I’m often asked what KPI’s you should be measuring in your business.
There are two types of KPI’s and a good measurement system will use both types
Lagging KPI’s
These measure things that have happened already. Things like,
- Number of new customers signed up
- Average Project value
- Gross profit Margin
- Wage costs to Revenue
Not a comprehensive list, but you get the picture
Which ones of these you should use really depends on the structure of the business, where you are on your journey, and what’s important to you at this point in time
Leading KPI’s
Leading KPI’s help you predict the future. Jack Welch (former CEO of General Electric) is famously quoted as saying
” If I could only measure three things in the business, it would be customer satisfaction, employee satisfaction and cashflow “
These 3 measures help you understand if you’re on a good path, or not. After all, if a business has happy customers, happy employees and a strong cashflow, that’s half the battle won….right?
How do you measure Leading Indicators?
We’ve helped a few clients implement Leading KPI tracking systems and use them ourselves. Cash and cashflow are pretty straightforward for a finance team to start measuring, but what about the other two leading measures?
Customer Satisfaction
If you’ve never read “The Ultimate Question” by Fred Reichheld, you should get yourself on Amazon and order it! I’ll give you the spoiler!
In the book, Fred says that you only need to ask your customers one question – “On a scale of 1-10 how likely are you to refer us to family/ friends/ business acquaintances”
This question is the core to the Net Promoter Score (NPS) that a lot of large companies use
At Accountancy Extra, we make it simpler than the big companies and just work with an average out of 10
Employee Satisfaction
For a quick monthly feedback on how your team are feeling, you can’t beat using something like Office Vibe
This tool quickly tracks the overall sentiment of your team towards work at any given point
I also love digging a lot deeper, maybe twice a year. To do that we use a survey based on the Gallup Employee Engagement questions (The Q12). The Q12 contains some really provoking questions and helps you “fix” any deeper lying issues within your team
If you would like to talk through any of the ideas in this email, or want to some help implementing them, feel free to drop a reply to this email and we’ll set up a call