Key Performance Indicators (KPIs) are essential tools for measuring the performance of industrial businesses. They help managers and executives track progress, identify areas for improvement, and make data-driven decisions. In this post, we will discuss some of the most important KPIs for industrial businesses and how you can use them to monitor and improve performance. Whether you are a manufacturing facility, a warehouse, or a distribution center, understanding and utilizing KPIs is critical for success in today’s competitive industrial landscape.
What is a Key Performance Indicator?
A key performance indicator is a metric that shows how effectively a company is achieving crucial business goals. Organizations utilize it as a quantifiable value on several levels to assess how well they’ve accomplished their goals. Low-level KPIs concentrate on assessing the effects of tasks and projects headed by specific teams like maintenance, marketing, sales, or customer service. Alternatively, high-level KPIs measure the entire performance of an organization.
High-level objectives trickle down to KPIs. Say your business decides that its overall objective for this year is to increase revenue by 20%. Next, you can then identify the precise elements of the goal that are under the direct control of each department’s teams. From that, you can establish your KPIs to measure the contribution of each team to the overall goal.
Are KPIs and Metrics the Same?
A KPI and a metric differ slightly from one another. The fact that you frequently need one to have the other, despite their slight distinctions, should be noted. Both of them are employed to monitor performance or progress. Alternatively, metrics are more quantifiable. You can track and analyze metrics to make sure you are meeting your KPIs. In the maintenance world, there are many metrics, including MTBF (mean time between failures), MTTR (mean time to repair), MTTF (mean time to failure), and more.
Why are Key Performance Indicators Important?
Key performance indicators assist companies in translating high-level objectives into actions with quantifiable outcomes. Increasing corporate revenue by 20% this year is a typical high-level aim. That’s a terrific goal to strive towards, but it leaves out specific instructions for how individual departments and team members can contribute to the achievement of the goal. High-level goals are challenging for different departments and individual personnel to translate into daily and weekly duties. Without KPIs, these high-level objectives are unlikely to be accomplished.
KPIs provide a feedback loop for your employees to understand their contribution and short-term progress towards long-term goals. This encourages employees to concentrate their time and effort on the tasks and projects that directly advance strategic business objectives.
How to Set Key Performance Indicators
The three main steps to setting business KPIs are:
- Set company objectives
- Establish departmental goals
- Set up KPIs for groups and individuals
Tips for Setting Good KPIs
An excellent KPI is practical, clear, and simple to measure. Here are some pointers for choosing effective KPIs.
Align with Overall Business Strategy
KPIs should be in line with the high-level goals and business strategy. You should base your KPIs on your overall business plan. Let’s take an example where your company wants to raise monthly recurring revenue (MRR) by 20% by the end of the fiscal year (a high-level KPI). If you work in sales, your KPI might be to double inbound leads by the end of Q3 (a low-level KPI). Because new leads have the potential to generate income, your KPI supports the overarching business objective.
Make them Actionable
KPIs must be linked to action. Once your KPI has been established, you must describe the steps you’ll take to get there and the supporting metrics you’ll track. You should have a strategy in place to achieve your objective of increasing inbound leads, such as moving more prospects from marketing to sales. Taking concrete actions will position you for success in achieving your KPIs. It’s also important to remember that KPIs should motivate action rather than raise more inquiries.
Don’t Go Too Big Too Fast
Realistic KPIs are essential. While big goals are exciting, starting small is wise. Key performance indicators won’t benefit you or your team if they aren’t achievable from the start.
Make them Measurable
The KPIs should be quantifiable. Consider your goals before setting KPIs. What are you aiming to accomplish? What is the time frame? Remember to include ways to measure your key performance indicators. This allows you to create a statistic and quickly and simply track your progress in data visualization.
How to Track KPIs
Maybe you’re thinking, “Can’t I just use a spreadsheet?” While you can, spreadsheets do have some restrictions. Here’s a closer look at your options for key performance indicator tracking.
If you’re new to KPI reporting, spreadsheets can be a good place to start. However, pie charts, bar charts, and other data visualizations are limited in spreadsheets. Also, setting up your report requires a lot of time and manual input. To keep your data current, spreadsheets also need routine upkeep. Spreadsheets have the benefit of being readily available but can have limited accessibility within your organization.
The dashboard and reporting features of CMMS (computerized maintenance management system) software streamline the entire KPI tracking and reporting process. Your CMMS can automatically report on your real-time data. This requires little manual work to maintain and pull reports. Dashboard and reporting solutions frequently include advanced data visualization capabilities and customization, providing a wide range of visualization choices. Last but not least, even though setting up dashboard and reporting tools initially takes some effort, the end effect is that you and your team can reclaim a ton of time thanks to automation.
KPIs and Maintenance Metrics
To assist you and your business in achieving your goals, key performance indicators act as a road map. Additionally, achieving your goals depends on delivering results that are consistent and focused. That’s why using a CMMS to track your KPIs and metrics has many advantages. If you’d like to see the robust reporting and dashboard capabilities, schedule a demo today.