Business Performance Measurements: How to Increase Production, Profit and Morale - Part 3
by Tom GrimshawIn the first article of this series I defined the basic terms and philosopy of KPIs.
In the second I related some of my experiences with KPIs.
Here are some of the gains to be had from implementing KPIs.
Financial Rewards
Coming from a sales background as I do it is almost unthinkable to me not to financially reward high production. Most people do not come from a sales background. In most activities, financially rewarding production is a foreign concept. In areas where performance is easily measured, like number of widgets sold, company share price, net profit etc. it is very easy to reward production. In others, it is more difficult but with some thought and effort it is doable.
BPM (Business Performance Measurement) Software
Most organisations use an accounting package. Some also use a contact manager. Bigger businesses often use a CRM (Client Relationship Management) program. Manufacturers and farmers will use dedicated manufacturing or farming software. Each of these will have an element of performance measurement but it is usually restricted to their area of specialty. Their orientation and focus is usually on solving one aspect of the data management problem, at which they do a good job.
Larger organisations will sometimes have dedicated BPM software. In it you can enter statistic names and formulae. Business performance measurement software enables the personnel of an organisation to quickly and easily gather and collate the data then present it in a fashion that highlights relative importances. This is a considerable advance over basic business software that does merely the accounting functions.
Business performance management software goes beyond historical record keeping, tax preparation and call reminders. It is all about providing ALL the relevant data on how your business is tracking so you can better manage your business. It is also about giving you the data in the best format to help you make better managerial decisions. By the right format, I mean that you can see trends better in a graphical presentation. A key benefit of good business performance management software is the ability to see a weekly line graph for each key performance indicator.
Do you get more than the basic reporting from your business software? If not, it is not doing enough for you. When you set up your program, you should be able to enter the KPI calculation formulae for your all levels of your business down to the individual staff member. Every week thereafter, your business software should produce a graph for each KPI.
Imagine how much more productive each staff member would be if they had their own statistic that measured their production and it was graphed each week for all to see.
Key performance indicators for individual staff members raise their accountability and responsibility. This enables them to focus on those actions that will raise their own production and therefore morale. They highlight the results achieved by your top performers and set those as examples for others to follow. It also enables you to accurately identify and reward production.
The organisation wide use of key performance indicators shines a bright spotlight on those who need more training to do their job or who are resting on their oars while the rest of the team struggle to carry their weight. There is a chalk and cheese difference between organisations that use staff KPIs and those that don't.
In summary, once every staff member gets into the habit of drawing a line in the sand at the end of each week and reviewing their KPIs, you will find that your business takes on a totally different complexion. Seeing a graph each week of each KPI will yield a huge increase in each staff member's certainty of where they need to put effort for the growth and expansion of your business.
Real Time Data Analysis and Business Intelligence
I made reference earlier in this article to the desirability of measuring progress daily for an individual and even hourly in some cases. Today there are software tools that can display real-time changes in KPIs as the data is acquired. This takes the ability of management to respond to changes to a completely new level.
Imagine being able to launch two new TV ads and see, in real time, the responses of those ads. If one was out-performing the other you could pull the poor performer and gain an immediate boost to your revenue.
In the next article I share some cautionary notes on drafting and using KPIs.