How to define the best business indicators?

Achieving success in our organization, being more efficient, actively listening to our customers, and being ahead of the competition are some of the orders we want to achieve successfully. Every business runs after attaining these objectives, but how do you reach them without getting lost along the way? What are we doing well, and what can we improve? Do we have information, data, and evidence that show us an accurate picture of our organizations? The answers lie in the Key Performance Indicators (KPI).

Find out how to establish key indicators and where to focus your efforts in this blog. Especially if you are managing an organization or are part of the strategic management and are looking for greater profitability.

Index

• What is a Key Performance Indicator?
• Advantages of a results-oriented organization
• How do you define key indicators?

What is a Key Performance Indicator?

The indicators or KPI is the information that allows us to measure the progress of a process. In other words, it is to place a thermometer that gives us a measurement of how the temperature is: cold, warm, hot. For our organization, it is to determine if our business processes are below a goal, if they are close to the objectives or if they exceed expectations. A proper definition of the indicators will be essential for the evolution and maturity of the processes. Leading us in a comprehensive and orderly manner to meet the agreed goals.

For example, we want to measure a purchase process through a website. It can be proposed as an indicator to count the number of visits to this website. Still, as a key indicator, you must establish how many of these visits result in effective purchases for your business.

Among the characteristics that the indicators must have, we can mention the following:

• To be aligned with the objectives of the organization
• Adequately measure the processes
• Be specific in what you are going to measure
• Clarity and easy to understand
• Delegate to a responsible person
• Define what you measure, how you measure, and how often you measure       

Figure 1: Summary of indicator characteristics

We may find ourselves in the following dilemma: what type of indicators are required by my organization? This will depend on the type of industry and other variants. For example, beyond finding a recipe and its ingredients (in this case, a list of indicators), we must be aware that these go in the direction that marks my compass: the company's objectives.

It will be possible to propose various interesting indicators, but you must be very clear about the objectives you have to meet. If this will benefit the customers and if the process is mature enough to apply this indicator.

Below is an image of the sequence that triggers a good definition of the organization's objectives in addition to the measurement of the processes to fulfill the customers' expectations.

Figure 2: Aspects that trigger added value to the clients.

Read more: 10 Signs that it is time to update your business model

Additionally, I list some indicators as a reference that are widely used and will allow you to go after the purpose you are looking for:

• Financial Indicators
• Commercial Indicators
• Customer Indicators
• Quality Indicators
• Efficiency Indicators
• Project Indicators
• Competitiveness Indicators

Advantages of a results-oriented organization

Part of the exercises and methodologies we must have on our radar is to motivate the culture of measurement that helps to improve, innovate, and, therefore, be steps ahead of the competition. So we should not be reluctant to the measurements and the results generated. On the contrary, if we do not measure, we will not know if we do well or if we should improve, where we can change and how we can manage the resources efficiently.

If you are still not sure if the key indicators can help organizations, I will point out the advantages here:

• In search of continuous process improvement
• In search of process automation
• Focus the efforts
• Alignment with the company
• Global vision of processes

Maybe you might be interested in: 11 sales productivity indicators you should know

How do you define key indicators?

Once we have clear objectives and they are duly communicated to the organization, we have the following points on how to define indicators for the processes step by step:

1. Establish and be clear about the processes. Define and know the steps you will measure to have the x-ray of how they are. 
2. Define what you are going to measure and the method to measure it. Once we know the processes, the next step is to detect what you have to measure (what causes pain, what is critical, where there are more risks) and a formula that generates the value to know if you are inside or outside the limits. 
3. Provide the limits of the indicators. It would help if you established these limits with a range of a floor and a ceiling. If we do not have data previously, we can use the expert criteria to start, but the accompaniment and adjustments are essential to get closer to where we want to go.
4. Select reliable data sources to have accurate and quality information. The data to be analyzed must come from reliable systems and sources; the intention beyond measuring and obtaining a percentage, number, etc., is to take actions based on the results generated. 
5. Determine which indicators generate the most harmonious result for the organization's direction. As mentioned above, there may be ideas for attractive KPIs, but if they are out of scope, it will be better to consider others and analyze the possibility of using them in the future.
6. Question the results. Like the processes, the critical business indicators will have to evolve and reach a point where their results no longer generate any alert or value. Or, it would be best if you made downward and upward boundary changes.
7. Establish the owner of the indicators and the target audience. Know who is the owner of the indicator, who is responsible for it, and who are the people within the organization who are interested in knowing about these measurements.
8. Define the frequency of measurement of the indicators. Those responsible for the KPIs must define the measures per month, quarter, semester, etc. This is determined by the nature of the process and its behavior. This means that if it is a very critical process for the organization, the measurement frequency is high.
9. Define an indicator review schedule. We must include in a work schedule the review of the value of the indicators. Rethink and improve them. Although it is precious to raise your hand in case any particular indicator is not generating results, change it and adjust it without waiting until the date that corresponds to its revision.

Learn about tools that could help you: HubSpot forecast software: The crucial indicator for management

At Imagineer, we are willing to help you and provide you with a customized consulting service to answer all your questions regarding indicators or how to apply these steps to your organization's specific processes. Visit our website, www.imagineer.co

Throughout this blog, we contemplated the key business indicators and that a reasonable determination of them will allow you to be more efficient and agile and move loosely towards change. Many organizations are successful, but not by chance. They are aligned to a structure, processes, and how to measure them.; this allows the various areas to have autonomy. We must establish key business indicators, which will be our allies and a valuable tool for the organization's growth.