Key Performance Indicators and Metrics = the lifeblood of your organization
by Loretta Daniels, CDP, MSCM
So, what are Key Performance Indicators (KPIs) and metrics? Metrics are the numbers used to provide organizations with an outlook of their performance and to monitor how close organizations are to achieving their goals. Key Performance Indicators (KPIs) are specific areas, a subset of overall metrics.
Consider KPIs and metrics as the lifeblood of your organization. In this case, KPIs and metrics would represent the blood of your organization. The operations infrastructure would be considered the arteries, and your depositing bank is your heart. Similar to your body, to have a healthy business heart, you must take care of its operations workflow. The lifeblood of the organization needs to flow effortlessly through the arteries and into the heart.
If this process is slowed by clogged arteries filled with fat or clots, then the result is heart failure and sometimes death. Now, apply that scenario to your organization (whether large or small, for-profit or non-profit, or even in higher education). If your metrics are not processing efficiently, then your workflow will get clogged—and a clogged workflow will result in lower profit margins or even worse. Consequently, those in leadership positions should be duty-bound to take ownership of their ‘organization’s metrics.
Can You Say, Stress Sweat?
A few years ago, I served on the senior leadership team at a large corporation. At the beginning of each month, the leaders were responsible for forecasting their department’s performance and providing weekly progress updates during the leadership meeting. I often marveled at the tension in the room from the leaders who were not ready to defend their metrics. Can you say, “stress sweat?”
Those individuals lead departments that had missed their metrics and were unprepared to explain why. Always be able to tell the “why or why not.” The majority seated around the table could explain their metrics and exhibited high-level satisfaction as they delivered brief analyses of the why and how for their department. More recently, I witnessed a dean of a college roll off several KPIs without pause. It was impressive!
Know Your Story
Knowing your KPIs and metrics is key to measuring the success of your goals and objectives. Still, equally as important is the art of interpretation. Your KPIs and metrics tell your story. It tells you if your blood is flowing and at what speed. Moreover, based on the analysis, you can either take immediate action (and prevent heart failure) or suffer the consequences.
Improving productivity requires innovation, implementation, and monitoring. Many organizations move forward without recognizing the direction their margins are facing. Tracking margins is one of the most important things you will need to do as a leader. Your KPI and metrics lifeblood is reports generated on a daily, weekly, monthly, quarterly, and yearly basis.
Top 6 KPIs and Metrics to Track
- Customer Acquisition Cost (CAC): the cost to acquire a customer (via advertising and marketing efforts). Divide all costs associated with customers (e.g., advertising or marketing) by the number of customers acquired within a specific period.
- Turnaround Time: the time it takes to deliver your product or service to a paying customer. Track the day of purchase minus the day of delivery.
- Customer Attrition Rate (Churn Rate): the rate of which you lose a customer, often referred to as customer turnover. Take customer acquisition divided by the number of customers lost by the end of a specific period and divide by the total number of customers at the beginning of the period.
- Sales Revenue: the total amount of money generated by your sales team. It is also a good idea to create a sales revenue report by representation (if applicable).
- Gross Profit Margins: the total amount of revenue generated by all of your sources of income minus your cost of goods.
- Net Profit Margins: indicates the efficiency of your sales and operations efforts. Subtract the cost of running your business (including all expenses) from the total revenue.
About the Author: Loretta Daniels, CDP, MSCM, is the Executive Director of Corporate Relations at the College of Professional Education and also teaches leadership at Kennesaw State University. She holds a Master of Science in Conflict Management from Kennesaw State University, a Bachelor of Science in Communication from Bradley University, and will graduate with a Ph.D. in Organizational Leadership in 2021. Loretta is a Certified Diversity Professional, a registered Mediator, and is also certified in Corporate Conflict Design.