There is a saying that “what is not measured cannot get done.” Similarly in business, if the performance of the business is not measured then that business can never achieve sustainable profitability. Measuring a business performance at the end of the quarter or end of the half year or end of year is a mistake that most businesses make and then wonder why they can never seem to fix their performance.
Businesses can use Key Performance Indicators (KPI) measurement to be profitable.
l Make KPI a daily target
Businesses must learn that their profit is the sum of their daily, hourly and per-minute activities. If a business measures its activities more rigourously it has a higher level of control on its final financial statement outcome. Prevention is better than cure, measuring performance daily or at a regular rate enables the business to detect any instances where correction is required. Think of a company selling burgers, if it only measures its result at the end of the month, it might discover that it sold 1 000 burgers instead of the targeted 1 500 burgers. If, however, the business knows the number of burgers they need to push per day and discover that the business is falling short, then the business has a greater chance of rectifying its selling techniques or marketing in order to achieve ther 1 500 sales per month target.
l Make people accountable to each KPI
The absence of accountability is the absence of responsibility. Each KPI must have a particular person who is in charge of it. Hence, when sales fall short, there must be a person who is answerable. There may be teams who are in charge of particular areas but the rule is that there must be at least one particular person who is answerable. What this does is enable KPIs to be acted upon. If everyone is accountable then everyone will ignore or leave unattended and assume that it is someone else’s responsibility to ensure a particular KPI is met. So that basically leaves work undone.
l KPI must be specific (tangible)
Some KPIs that organisations use are not real as they cannot be measured. If a company is to succeed in what it does, then the KPIs that it uses must be realistic. A target such as 1 500 burgers is quantifiable but a target such as “increase sales” is not measureable and therefore it is just an objective. To fix this, the objective must be specific as to say “increase sales by 25% from the previous actual of 1 200”. Such a target then enables quantification and can be measured easily. Increasing something is a good thing but if it is not relating to anything, it is actually just a farce. There is a huge difference between increasing by 1% or 25%.
l Make the KPI time bound
A business is based on time and time “is money”. It is important for a business to get into the culture of measuring itself in time at the right moment to be able to make adjustments. So a KPI that says “increase sales by 25% from the previous actual of 1 200” is not enough, it must state the time required, for instance “increase sales by 25% from the previous actual of 1 200 within 30 days”. Successful companies understand that they need to work with time, hence they create standards which force them to adhere to these standards. If your company has no mechanism of measuring itself over time on a daily basis, then this becomes a recipe of non-accountability and revenue leakages in the company.
The success of any company is only as good as the achievement of its daily, weekly and eventually its monthly KPI. In the absence of these measures, the company is as good as shooting in the dark and hoping its arrows hit the target. It is important that every organisation makes it part of their DNA to worry about their performance. This is the only way that our companies can compete globally or even locally against international companies.
l Winston Zvirikuzhe is an Assurance executive at one of the telecom companies in Zimbabwe with extensive experience in strategy and performance management, as well as audit, risk and advisory services.
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