When evaluating the performance of a company, we use key performance indicators. They are used to benchmark processes, financial and non financial data. Just to give an example, lets say on a daily average, you get 10 leads. With just this information, you can do multiple key performance indicators:
1) How many leads on average you can do a day?
2) How long does it take to turn a lead into a sale?
3) How much out of your average daily leads are converted into a sale?
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Now let's say you wanted 12 leads on an average a day. Because you only reached 10 out of 12 leads, you'll have the reflex to ask why you have not reached the 12 leads a day and what can you do to increase you leads? As you can see, performance indicators let's you benchmark your processes so you can implement a new strategy to increase performance.
As I had mentioned, they are also used to benchmark financial and non financial data. As an example, let's say you have a gross margin of 25% and you goal was to get 30%. Again, you'll have the reflex to ask questions, what went wrong? What can we do better? Is there a cost we can cut? Do we need to increase our prices?
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On the other hand you can have a performance indicator to see your employee retention. Let's say on an average year, you have a employee turn over of 6 employees a year and let's say you would like to want a turn over of 3. What cause the variance, is there something we can do to increase employee retention. Was there an event that cause the turn over? Or is there an employee causing the turn over?
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Usually, the indicators are set by the executives to drive the business, but it is not limited to them, they are also use by the entire company. They can be set at the management level, at the employee level, there is no limit to how many indicators you can put into place. What is important here is to define what you want to benchmark and make sure the entire company understand these indicators. Having a clear expectation helps people drive out the indicators.