

  1. They favor the understanding of the success and error of the company.
  2. They offer the possibility of applying corrective actions in the event of a possible deviation from a company's objectives.
  3. Provides a control and monitoring system for the actions launched and the work carried out.
  4. They contribute to learning and improving business and marketing decision-making.

 

KPIs for decision-making in business management.

Business leaders understand that they need information on the most important dimensions of how their companies are performing. But only by choosing the vital indicators, as if it were a doctor looking for indicators of the health of their patients, they will be able to pay attention to the metrics that are generated after setting those indicators.

Going back to the performance indicators for companies, the most effective management indicators are closely linked to the strategic objectives, because they help to answer the main business-related questions of the moment.

Therefore, the starting point should be to identify the questions that decision-makers, managers, or external stakeholders need to answer.

The key performance questions that need to be answered for each strategic objective should be identified.

Next, the correct KPIs must be selected or defined to answer those questions. Consequently, the KPIs for decision-making will be strategic, relevant, and meaningful.

 

In conclusion, there are different KPIs for decision-making in business management. Choosing the ones that best suit the objectives that your company seeks to achieve to be more scalable is a challenge that you must pose, discuss and then plan with your executive team.