Benefits of KPIs

The benefits of adding Key Performance Indicators (KPIs) into your business are incredible. Here are some of the most critical benefits I see my clients experience.

1. More information in less time.
   When you choose the best KPIs and stay focused on the critical few, one of the best benefits is the ability to see more information about your business than you ever have before, and do it in less time. My clients enjoy having more information and confidence about their business performance, while having fewer, shorter meetings about business management.
   
   
2. Build a track record.
   It’s a natural human tendency for managers to think previous quarters were either much better or much worse than they actually were. These false memories can drive reactionary decision making that doesn’t serve the business well. Creating, planning, and recording results against well-chosen KPIs creates a track record of performance recorded in black and white.
   
   
3. Drive focus on the critical aspects of the business.
   KPIs provide a focusing function. The process of identifying KPIs is itself a focusing exercise. In creating and using KPIs, you’re extracting the most information from your business in as few data points as possible. That’s a powerful mechanism for keeping yourself and the leadership team informed and ready for action.
   
   
4. Create a culture of higher performance and accountability.
   Especially when paired with a Performance Budget, KPIs create a culture of performance and accountability. In part because KPIs are so incredibly focused, the information presented carries an obvious sense of urgency. When things are going well, celebration is obvious. When the KPI data shows deficiency, urgency to take corrective action is equally obvious.
   
   
5. Create consistency in management.
   The focus and clarity provided by KPIs also tends to make managers less reactive and more consistent. That is, managers who are otherwise intuitive in their management style or intuitive through lack of data suddenly become much more data driven. That is not to say intuition doesn’t play a role. Intuition has an important place in business. It is simply to say that KPIs provide an excellent basis for data-driven decision making, and that tends to increase the predictability and consistency in decision making.
   
   
6. Anchor daily execution in a common business language.
   To use a metaphor, the concept of a “common business language” is the concept that everyone in the band is playing from the same sheet of music. When everyone is looking at the same key indicators, it takes far less time to determine how the business is performing and what to do about problems. It’s as if the business has it’s own “shorthand” for communicating within and between teams. We know what matters to each other and to the company as a whole.
   

The benefits of KPIs are tremendous, especially considering how little effort they take to establish and maintain, and the streamlining effect on the business.

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