Constant evaluation of operations is a must for growing and competitive businesses. KPI tracking is how they monitor and analyze their effectiveness and evaluate their advancement and improvement.
But, what is KPI tracking exactly, and why is it so important for companies and businesses?
Here’s everything you need to know about it.
In order to know what KPI tracking is, you must first understand what KPIs are. This acronym stands for Key Performance Indicators that measure certain goals for businesses of all sizes and types. The information they provide is helpful for managers, employees, departments, customer support teams, and processes.
It’s capturing data produced by a process that’s later used to produce KPIs which measure progress against certain objectives and goals that are displayed in easy-to-understand graphs and charts using KPI reports and KPI dashboards.
In other words, every business or company generates data in their daily operations, which is then used to support KPIs that measure performance against business’ strategic goals. The generated data is also used for everyday management of the company or business.
KPIs provide details about different aspects of a company’s operations. Not only that KPI tracking involves collecting data, but it also includes placing these metrics in a broader context to show if they indicate a need to optimize certain areas of a company or business, or if they show a level of improvement.
One of the KPI tracking goals is to measure the progress towards certain long-term objectives and goals with quantifiable milestones. That’s why it serves as a benchmark for improvement and evaluation.
Besides collecting and measuring data, tracking KPIs includes presenting this data in easily digestible dashboards and charts. This process helps businesses to see their progress and find out how to improve their operations.
KPI tracking provides valuable data to teams and gives them the power to constantly improve. It gives companies a clear direction and advantage over their competitors. It allows everyone involved within a business to concentrate on goals and on areas that need improvement by highlighting potential opportunities for improvement.
KPI tracking is extremely important for any modern organization or business when it comes to properly fine-tuning and guiding it for success. The first thing to do is create a relevant KPI library that will effectively monitor the performance metrics of your organization or business. With clearly defined relevant KPIs, a few areas can be immediately improved by tracking them correctly.
Sales is one of the most common use cases for key performance indicators. Here, progress towards goals and overall success is quantifiable. This, in turn, allows easier tracking in areas such as sales growth, sales as a function of converted leads, and monthly sales.
Monitoring these KPI objectives ensure businesses and organizations know how their sales funnels function from lead to conversion, as well as how to improve them.
KPI monitoring is also beneficial for marketing. Key performance indicators clearly show the performance of certain strategies and campaigns. Common marketing KPIs are returning visitors, lead conversions, purchase funnels, and brand awareness.
Still, the KPIs an organization or business will track depend on the industry, business model, goals, and strategies. However, customer acquisition cost, customer lifetime value, and revenue growth rate are three baseline metrics that need to be tracked properly for the health of your company and your basic success.
Setting SMART goals means accomplishing a lot without much effort. It means clarifying your thought and ideas, focusing your efforts, using your resources and time productively, and raising your chances of achieving your goals.
The first time the acronym SMART was mentioned was in 1981 when the consultant George Duran published a paper with the following title: "There is a S.M.A.R.T. way to write management goals and objectives."
Here are five things to have in mind to ensure your KPIs will be successful:
E.g. I have a clear definition of new sales
E.g. This measure is easily calculated
E.g. I can easily get this from my accounting system
E.g. It is pragmatic and practical to track.
E.g. I can get this every month.