Since we’re at the beginning of a new year, many of us are thinking about annual goals and New Year’s resolutions. I thought a video on the topic of Key Performance Indicators just be what the doctor ordered for you.
You might find some surprising thoughts here about what a Key Performance Indicator is as well as a surprising take on goals. Why don’t you watch the video, and let me know what you think?
Hi. Today we’re going to be talking about the topic which we call key performance indicators. So key performance indicators are eyes eyes you know for many people they think K.P.I. areas are from their profit and loss statement. The balance sheet which are historic numbers.
The truth is a KPI is not a historic number. Nor should it be K.P. a KPI. Should the numbers that help you see what’s going to happen in the future. They should be. Things you think are going to help you know what drives your business forward.
Hi I’m Josh Patrick and I’m the principal here at the Sustainable Business does CEO. And we’re going to dive into even deeper into what K.P.I.’s are. But first let’s start with some examples.
For example a KPI might be the number of sales calls are being made and might be how many proposals are made and might be the backlog for work to be done. It might be work for utilization meaning how effective are your employees and might be dollars per employee per period. These are all things that you could measure that will help you think about what’s going to happen to your business in the future.
You know the truth is we do a good job of looking at what has happened in the past. We look at our profit and loss statement from most people do that every month. And if you’re not you need to be doing that. But if you want to find out what’s going on with your business in the future that’s where KPI’s come in. But before you start doing this you must normalize your numbers.
So for example if one week you have one sales call in the next week you have 20 sales calls for 1 week. You have one defect in your manufacturing line and next week you have 20 defects in their manufacturing line. Next week are 30 then you go back to 2. You have to normalize these numbers which means you have to do some work to get your numbers through into what was called an expected range.
We like to be measuring what’s within that 9 percent which is 3 standard deviations so when you start going down this path you need to be putting your numbers together on a weekly basis and you need to normalize and get into a point where there are understandable and you can actually do something about them. The other thing with KPI’s don’t make big big plans, do small experiments and learn what moves the needle.
The next thing I want you to think about and I know this is going to be a tough one for many people…… don’t have goals.
Let me tell you a little story that we had when I used to be in the vending business we had these glass front snack machines that you would fill with lots of candy lots of chips. We started off having 40 varieties. And we kept cutting down how many varieties we had. And we went from an average of 40 dollars per stop to a hundred and forty dollars per stop. Every time the guy opened the door the machine now had I had goals. I said I want to go from 40 to 50 or maybe 40 to 52. I would never thought about 140.
The thing is with goals you actually limit yourself.
So here’s what I want you to do. I want you to click on the button below and I want you to get our free ebook on 4 Tiered Budgeting. And why don’t you leave a comment about what you’re thinking about KPI’s and how you want to use them in your business and if you’re a trustee have a conversation with me I would be happy to do so. And again this is Josh Patrick and you’re at The SustainableBusiness.co. I hope to see you back here really soon. And most importantly I want you to start using KPI’s in your business.