Whatever business you own or run, you’ll want to know how the business is performing. This is where measuring performance metrics comes in!
Performance metrics are data used to track processes within a business.
By collecting and evaluating performance metrics against established objectives, business owners can see how a business process is faring and take appropriate steps to ensure the business remains on track to achieve its goals.
But how do you measure performance metrics?
You can measure performance metrics like a professional by identifying goals, developing metrics for objectives, collecting data, establishing a reporting process, and using different measures to get a holistic view of performance.
This article will examine these steps in detail. It’ll also look at the different types of performance metrics and the benefits of measuring performance metrics.
Measuring performance metrics: A step-by-step guide
The following steps can help you measure performance metrics and stay on top of your business:
Identify goals and objectives
If you do not know what you want to achieve, how do you intentionally work towards achieving it? For this reason, the first step to tracking performance metrics like a pro is to outline your company’s goals and objectives.
A simple way to identify goals is to think of what success will look like for your company. Thus, you can use critical success factors to represent your goals.
Some of the most popular goals businesses identify at this stage include:
Increase production volume
Reduce production costs
Increase customer base
Increase customer satisfaction
It is important to use the SMART model when developing objectives. That is, objectives should be specific, measurable, accurate, relevant, and time-bound.
When objectives are measurable and time-bound, you can easily tell how effectively you are accomplishing them.
Consider sales objectives that include “increase sales.” While that is a worthwhile objective, it is not measurable, making it difficult to tell how effectively you achieve it.
However, consider refining it using result-oriented terms specific to outputs that can be measured (something like “increase sales by 20% before the end of the second quarter”). It becomes easier to track progress toward the objective.
Develop metrics for your objectives
After outlining your objectives, the next step is to develop measures for tracking progress toward them. This step answers the question, “How do I know whether the company is achieving its goals?”
Measures for tracking progress toward your goals are called key performance indicators (KPIs).
A key performance indicator provides quantifiable data for measuring performance. For the above sales objectives, one could select key performance metrics like monthly sales growth rate and conversion rate to track progress.
KPI selection is one of the most tricky aspects of business performance management.
Traditionally, selecting KPIs for objectives involves countless hours of reviews of business processes and consultations with relevant parties.
Worse still, choosing the right KPIs is not always guaranteed at the end of the manual process, and using the wrong KPIs can lead to overlooking essential matters or focusing on less important ones.
Getting KPI selection right is one reason to use the strategy management and KPI tracking solution, Kippy.
Kippy is software that autogenerates accurate KPIs for your objectives.
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KPIs are used to draw insights from data. Thus, after developing metrics for your objectives, the next step is to collect your data and enter them into a performance management system.
There are different kinds of performance data and different ways to collect them.
Performance data could come from sales records, employee surveys, customer reviews, interviews, performance management systems, etc.
However, the data to collect and collection methods will depend on your goals.
For example, if your goal is to grow your customer base, you may want to collect “new customers” data from sales records.
Establish a reporting process
Data alone cannot provide actionable intelligence. So after collecting performance data, you need to provide reporting processes that turn your data into actionable insights.
Data analysis involves using metrics to monitor performance. You can start by comparing performance over time, establishing relationships in the data, etc.
The sooner you can connect data points, the sooner you can use data to make key observations about business performance.
The output of the analysis is a report. Performance reports help you visualize the connections within your data and drive you to valuable concussions.
Use different measures
While one measure may give you a good view of a specific aspect of your business, it does not give a comprehensive view of everything informing your performance.
Thus, measuring performance metrics like a professional requires combing different measures for a holistic view of business performance.
For example, measuring only profits may reveal you are doing well in the market. But you also need to measure employee metrics like employee satisfaction to know how your employees are feeling.
If not, you may immediately face high employee turnover or low employee productivity, which are indicators of lower organizational performance and can plummet profits.
Thus, to track performance metrics like a pro, you should look at other metrics in addition to a particular performance measure you have in mind.
What are the types of performance metrics to measure?
Businesses use performance metrics to measure different aspects of their business (such as sales, project management, etc.).
Performance metrics are generally classified into four categories:
Sales performance metrics
Sales performance metrics are data points you can use to measure the performance of both an individual salesperson and the entire sales team.
You track sales metrics by comparing the data to predetermined sales goals and objectives.
This provides insight into how your company's sales efforts are working. The result can help you see whether your sales activities are paying off or whether you should make adjustments.
Common sales performance metrics include:
Sales activity metrics
Sales activity metrics are data that provide insights into the everyday activities of a company’s salespeople.
They include measures like how many calls your salespeople make daily, the number of emails sent, the number of follow-ups made, the number of conversations, etc.
Lead generation metrics
Lead generation metrics are data that provide insights into how well a business is doing at acquiring new sales.
Good lead generation metrics include the number of leads generated, lead response time, sales cycle, and customer lifetime value (CLV).
Sales productivity metrics provide insights into how quickly salespeople can achieve sales revenue.
The shorter the time, the higher the sales productivity.
Common sales productivity metrics include conversion rate, win rate, and sales length.
Employee performance metrics
Employee performance metrics are data points you can use to measure how productive and efficient employees are in meeting predefined targets.
When you measure employee performance, you can see where employees are struggling, giving you insight into how you can help them meet their targets and propel the company forward.
You can track an employee’s performance using the following:
Work quality metrics
Work quality metrics look at the quality of an employee’s work. A subjective appraisal is commonly used to determine a team member’s work quality.
However, work quality metrics can also be measured quantitatively using product defects or the number of errors.
Work quantity metrics
Work quantity metrics are used to measure the amount of work an employee delivers toward achieving set goals.
Common work quantity metrics include the number of outputs produced, the number of deals concluded, etc.
Work efficiency metrics
Work efficiency metrics combine work quality and work quantity metrics to understand employee performance better.
For example, an employee that outputs two super-quality items will not be considered productive if the expectation is 20 units.
Similarly, an employee meeting the 20-unit expectations cannot be considered productive if they’re full of errors.
By using quality and quantity data points, work efficiency creates a balance that tells a better story when measuring employee performance.
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Business performance metrics
Business performance metrics are data points you can use to measure specific processes within your business, such as sales, profitability, etc.
Three business performance metrics to track your processes include:
ROI (Return on investment) indicators are metrics that help you determine whether or not an investment will be profitable. Tracking this key performance metric will help you decide which investment to pursue.
The most common ROI indicators are financial KPIs. These include payback period, net present value (NPV), and internal rate of return (IRR).
Productivity metrics track the amount of work delivered in relation to the resources used. Measuring a department’s productivity shows you your capacity.
It tells you your ability to meet deadlines or take up more work. It also shows whether you need to make operational adjustments (such as increasing employees, adding new equipment, etc.).
Profitability metrics are data points you can use to track your business’ profit margin. Every business aims to make a profit, and profitability metrics measure progress toward that goal.
These key metrics show whether you are using assets and equity well and whether the business will survive and grow.
Common profitability metrics include total revenue, gross profit (gross margin), operating profit, return on total assets, return on equity, etc.
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Project management metrics
Project management metrics are data points you can use to measure the effectiveness and profitability of your projects. Project planning involves setting performance goals and objectives.
As the project progresses, you compare results with expectations to determine progress toward goals.
Project management metrics offer insight into whether a project will be successfully completed.
Some of these metrics include:
Project quality metrics look at the quality of project deliverables. Satisfaction of relevant stakeholders with output is the main measure of quality.
But you can also use quantitative measures like the number of errors.
Project cost metrics
Cost metrics look at whether a project will be completed within the expected budget.
As a project progresses, tracking cost factors can help you determine when there might be an overrun, so you can take appropriate steps to rein in costs and stay within budget.
Project time metrics
You can incur more costs and miss good opportunities if you fail to deliver a project within the expected timeframe. Project time metrics measure your ability to deliver your projects on time.
It involves tracking whether project activities are executed and delivered on time and that everything remains on track.
This can help you identify and fix potential delay areas.
Project scope establishes boundaries for the project by defining what needs to be done. Scope metrics are data points that help you keep an eye on a project so unplanned goals and tasks do not creep in.
Know that all tasks have cost and time implications. Thus, project scope metrics that help you focus on core project tasks help keep your project within budget and schedule.
What are the benefits of measuring performance metrics?
You should track performance metrics because doing so delivers many advantages to your business. Tracking performance metrics provides valuable information you can use to grow your business and boost profits.
Specific benefits of measuring performance metrics are:
Helps you specify your goals and expectations
Creating a system to measure/ track performance requires defining your goals, objectives, and expectations. Thus, the need to track performance metrics gives your company measurable objectives to pursue.
Helps you put strategies in place to meet objectives
You need to define specific actions you will perform to achieve your goals before talking about measuring performance while performing the action.
So, measuring performance metrics helps you put strategies in place for meeting objectives.
Provides you with valuable information to grow your business
The core benefit of measuring performance metrics is providing valuable information about a business.
When you examine data points representing actual performance, you can gauge progress toward achieving goals.
Depending on what the data reveal, you can optimize efforts or make adjustments to processes toward achieving your goals.
Thus, you can use insights from performance measures to grow your business.
Takeaway: Measure performance metrics like a PRO using Kippy
Measuring performance metrics is critical to business success because it helps you determine how you are progressing toward achieving your objectives.
You can use performance metrics to measure different aspects of your business, such as sales, employee productivity, project management, and overall business processes.
Whatever aspect of your business you want to stay on top of, the five steps mentioned above will help you measure performance metrics like a pro.
Strategy management and KPI tracking solutions help streamline the process of measuring performance metrics. Interestingly, Kippy is the go-to strategy management and KPI tracking solution.
With Kippy, you’ll not spend hundreds of hours or thousands of dollars to find KPIs for your objectives. You’ll also not worry about choosing the wrong KPIs.
Kippy provides a single source of truth for generating accurate KPIs, aligning every person in your organization with strategic goals, tracking performance metrics, and appraising employee performance.
Want to take the stress out of managing your strategy, objectives, and KPIs? Book a demo today and see how Kippy can help.