Key performance indicators (KPIs) are an indispensable part of a business’ long-term strategy. They simplify reporting, streamline objectives, and provide an effective means of monitoring an organisation’s overall health and market position. On an individual level, KPIs appearing on dashboards or control desks, keeps staff on track to achieving your business goals.
Like all business metrics, however, it’s important that KPIs are properly set up, utilised, and aligned to your overarching objectives. Leaning too heavily on inconsistent, irrelevant, or outdated KPIs can spell trouble, so it’s vital that you regularly assess your performance indicators to ensure they meet your business needs.
In this post, we’re taking a closer look at KPIs and offering guidance on how to implement them across your operations. Focusing on businesses with both eCommerce and brick-and-mortar stores, we’ll show you how to marry different KPIs to improve performance benchmarking, as well as looking at the things you should avoid.
Use the links below to navigate or read on for the full guide.
- What Are KPIs? Definition and Examples
- Assessing Existing KPIs: Things to Consider and Avoid
- Why Are KPIs Important?
- How to Align KPIs Across Your Retailer Operations
What Are KPIs? Definition and Examples
Key performance indicators are metrics that show how successful a business is in achieving its goals and objectives. They’re used to measure operational, departmental, or individual performance, and provide leaders with actionable insights that can aid decision-making and strategy.
Typically, KPIs are used to show that your business is on the right track and progressing in line with short- and long-term objectives. They’re the numbers that you and your team monitor most regularly, and which give the best indication that your strategy and day-to-day operations are working as expected.
KPIs can also be set on an individual role or department level, keeping day-to-day operational goals in check. An example may include, setting daily call list for your telesales team in order to ensure future sales targets are met.
For businesses operating both eCommerce and brick-and-mortar stores, it’s important to adjust KPIs to account for these wholly different marketplaces. Whereas eCommerce KPIs may focus on things like conversion rate, cart abandonment rate and other digital-focused objectives, physical retail requires a different approach, including things like sales per employee, sales per region, and sales of related items.
Reconciling KPIs across both your digital and physical stores is vital to ensuring operational cohesion and goal setting. From growth forecasting to efficient inventory management; much relies on having an accurate and consistent approach to KPIs and reporting.
Assessing Existing KPIs: Things to Consider and Avoid
If you’ve only recently set up an online store, adjusting and aligning KPIs across both physical and digital shop fronts can be challenging. A good place to start is by assessing the relevancy and value of your existing KPIs, so you can make the necessary adjustments needed to ensure whole-business alignment.
Below, we look at a few points to consider that may tell you that it’s time to update your KPIs.
KPIs may not be tied to specific business objectives
With so much data at our fingertips, it’s easy to focus on the wrong metrics, at the expense of letting other, more valuable insights pass us by. This is particularly true for eCommerce settings, where a slew of information from analytics software can make it difficult to focus on the KPIs that align most closely with business objectives.
When designating KPIs, start with the basic question: what are our objectives? Whether it’s to boost sales over a set period or attract return custom, redefining your objectives can make it easier to focus on the metrics that matter.
There may be a lack of KPI definition
Loosely ascribing KPIs across your business can lead to a lack of definition, which means you won’t get an accurate measure of how your business is performing. KPIs should be unique to teams, departments, and even individuals, so as to ensure maximum definition and clarity.
If your business is used to operating within the parameters of broad, ill-defined KPIs, tightening your focus could make a significant difference. Business leaders should decide which KPIs to use in different business areas, so that you have a full-spectrum view of progress in all key operational areas.
KPIs may not be efficiently and consistently monitored
For KPIs to offer actionable insights and aid decision-making, they need to be monitored effectively. It’s no good glancing at performance indicators from time to time; a consistent approach ensures that insights are readily available to those who need them, so you can make real-time adjustments that positively affect decision-making and strategy.
One of the best ways to monitor KPIs is to use KPI dashboards. Predominantly in-built and connected to your central business management system, KPI dashboards or control desks can be personalised to specific KPIs, providing real-time alerts and updates when you and your team need them most.
Why Are KPIs Important?
In today’s competitive marketplace, KPIs are essential to maintaining market position and edging competitors. They provide a means of measuring performance on a granular level, so that you can refine your processes and workflows to better suit changing customer demands – and understand when something isn’t working.
Without KPIs, your business would rely on guesswork. Predicting reasons why sales are down is never a good response; you need KPIs to make the right decisions and drive your business forward.
It’s for this reason, too, that aligning KPIs across both eCommerce and physical stores is so important. If one area of your business begins to decline or out-pace the other, you need to be in a position to understand why, so you can prioritise resources and respond to changing operational conditions.
How to Align KPIs Across Your Operations
Aligning KPIs across your sales channels is a great way to benchmark overall company performance and discover your most valuable revenue streams. Such insights can help you to better structure your operations to ensure that the most high-value sales channels are prioritised, as well as to highlight where improvements are needed.
Here, we offer some essential tips on how to better align KPIs across your business:
- Align your KPIs to your business’ strategic direction – aligning future sales KPIs relies on having a sound, long-term strategy. For example, if you see eCommerce becoming your main source of revenue, utilising KPIs across both your digital and physical stores which help to support and enable this should be your primary objective.
- Align KPIs to business processes – focusing on high-level objectives will only get you so far when it comes to monitoring KPIs. To get genuine, high-value insights from across your various sales channels, you need to look at individual business processes. Aligning KPIs with day-to-day processes will provide a real-time, frontline view of what’s working and what isn’t, so you and your team can implement improvements more readily. If, for example, you need to ensure all deliveries have left your warehouse by 4pm to facilitate next-day delivery, you set up a KPI control desk in your ERP system with a traffic light system forewarning you of any issues.
- Utilise KPI dashboards and software ‘control desks’– as touched on above, KPI dashboards have emerged as a powerful way to keep track of your performance indicators. Flexible and fully integrated business management software makes it incredibly easy to monitor progress and performance on several fronts – ideal for businesses that need an all-compassing view of their various sales channels. Such tools provide personalised alerts in multiple formats, so you and your team can monitor metrics anywhere, anytime.
- Make use of KPIs on the go – getting the right information when you need it is critical to day-to-day decision-making and task management. Having KPI alerts and updates transferred to mobile devices in real-time means you never miss out on insights that can impact your business in the here and now. And with a growing number of businesses now working on a flexible or remote-working basis, on-the-go access to KPI updates is essential for business progress and control.
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