Business indicators are one of the most important tools for managing a company. Business is based on numbers, and financial, marketing and sales indicators play an important role in formulating the company's strategy. They are defined as financial and non-financial indicators used in the processes of measuring the degree of achievement of the set goals. There are many examples.
Indicators help to obtain and correctly interpret information about the activities carried out. Misused metrics lead to wrong conclusions and bad business decisions. They lead to a reduction in the effectiveness of a given organization and improper management of the resources held. The measurements are performed, for example, by KPIs, GRP indicator, CSI indicator.
In many organizations, key business indicators do not function properly. They often create a set of random information that does not lead to any conclusions, let alone actions. Contrary to popular belief, not all measures can work effectively in every company and at every stage of its development. Communication strategy it ultimately translates into sales results. Same as suitable brandingwhich builds a strong brand.
Why should companies define business indicators?
Properly defined and interpreted business indicators help to make the right management decisions. The possibility of obtaining relevant feedback helps to engage the appropriate amount of financial resources, production raw materials and the involvement of time and human work. Performance indicators are an integral part of the set of best production practices, leading to the reduction of losses and wastage of resources.
What are business indicators?
Indicators and the information they collect are also of great importance in building an efficient and results-oriented organizational culture. Being a source of objective feedback, they positively affect the quality of performance of duties and commitment to work. Performance indicators are also an important part of a comprehensive assessment in the process of selecting employees, suppliers, distributors and business partners.
Properly implemented indicators point to the limitations and problems in a given area, which is especially valuable because most of the improvement processes have their source in solving specific problems.
Where to start in determining business metrics?
Business indicators should show progress in taking specific strategic and operational actions. Thanks to constant monitoring of the achievement of goals, we can adjust them to changing conditions on an ongoing basis. When setting indicators, we must remember that each employee, whose work will be accounted for on the basis of specific indicators, is thoroughly familiar with the objectives of their implementation and the measurement method used.
The implementation of business indicators takes into account the following stages:
- Establishing the company's mission, vision and strategic goals.
- Identifying customer needs and on this basis specific operational goals.
- Assigning appropriate activities and indicators of their effective implementation to each operational goal.
When determining the business metrics we intend to measure in the course of our business, remember that our goal should not be to measure everything. Performance indicators should take into account the most important processes and functional areas of the company - e.g. sales efficiency. In addition, only indicators for which the necessary figures exist or can be easily collected should be used.
Particular attention should be paid to indicators that can compete with each other and also lead to the fact that a high score of one indicator is achieved only at the cost of deteriorating the result of another indicator. In this case, we should always focus on indicators relating directly to the level of customer satisfaction, at the expense of indicators relating only to the internal needs of the organization.
Business indicators should be:
1. Measured with the appropriate frequency.
2. Supervised by the board of directors or senior management.
3. Understandable by all members of the organization.
4. Relevant from the point of view of the goals pursued.
5. Designed in such a way as to minimize the possibility of controlling them.
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Examples of business indicators influencing the company's efficiency
In companies focused on continuous improvement and increased competitiveness, performance indicators play an important role on many levels of management. To support the achievement of goals, they should be simple, up-to-date, relevant, clear and measurable.
Examples of indicators used in marketing include: the number of new newsletter subscribers, the number of Facebook fans, the number of completed contact forms, the cost of one click on a paid ad or a return on marketing expenditure.
Examples of indicators used in online sales are: the number of views of individual product pages, the number of visits to the website completed with a purchase, or the time spent on the e-shop website. In turn, the examples of financial indicators include: profit value, average margin, or the cost of an hour of work.
Efficiency indicators are also used in logistics (e.g. the average shipping time of the ordered goods, the value of the goods rotating in the warehouse), as well as in sales (e.g. the average value of the order, the number of new customers, the duration of the sales process, the number of customers per one employee of the department). sales) and call-center (e.g. the number of calls made, or the number of transactions in relation to the number of calls)
Business indicators help you focus on what's most important as well as add value to your decisions. Thanks to them, we obtain valuable feedback that helps to notice the effects of work and identify the right people to carry out specific activities.