Tag Archives | performance indicators

KPI Overload

It’s that time of year…  There’s so much going on and it’s becoming difficult for you to stop and breathe.
too many KPIs, KPI Overload

Kids are finishing up school, which entails end-of-year parties, standardized testing, and projects. Businesses are pushing to boost sales as the end of the second quarter quickly approaches. Summer vacations are booked. You may feel a little bit overwhelmed!

Information & KPI Overload

How are you measuring your performance and productivity?

It’s easy to get caught up in thinking that monitoring as many indicators as humanly possible is the best way to boost your performance. Multitasking, exhausting yourself, and spreading yourself too thin are not helpful when analyzing your performance.

The same goes with business… We often see that our clients have 8-10 KPIs (key performance indicators) per department to measure productivity.  Assuming the average company has 6-10 departments, that means you’re tracking up to 100 KPIs!

How can 100 KEY Performance Indicators be useful?

Performance Indicatorstoo many KPIs, KPI Overload

When organizations have so many “KPIs,” we find that they become PIs (or performance indicators). These PIs are useful for when you’re in the nitty gritty of a specific department as it measures the success (or failure) to meet goals in that department.

As a financial leader, it’s important to categorize which indicators are key and which are just to measure specific performance.

For example, a person who doesn’t differentiate KPIs and PIs might pitch that the company is doing well because it’s decreased the amount of time packing the inventory for shipping to customers by 15%. How does that correlate to sales and your net profit?

(NOTE: Need help finding your company’s KPIs? Check out our KPI Discovery Cheatsheet!)

Too Many KPIs

Having too many KPIs can result in what I call KPI overload. So many organizations think that by having 8-10 KPIs per department, they will be better able to assess the performance of the company. WRONG.

(K.I.S.S. Keep it simple, stupid!)

Truth is: when you have 100 KPIs, no one has the time or energy to look at every one of them. All of the sudden, those KPIs become redundant to the company. There’s a lot of reading in between the lines to understand what the KPIs are measuring.  Not to mention the wasted time preparing the measures that are most likely being ignored…

Difference Between KPI & PI

By performing an analysis of the most important business activities that drive profits and cash flow, you can then develop a set of true key performance indicators. Look for the 6-8 numbers that really drive the bottom line.

If you need more numbers than the 6-8 KPIs to analyze productivity, they aren’t necessarily KPIs. These PIs can be used for quality control, etc. A department might need to use a PI to manage their procedures; the key difference is that it doesn’t “move the needle”.

What is Key?

First, figure out what your CEO wants to know. As a financial leader, it’s imperative for you to act as a wingman to the CEO. You may have 100 indicators that you could give to your CEO… BUT do they have the time and knowledge to assess the general performance?

Give them the 40,000 foot view of the companies performance by providing 6-10 KPIs for your organization, regardless of the size of the company. Without this 40,000 foot view, it becomes difficult to discern what is key.

(How do you use flash reports to improve productivity? Check it out here now!)

Once you have identified some KPIs, it’s time to track them. Track KPIs and analyze variances. Then you may use trend tools, what-if scenarios, and breakeven analyses. Evaluate what is important.

For example, as you build a dynamic cash flow projection (one of the many trend tools you can create after identifying your KPIs), you’ll be able to key in assumptions that drive revenue and manage the cost of goods sold. By adjusting those numbers, you’ll be able to see what is sensitive.

Download our free KPI Discovery Cheatsheet and start tracking your KPIs today!

too many KPIs, KPI Overload

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too many KPIs, KPI Overload

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Key Performance Indicators (KPI’s)

See Also:
Flash Reports
Normalized Earnings
Continuous Accounting: The New Age of Accounting
Collection Effectiveness Index

Key Performance Indicators (KPIs) Definition

Key Performance Indicators (KPIs) are defined as the key drivers of economic activity for a company In essence, KPIs measure the productivity of an organization. By performing a key drivers analysis of the most important business activities that drive profit and cash flow you can then develop a set of key performance ideas. Included in your key drivers analysis should be a sensitivity analysis of your financial projections in order to identify the key financial drivers. The best way to manage and report KPIs is through the use of Flash Reports.

(Find out why KPI’s are important!)

Key Performance Indicators (KPIs) Metrics

Key performance metrics should include both financial and operational metrics, as well as, combinations of the two. Key performance measurement is as much an art as a science. The actual numbers themselves are not as important as the trends in the key performance measures. By combining financial measurements with operational performance measurements you can gauge the productivity of an organization.

Key Performance Indicators (KPIs) Calculation and Examples

KPIs measure productivityProductivity can be expressed as:

    Throughput    

Resource

Examples of throughput would include the following:

  • lbs concrete poured
  • widgets produced
  • # of invoices or tickets written
  • product shipped

Examples of resources would include the following:

  • man hours
  • # of full-time equivalent employees (FTE)
  • cubic feet of warehouse space
  • machine hours

So, in order to calculate productivity over a period (expressed as a KPI), we would take a measure of throughput such as widgets produced and divide it by a resource such as machine hours.  The resulting KPI would be widgets produced per machine hour.

Examples of key performance indicators (KPIs) would include the following:

Key Performance Indicators (KPIs) Dashboard

KPI reporting should be done on a daily or weekly basis. Furthermore, you should prepare a key performance indicators dashboard on the shortest timeframe feasible. The KPI dashboard should be easy to prepare and not take more than thirty minutes to generate. If it does, then you are making the process too complicated. A template should be used to generate the key performance indicators. This template should enable the CFO to identify both positive and negative trends.

Key Performance Indicators

Strategic CFO Lab Member Extra

Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to create a dashboard to measure productivity, profitability, and liquidity of your company.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Key Performance Indicators

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