WHAT ARE THE RIGHT KPIs FOR YOUR COMPANY? Veda Ferlazzo Clark Zedare Consulting www.zedare.com VFClark@Zedare.com 617-429-3808 This paper presents 100 KPIs examples for consideration and highlights the importance of dashboards for quick visual comprehension. 2014 Zedare Consulting LLC
What Are the Right Key Performance Indicators for Your Company? Every sport has a way of keeping score, and key performance indicators (KPIs) are the scorecard for business. KPIs are metrics to assess performance and progress to a set of targets that define your business success. Organizations, business units, divisions, departments and employees all have KPIs. KPIs are useful tools to drive and understand your business and need to be defined in a way that are understandable, meaningful, and measurable. How to Define Your KPIs KPIs are dictated by your strategic plan and annual objectives. Select the key elements to watch that will answer these questions and tell you if you are on track: Where are we now? Where do we want to go? How will we know if we will arrive on time? There are two KPIs that all companies should include: A social sentiment measure of how the company is viewed by customers, vendors, stakeholders and a share of voice measure to understand the influence your company brings to bear in your industry. KPIs and Dashboards KPIs need to be readily accessible to managers at all levels to help them manage their business. There are many dashboard products available, and the quick comprehension that visuals allow is invaluable to propel action. The following list of 100 KPIs is a place for you to start to consider what measures will help you to manage your company more effectively. Companies typically gather way more data than they can act on, so be sure to select the fewest KPIs possible to keep you focused and on track. A few visuals from dashboards are shown, to demonstrate the impact of visuals. Financial/Corporate/Business Unit Performance Financial metrics measure your company s performance towards high level goals that are critical to shareholders, investors, banks, etc. to understand how your business is doing compared to plan and industry standards. They are a required part of the executive dashboard. 1. Revenue compared to plan/budget/prior year 2. Revenue growth rate compared to industry 3. Operating profit margin 4. Gross profit margin compared to industry 5. Net profit margin compared to industry 6. Cost of goods sold percentage of sales 7. Cost of goods sold percentage compared to industry 8. Product profitability percentage comparisons 9. Accounts receivable age 10. EBITDA 11. Return on investment 12. Return on capital employed 13. Return on assets 14. Return on equity 15. Current assets as a percentage of current liabilities 16. Debt-to-equity ratio 17. Working capital ratio 2014 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 1
18. Department expense percentage of sales 19. Capital expenditure percentage of sales 20. Revenue per employee 21. Revenue per production employee Customers & Customer Service Customer metrics should be watched by executives and managers at all levels. A decline in customer metrics typically is a precursor to a decline in customer satisfaction and, ultimately, revenue. 1. Customer retention rate 2. Customer turnover rate 3. Customer satisfaction index 4. Customer profitability ratio 5. Customer engagement 6. Customer complaints 7. Problem resolution time 8. Order fulfilment cycle time 9. Order lead-time 10. Perfect order percentage 11. Delivery fulfillment rate (completeness of order) 12. On-time delivery rate 13. Order entry accuracy 14. New customer acquisition 15. Customer segmentation Sales and Marketing Sales and marketing rely on metrics to help them determine the effectiveness of marketing methods, sales channels, and individual sales people. 1. Market growth rate 2. Market share 3. Sales dollars per salesperson 4. Geographic penetration per salesperson 5. Sales per channel 6. Geographic market share/penetration rate 7. Geographic share compared to competitors 8. Sales by contact method 9. Target market penetration 10. Target market penetration compared to competitors 11. Target market penetration by salesperson 12. Cost per lead 13. Conversion rate of leads and prospects 14. Search Engine Rankings (by keyword) and click-through rate 15. Page views and bounce rate 16. Customer online engagement level 17. Online presence percentage compared to competitors Research and Development Understanding the impact and effectiveness of R&D dollars is critical. Key measures include time to market and the impact of new products on revenue. 1. R&D spending to sales ratio 2. R&D spending compared to industry average 3. Project schedule variance or on-time rate 2014 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 2
4. Project cost variance from budget 5. Time to market 6. New product (past 1-3-5 years or appropriate industry timeframe) revenue percentage of revenue 7. New products percentage of revenue compared to plan 8. Revenue per new product compared to projections 9. New product introductions compared to industry average 10. New product profitability Operations Every operation will have its own unique, detailed measures. Daily posted measures help productivity grow because everyone likes to see if they can beat the last score posted! 1. Capacity utilization rate 2. Revenue per production employee 3. Revenue per various department employees 4. Process waste level 5. Savings by process improvement 6. Inventory shrinkage sate 7. Inventory accuracy rate 8. First pass yield 9. Rework level as percentage of revenue 10. Quality index 11. Equipment production rate compared to optimal 12. Process or machine downtime level 13. Machine set-up times 14. Six Sigma level 15. Safety measures Employees With the increasing shortage of well trained employees, measures of employee satisfaction are helpful to plan for staffing and recruitment efforts. 1. Employee satisfaction 2. Employee engagement level 3. Employee turnover rate 4. Employee referral rate 5. Average employee tenure 6. Absenteeism 7. 360-degree feedback score 8. Salary market quartile 9. Employee investment in company stock (if available) 10. Average employee age Environmental & Sustainability Performance Every business today must be respectful of the environment to retain customers and avoid the expense associated with environmental issues. The Global Reporting Initiative is a great resource for information: https://www.globalreporting.org/pages/default.aspx. 1. Carbon footprint 2. Water consumption 3. Energy consumption 4. Greenhouse gas emissions 2014 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 3
5. Savings through conservation 6. Supply chain/product delivery miles 7. Employee commuting miles 8. Waste reduction rate 9. Waste recycling rate 10. Product recycling rate What Is Measured and Watched Improves! Once key metrics are in place, test them for a while to understand if they are really useful to you in managing your business. Metrics may need to change over time as your business evolves. What is clear is that what is measured and watched almost always improves. Veda Ferlazzo Clark Zedare Consulting, LLC www.zedare.com 617-429-3808 2014 Zedare Consulting info@zedare.com 617-429-3808 www.zedare.com 4