Key Performance Indicators (KPIs) should be the vital navigation instruments used by managers and leaders to understand whether they are on course to success or not. The right set of KPIs will shine light on performance and highlight areas that need attention. Without the right KPIs managers are flying blind, a bit like a pilot without instruments.

The problem is that most companies collect and report a vast amount of everything that is easy to measure and as a consequence their managers end up drowning in data while thirsting for insights.

Effective managers understand the key performance dimensions of their business by distilling them down into the critical KPIs. This is a bit like a doctor who takes measures such as heart rate, cholesterol levels, blood pressure and blood tests to check the health of their patients.

In order to identify the right KPIs for any business it is important to be clear about the objectives and strategic directions. Remember, navigation instruments are only useful if we know where we want to go. Therefore, first define the strategy and then closely link our KPIs to the objectives.

I believe KPIs have to be developed uniquely to fit the information needs of a company. However, what I have leant over many years of helping companies and government organizations with their performance management and business intelligence is that there are some important (and innovative) KPIs everyone should know about. They will give you a solid base of knowledge. However, there will be other, more specialized measures designed for your specific strategy or industry context. Take for example the network performance KPIs for a telecom operator or the quality indicators for healthcare providers. These will have to be included in your list of KPIs but will not be found in the list below, at least not in their industry-specific format.

The list of 75 KPIs includes the metrics I consider the most important and informative and they make a good starting point for the development of a performance management system. Before we look at the list I would like to express an important warning: Don’t just pick all 75 – You don't need or indeed should have all 75 KPIs. Instead, by understanding these 75 KPIs you will be able to pick the vital few meaningful indicators that are relevant for your business. Finally, the KPIs should then be used (and owned) by everyone in the business to inform decision-making (and not as mindless reporting references or as 'carrot & stick tools').

To measure financial performance:

1. Net Profit

2. Net Profit Margin

3. Gross Profit Margin

4. Operating Profit Margin

5. EBITDA

6. Revenue Growth Rate

7. Total Shareholder Return (TSR)

8. Economic Value Added (EVA)

9. Return on Investment (ROI)

10. Return on Capital Employed (ROCE)

11. Return on Assets (ROA)

12. Return on Equity (ROE)

13. Debt-to-Equity (D/E) Ratio

14. Cash Conversion Cycle (CCC)

15. Working Capital Ratio

16. Operating Expense Ratio (OER)

17. CAPEX to Sales Ratio

18. Price Earnings Ratio (P/E Ratio)

To understand your customers:

19. Net Promoter Score (NPS)

20. Customer Retention Rate

21. Customer Satisfaction Index

22. Customer Profitability Score

23. Customer Lifetime Value

24. Customer Turnover Rate

25. Customer Engagement

26. Customer Complaints

To gauge your market and marketing efforts:

27. Market Growth Rate

28. Market Share

29. Brand Equity

30. Cost per Lead

31. Conversion Rate

32. Search Engine Rankings (by keyword) and click-through rate

33. Page Views and Bounce Rate

34. Customer Online Engagement Level

35. Online Share of Voice (OSOV)

36. Social Networking Footprint

37. Klout Score

To measure your operational performance:

38. Six Sigma Level

39. Capacity Utilisation Rate (CUR)

40. Process Waste Level

41. Order Fulfilment Cycle Time

42. Delivery In Full, On Time (DIFOT) Rate

43. Inventory Shrinkage Rate (ISR)

44. Project Schedule Variance (PSV)

45. Project Cost Variance (PCV)

46. Earned Value (EV) Metric

47. Innovation Pipeline Strength (IPS)

48. Return on Innovation Investment (ROI2)

49. Time to Market

50. First Pass Yield (FPY)

51. Rework Level

52. Quality Index

53. Overall Equipment Effectiveness (OEE)

54. Process or Machine Downtime Level

55. First Contact Resolution (FCR)

To understand your employees and their performance:

56. Human Capital Value Added (HCVA)

57. Revenue Per Employee

58. Employee Satisfaction Index

59. Employee Engagement Level

60. Staff Advocacy Score

61. Employee Churn Rate

62. Average Employee Tenure

63. Absenteeism Bradford Factor

64. 360-Degree Feedback Score

65. Salary Competitiveness Ratio (SCR)

66. Time to Hire

67. Training Return on Investment

To measure your environmental and social sustainability performance:

68. Carbon Footprint

69. Water Footprint

70. Energy Consumption

71. Saving Levels Due to Conservation and Improvement Efforts

72. Supply Chain Miles

73. Waste Reduction Rate

74. Waste Recycling Rate

75. Product Recycling Rate

Using Key Performance Indicators to Increase Productivity and Profitability

In most businesses, the employees represent both an organization's biggest expense, and its most

valuable asset. This means the company's productivity, and ultimately, its profitability depend on

making sure all of its workers perform up to, if not exceed their full potential.

To survive and prosper in today's economic times, companies can no longer manage using financial

measures alone. Businesses have to track non-financial measures such as speed of response and

product quality; externally focused measures, such as customer satisfaction and brand preference;

and forward looking measures, such as employee satisfaction, retention and succession planning.

Key Performance Indicators (KPIs) are a company's measurable goals, typically tied to an

organization’s strategy, as revealed through performance management tools such as the Balanced

Scorecard.

Most goals are achieved not through the efforts of a single person, but by multiple people in a variety

of departments across an organization. Performance management experts agree that cascading and

aligning goals across multiple owners creates a "shared accountability" that is vital to a company's

success. The company then uses its Key Performance Indicators as the foundation to analyze and

track performance and base key strategic decisions regarding staffing and resources.

Implementing the key performance indicators of a balanced scorecard typically includes four

processes:

The company translates its corporate vision into measurable operational goals that are

communicated to employees.

These goals are linked to individual performance goals which are assessed on an

established periodic basis.

Internal processes are established to meet and / or exceed the strategic goals and customer

expectations.

Finally, Key Performance Indicators are analyzed to evaluate and make recommendations to

improve future company performance.

Case Study: Lancaster Landmark Hotel Group

The solution:

By cascading goals across Landmark Group's three London properties, everyone is now aligned

together with full line of sight of each others' goals and objectives. The Group now also has the

ability to review more competencies than ever before and has created a true performance-based

culture across the group. There is now clear visibility of the company's Key Performance Indicators

on how effectively strategy is being executed and the value it delivers back to the business.

Here are some of the benefits of using Key Performance Indicators through the Balanced Scorecard

methodology as a measurement of a company's success:

Employees and managers see the overall corporate goal plan—and understand how their

individual goals fit into the company's business objectives creating a situation in which

employees feel energized and engaged in the success of the company.

Create shared employee responsibility—by cascading his or her goals with others in the

company.

Managers more easily stay in touch with employees' progress—during every phase of goal

completion, and offer immediate reinforcement or coaching to keep performance and

deadlines on track.

Creating an open and communicative environmentincluding quality feedback regarding goals

and progress

Cascading Your Strategy Throughout Your Company

Cascading your corporate goals throughout the organization lets you align your entire workforce to

the overall strategy. This ensures that everyone is focused on your key business objectives.

Translating high-level strategic goals into clear objectives for every business unit and every

employee creates a clear line-of-sight - from top down and bottom up—so each individual

understands how their day-to-day actions are contributing to overall company success.

This also allows employees to develop goals that link to the organization's objectives, driving

understanding of strategy, generating commitment, and instilling personal accountability.

Conclusion:

SuccessFactors' Business Execution Software is a web-based solution that provides all the

functionality required to create and maintain the balanced scorecards for your organization—from

the individual employee performance review to measuring the success of your corporate strategies

and goals. You can use our reporting modules to analyze all of your Key Performance Indicators

more effectively to gain powerful insights about company performance.

We seem to live in a world saturated with KPIs. Our corporate rivers are overflowing with them drenching everything in numbers and targets. KPIs stands for Key Performance Indicators and most companies and government organization are either drowning in metrics and/or are using them so badly that they are leading to un-intended behaviors.

The other week I wrote about the 75 KPIs every manager needs to know. That list of metrics was intended as an overview of all the ‘good’ KPIs I see in use today. I thought I made it unmistakably clear in the article that no-one should pick all 75, but some still didn’t get the message. Anyhow, my suggestion was to learn about the 75 good ones and then select the vital few that would be most relevant and meaningful to any given business.

With this post I want to follow on to say that there are really only 4 KPIs that every manager needs to use. These four are the same KPIs that come out of every workshop I run with executive from all over the world, across all different types of industries. To get to them I create a simple exercise and say to them: “You are running this business and want to understand how well the business is performing. You now have to select KPIs for the business and those metrics are the only management information you can use to judge whether the business is doing well or not. The challenge is that you have to agree on only 4 and together they should give you a complete picture.”

This, by the way, is a great exercise you can do in your own company or with your own team and is one that sits in stark contrast to the way KPIs are usually developed: Brainstorming what we could possibly measure and ending up in a position where we measure everything that walks and moves and nothing that matters!

Anyway, the four KPIs that always come out of these workshops are:

Customer Satisfaction, Internal Process Quality, Employee Satisfaction, and Financial Performance Index

Here are the reasons why these KPIs are picked time and time again:

Customer Satisfaction: It’s simple, without customers your organization wouldn’t be here. Any organization has customers it has to satisfy. For example: Apple, Inc. has customers that buy their products, the FBI has customers (the American public) whom they protects from terrorist and foreign intelligence threats, and an internal IT or HR function has customers (their co-workers in the operational departments) to whom they deliver services. Any business, government or not-for-profit organization has to ensure it delivers to their customers.Internal Process Quality: Companies need to make sure their services and products are to the expected standards and that they optimize the way these products or services are delivered. It doesn’t matter whether you are Apple, the FBI or a shared services function, all

of them have to ensure their processes are as efficient and effective as possible and deliver the quality their customers expect.Employee Satisfaction: Even though my last article was about the elimination of human jobs through the use of artificial intelligence and big data robots, we can safely say that employees are still the most important ingredients in any business. We all know that companies don’t do well if their employees are not happy and this again applies to all enterprises.Financial Performance Index: Money matters to Apple as much as it matters to the FBI or a shared services team. Apple needs to ensure it satisfies shareholders by delivering turnover growth and healthy profits, the FBI has to demonstrate it delivers value for money to the tax payer and the internal IT function has to ensure it controls costs and generates efficiency savings.

So here we have it. The four KPIs every manager needs to use. But how exactly do we know collect data on these? Ah, this brings me back to my original article about the 75 KPIs. Apple might develop their financial performance index by combining revenue growth with profit margins and EBITDA. The internal services team might track customer satisfaction using the Net Promoter Score. And the FBI might measure staff satisfaction using the Staff Advocacy Score.

Some will have spotted that these four KPIs fit neatly into the four perspectives of the Balanced Scorecard (BSC). The point I am always making is that this means the BSC is a very intuitive framework – which might explain why it is one of the most popular management tools in use today. However, it suffers from the same problems as KPIs – most scorecards are stuffed full with KPIs that are not relevant or meaningful.

So if you are seeking relevant and meaningful KPIs, simply start with customer satisfaction, internal process quality, employee satisfaction and financial performance.