What Are KPIs and Why Should You Care About Them?
You are probably more than a bit sick of being fed acronyms. Every business owner has to acquaint themselves with an ever-growing dictionary of acronyms to keep up with entrepreneurial trends and stay afloat in a competitive business world. One of the most common acronyms used in business today is KPI.
KPI stands for Key Performance Indicator. Key performance indicators are especially useful in contact centers, where they are used to identify just how well a business is doing, even if the data can seem extremely abstract. The concept behind Key Performance Indicators is a simple one, but it warrants dissection. Here are a few quick facts about KPIs and some reasons why you should incorporate them into your business management model.
What Is A KPI?
A Key Performance Indicator is any metric that can be used to measure progress towards a goal. KPIs can usually be placed into one of these categories:
An input is a measurable attribute of resources, time or money that is used to produce outputs. The more efficiently inputs produce outputs, the more efficient a business is.
Measurable processes can include the methods used in production or the effectiveness of training.
A measurement of how much work is actually done can be used as an output indicator.
Outcome performance indicators can include customer retention and increased brand awareness. Any measurable factor that is tangential to primary outputs can be considered an outcome indicator.
What Gets Measured Gets Managed
Management mastermind Peter Drucker coined the phrase ‘what gets measured gets managed’. This idea holds water immensely well in the modern business world. Essentially, Drucker was trying to convey the idea that a business cannot improve performance if it is unable to measure its own success. This is why Key Performance Indicators are such crucial metrics for business strategists and managers alike. Areas that badly need improvement can go unnoticed for years unless they are identified as being problematic by measuring KPIs. Knowledge is power – and the more power you have to change things for the better, the more successful an entrepreneur you are going to be.
For KPIs to be effective, the right data needs to be collected and analyzed and done so efficiently. There are countless services that provide analytics, either through outsourced facilities, networks, or systems. An example of this is KPI tracking software that lets companies manage metrics with dashboards and reports so that KPIs can be set and tracked over time while visualizing performance to improve outcomes. To track and assess customer service performance, for example, some call center solutions offer software packages that are compatible with multiple phone systems and produce dashboards that report real-time performance metrics.
Sometimes Progress Is Hard to Gauge
Some indicators of progress are very easy to track. Outputs, for instance, are pretty simple to measure and understand as either positive or negative. Sometimes, however, progress is a great deal harder to gauge. Customer experience, for instance, is not so easily metricized.
In order to get the most out of abstract qualitative data, you’ll need to set clear Key Performance Indicators and figure out a way to code data into hard numbers for analysis.