At Continuous Business Planning, we firmly endorse Peter Drucker’s idea that “If you can’t measure it, you can’t manage it”. Having accepted this as a business truism, the next important question is "what do we need to measure in order to manage our business effectively"?. Key Performance Indicators (KPI) serve to reduce the complexity of small business performance to a small number of key indicators in order to make performance more understandable and digestible for us. This is the same approach we understand and appreciate when we go to your doctor and he measures blood pressure, cholesterol levels, heart rate and body mass index as key indicators of your health. With KPIs, we are trying to do the same in our organisations.
In practice, great caution needs to be exercised in ensuring that what we measure is linked directly to the results we hope to see. Many businesses, both large and small follow the ‘ICE’ approach:
Clearly, this approach is counterproductive. Another problem is that we often associate KPIs with quantifications and numbers. The perceived objective is to provide us with a rigorous picture of reality. However, this seems to work in some areas better than in others. We find it easy to quantify things like money earned, customer transactions in a day, a number of patients treated and we can count incoming complaints or number of service visits. Other things though are not easily counted. Things like overall service delivery, organisational culture, our know-how, the strengths of customer relationships or the reputation of your organisation are all inherently difficult to count.
Therefore, any attempt to systematically measure the important outputs of our small business must go beyond simply counting. In any small business, we also have to balance quantitative and qualitative measures to gain a real understanding of what is really going on under the bonnet.
If you are looking to consistently check the health of your business but don’t know how or where to start, call Continuous Business Planning. We’ll ask one or two so-called Key Performance Questions (KPQs) for each of your small business's strategic objectives. Our KPQs will help you articulate the information needs which in turn allows you to design the right performance indicators to help you answer your KPQs.
Contact Continuous Business Planning today if you want to introduce the power of KPI’s into your small business.