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KPIs Vital to Performance Goals
Key performance indicators (KPIs) are vital to helping a company meet its performance goals and maintain customer satisfaction. KPIs help companies assess their current performance in key areas and use the information gleaned to determine future actions and activities.
Companies determine KPIs based on their primary goals. These may include revenue-based goals, customer perception or loyalty goals, measurable performance activities or a combination thereof. The process of defining goals and identifying which business practices contribute toward those goals is valuable for any company and helps key decision makers understand how to move those key indicators to positively affect performance.
Different Kinds of KPIs
“KPIs can take on various forms,” says Michael Allenson, a strategic consulting director in the technology and telco sector for Maritz Inc., a leading sales and marketing service company. “In a lot of industries, the more KPIs go up, the better it is for the company. It’s a bit different for managed service providers (MSPs). Typically in their situations, it only becomes an issue if there’s a failure, if they’re not delivering.”
Allenson says generally two kinds of KPIs exist. “The first are overarching, ‘How am I doing’ kinds of KPIs and the second are functionally specific KPIs. The overall KPIs have to do with customer satisfaction: Are customers satisfied with the service they’re getting, how likely are they to renew their service when their current contract is up and how likely they are to recommend the service to others. The functional KPIs are tied to specific functions of the company, such as how well it’s meeting the conditions of its Service Level Agreement (SLA). This might be how many viruses it’s thwarting or the percentage of uptime on the network.”
Both types of KPIs are critical and should be monitored because a slip in one could indicate a problem in the other. For example, falling customer satisfaction rates could indicate a functional problem that needs attention. In the same way, a network downtime issue will flag a potential satisfaction problem. Constant monitoring and implementing the dictated adjustments help keep a company at the top of its game with happy, loyal customers and continued revenues.
This early warning system can save companies from disaster. “A KPI is typically a way to measure if an MSP is delivering what the SLA says, which tends to be things like service times, percentage of uptime or perhaps the relative speed of the network on a daily basis,” Allenson says. “In these situations, KPIs are very valuable and important because MSPs want to make sure that if something is starting to slip, they address it immediately before it becomes a problem for the contractor.” KPIs can act as a type of preventive maintenance, so to speak.”
He adds, “Companies can create metrics that are tied to specific activities they do so that when certain KPIs move in one direction or another, they know what activity that KPI is tied to. For example, if a company is providing virus protection services and it saw a significant change in the number of viruses being picked up, it would trigger them to take action and evaluate if they needed to be more aggressive or build something new into their routines.”
Added Benefits
To illustrate another example of the effect of KPIs, consider a Web presence or e-commerce store. A company would measure how long it takes to register on the site, make a purchase or read an article and then build KPI metrics that reflect its findings. For example, if it takes five pages to make a purchase and web analytics show that the average visitor is only viewing two pages, companies can evaluate why visitors may not be making it through enough pages to make the sale. Perhaps the process is too complicated and needs to be streamlined. The KPI can not only indicate a problem but also point the way to a solution.
Another benefit of KPIs for companies is a consistent message and performance measuring stick for employees. Identifying primary goals helps all employees see what they’re working toward and lets them gauge their own performance against stated goals. Employers also have a consistent scale by which to evaluate and reward employee performance. KPIs give the entire organization a clear picture of what’s going on and provides direction on how to better meet or exceed company goals.
To be useful, KPI information must be presented in a consistent manner, be available in a timely manner and be accurate reflections of satisfaction or functionality. Old or incorrect data is worthless. This is one of the biggest challenges of using KPIs, but when companies get it right, the information is invaluable.
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