With so much data available to business leaders, it can often be difficult to determine what information to focus on. Over the years, experts have determined several important factors in successful businesses tend to excel in and dubbed them “Key Performance Indicators” or KPIs. These KPIs have been the gold standard for most industries for decades, but as technology continues to evolve, limitations have become apparent.
Traditional KPIs measure outcomes - the most typical being profit, profitability, risk, and growth rate. These factors are vital statistics for any business, and should always remain monitored, even as needs and technology evolve, but experts noted that they only measure situations after they are no longer able to be impacted by decisions and have started to term them “lagging KPIs”. This is not to indicate they are unimportant- they are integral to monitoring success, but they do not serve to help diagnose problems until it is already too late to fix them.
For that job business leaders have begun to track “Leading KPIs” or indicators. These indicators help measure more intangible or abstract concepts like innovation, problem-solving, and agility. These indicators help businesses create a culture where attributes such as innovative ideas and troubleshooting problems before they reach critical levels are not only rewarded but considered the standard, allowing those businesses to raise customer service levels, employee satisfaction, and, ultimately, profits. It is only by monitoring a combination of traditional, “lagging” KPIs and more future-focused “leading” KPIs can businesses hope to succeed.
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What Leading KPIs Can Measure and Why They Matter
Because leading KPIs are not “bottom line” oriented, some companies can struggle to understand what, precisely, they are meant to be measuring, and how those measurements can improve their business. Below are several areas that leading KPIs can give Small to Medium Sized businesses a vital edge.
Agility
Agility refers to the ability for a company to adapt rapidly to business challenges or other unexpected circumstances. These challenges can be short term, like system outages or supply chain issues, or more long-term ones like changes in the marketplace. Being able to make rapid decisions in the face of these hurdles can often be the difference between success and mere survival.
Experts advise leaders to assess how quickly their company would be able to complete system tasks such as: setting up a new company customer or vendor, create a new line of credit for a vendor, adding in a new accepted currency, or new products. These tasks are common enough that an inflexible system would add hours of costly stress and frustration to a company’s workflow.
Website processes such as updates, SEO work, and paid advertising turnaround should be observed for similar reasons. The longer and more complicated the process for these tasks are, the more valuable time and energy is spent on them, rather than on other, more ‘mission critical’ work.
Internal company workflows should also be assessed. How long it takes to onboard new employees is often a good indicator of the overall agility of a business. Other internal workflows that give similar insights include how quickly employee benefits or compensation can be changed internally and how quickly organizational structure can be shifted.
Agility and adaptability is the key to survival for many SMBs, especially those in crowded fields. Setting KPIs to measure these aspects gives businesses valuable insights to where they can improve workflows and maximize efficiency in their organization.
Knowing Your Customers- Brand Sentiment
Another leading KPI is known as “brand sentiment”. This refers to an understanding of how your customers view your brand, what emotional connection they have to it, and how attached or loyal they are to you compared to competitors. These feelings and perceptions are, by their nature, difficult to quantify but remain vital to understanding where a business stands with their target customers. Ways to gauge customer satisfaction range from simple surveys to tracking web traffic and social media interactions, and can offer real-time insights to campaigns, price or product availability changes, and products.
Common KPIs by Business Segment
- Sales: Length of sales cycle, lead and credit processing times
- Finance: Month and year-end cycle times, financial reporting timelines
- Human Resources: Time and cost to hire and onboard a new employee
- Marketing: Customer acquisition cost, customer lifetime value
- Customer Service: Time for initial customer resolution
- Tech support: System downtime, incident response time, resolution rate
- Inventory: Perfect order rate, daily sales outstanding (DSO)
- Warehousing: Fill rates, shipping timelines
Work Smarter with Productivity Tracking
Working hand in hand with leading KPIs are the concept of OKRs- Objectives and Key Results. These measurables, while not used for forecasting like leading KPIs, are vital for ensuring a company’s employees are focusing on achieving objectives that are in-line with the overall vision for the business. OKRs serve not only the business- by clearly defining the terms for success, but also the employees, as that same clarification shines a spotlight on their path for career advancement. They allow businesses to ensure the right people are in the right positions, all on the same page about what it takes not only to succeed, but to excel.
Know the Score
Microsoft Dynamics 365 apps offer a concise way to measure productivity of their users—the Microsoft Productivity Score. This unique offering allows businesses a clear way to measure the often-intangible concept of “productivity”, tracking statistics such as how long it takes employees to complete job-specific tasks such as service calls, data entry, or product assembly. These stats are not just for performance tracking but can be key to sparking conversations about ways to improve both individual performance and business workflows on the whole.
The Cost Performance Index
For businesses that are centered around projects, the Cost-Performance Index (CPI) is a key component of improving financial performance. CPI can be measured with the simple formula of Earned Value divided by Actual Costs. While other factors play a part in the ultimate success of a project (timeliness, customer satisfaction), the CPI is the best way to measure the direct impact on the business, as well as charting progress over time.
Business Central is the Key to Unlocking KPIs
To truly harness the power of KPIs and drive continual improvement, a business needs the right ERP platform running the show. Microsoft Dynamics 365 Business Central (BC) is the platform best equipped to offer businesses the tools to not only determine which KPIs to track, but ways to power their users to exceed expectations in each of them.
An agile, could-based solutions, BC offers business SMBs the ability to connect all the major segments of their business together, from finance to operations and service to sales. With powerful tools including next-gen AI, real-time data updating, and seamless integration with the most common productivity apps like Word and Excel, Business Central arms its users with the tools they need to exceed every KPI expectation.
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