key performance indicators

Key Performance Indicators: How to Measure Quality of Work Properly

Building a successful business is never the easiest. It entails patience, perseverance and a whole lot of brainwork. However, even if some business owners and entrepreneurs have put in a lot of these three things into their companies since day one, much of the struggle still comes from making the business grow. Ever since I started coaching in my podcast or webinar, I have gotten a lot of interesting questions that I realised were my questions before.

These questions include the following:

  1. Why isn’t my business still not where I envisioned it to be in the first one or two years of operating?
  2. How do I get my business to move from point A to point B?
  3. How can I increase my revenue in the next six months?
  4. How can I get value for the money that I shelled out for capital and operations?

I bet that you have also asked these questions to yourself once or twice during your business journey. Allow me to share to you my very own take on the magical word that every business owner should know by heart: QUALITY.

Not a lot of business owners realise that the secret to growing a business is a healthy business. If you want to ensure you are building your company’s future towards security and stability, the most important factor to monitor is the quality.

  1. Establishing a business process that will help you achieve your revenue goal this year
  2. Making sure that all departments in your company are performing to its fullest
  3. Ensuring the actions taken across all the business areas are producing positive outcomes
  4. Attracting new customers regularly and maintaining the current business contacts
  5. Showing consistency among all the products and services done daily

But I can almost hear you say to me…

‘Charley, I am not for micromanagement…’

‘I do not have time to oversee each department. I want to focus on what only I can do’.

‘Our current budget doesn’t look like we can afford a quality assurance team’.

‘You’re crazy. A start-up company like mine will never attain that standard of quality’.

Before you think I’m crazy, let me tell you a story a colleague told me:

I was once a legendary dreamer who believed that I could someday make an impact to the business industry. It was the perfect timing for me since doors were suddenly flying open for me to embrace different opportunities. The time came for me to launch the rocket, and there was I. All I’ve ever dreamed of is suddenly coming to life. Until…

Somebody told me, ‘Mike, given the way you’re handling your business, I think you may be able to enjoy it for the next nine months, BUT not one more month after that’. I replied, ‘Excuse me?’ ‘Yeah’, he said.

‘The pace your business is running now is TOO risky. You have more money than you have ever made in the last five years; that’s great! But if you don’t check in on your work QUALITY, your fascinatingly fast acceleration might force you to a pit stop or, worse, to face a dead end’. I can still hear those very words ringing in my ear, resulting in the tiny bits of hair at the back of my neck stand up.

I was going way too fast, and it could force me to go out of business. I thought I wasn’t doing anything wrong. I thought I was different. I didn’t think I would struggle as any CEO did. Naturally, I did not let that guy go. I made him expound more on why he thought of that advice, and that’s where I learned about key performance indicators.

What are Key Performance Indicators (KPIs), and Why Should I Care About Them?

You can bet that every school, manufacturing company, hiring agency, and many other types of company which have been ISO certified had also experienced the same scenario as my friend in the story.

Gone are the days that the president, vice president or CEO will have to wonder graph after graph what all their busy employees’ hard work amounts to at the end of the day. Hectic is not equal to productive. Don’t fall into the same trap; create KPIs. Yes! KPIs can save the day.

Key performance indicators can effectively measure your business’ performance to accomplish its primary objectives and help you formulate better improvement strategies.

Many say, ‘Don’t focus on the product, focus on the performance’. Well, they may not have a clue about the significant benefits of KPIs.

KPIs can shoot two birds with one stone for your business—help you deliver the right performance and produce better products and services.

I’ll tell you why you should love KPIs:

  • They can make alignment with all your key persons/employees easier and smoother.
  • They inspire not only thoughts and ideas but also action.
  • They work with business owners who want to implement a more black-and-white culture yet allow some room for creativity to help their employees grow.
  • They improve communication, continuously encouraging to work out small lapses.
  • They can be tailor-fit according to what your business in its season may need. What works for one firm may not for everybody else.
  • They can quickly point out the owner of each task/responsibility, and from there on, you will be able to identify who needs more what elsewhere.
  • They demand a healthy dose of teamwork, collaboration and brainstorming now and then from your management or board of directors. Don’t underestimate a regular discussion; some of the brightest ideas may come from what seems like a typical touch-base meeting or a short talk in the pantry.
  • They generate more constructive and helpful feedback. More feedback, more fun.

Quantifying Quality

Five years ago, I always thought there was a vague sense of a relationship between quality and quantity. Over time, my understanding of these two words somehow makes me want to set them up against each other.

QUANTITY answers to how many, how much, minus, what you added, what you multiplied, among others. On the other hand, QUALITY deals with how excellent, how poor, how fast or slow, how long-lasting, and other related questions. Little did I know that they are strongly correlated with one another, and learning the reasons in-depth did wonders for my business.

I will discuss later on how to formulate a specific and customised KPI for your own business, but for now, let us dig more into the relationship of quality and quantity.

When trying to determine QUANTITY, we have to formulate the right metrics.

You should ask yourself, ‘What am I trying to measure? And what unit of measurement should I use?’ Some metrics are quantifiable by time, some by money, and some by headcount or product count.

When trying to determine QUALITY, the most suitable questions you should ask are the likes of ‘Did we do it in the best way possible? Or was the result at par or better with the previous results?’

Put quantity and quality together just like two differently colored clays, one blue and one red, and mold them as one. Aside from getting a bizarre-looking, purple clay ball, you get a fresh and better way of measuring success in terms of performance. There is no escaping this innovation. How do you even think those other billion-dollar companies did it?

You cannot value one over the other. The two Qs need to go together. Establishing KPIs contributes to distinguishing the good companies from the potentially great ones.

Also, don’t stop with using KPIs to measure your business; KPIs also help in evaluating your business against other companies’ performances so that you’ll know where you are in the industry. Only when you know where you currently stand will you finally point out where exactly you want to go next.

Everyone Needs KPIs

Here’s a fact: everyone needs KPIs.

If you are in the top management team, you need KPIs. The grumpy old lady who runs the logistic department needs them. Your sales department needs them, as well as your talented graphic designer. It’s the truth.

No matter what role and responsibility someone may have in a company, KPIs are a must. If not, how else will we determine if a job is complete? More than doing the job, you need to ask yourself, ‘Is the overall mission of the company accomplished?’

The bottom line is this: one way or another, everyone needs to measure their success.

Many companies found out that KPIs are practical and easy to understand and apply even for different departments which have different objectives. They love them and are sticking to them.

Although this information may seem appealing to you, you may still think that defining KPIs will not add anything good for your business. Here are some rebuttals I previously mentioned that might be stopping you from championing KPIs.

1. ‘I am not for micromanagement…’

Great news! KPIs help you kill micromanagement. You don’t need to visit every branch, store or department to check on what is happening around. Instead, when a ‘cheat sheet’ guides the individuals working in your company to what real success looks like according to their job, it eliminates the need to micromanage.

Everybody will have more time doing their work, and the sense of accountability and ownership will even be more developed—what a win-win situation.

2. ‘I do not have time to oversee each department. I want to focus on what only I can do’.

As the business owner, your part will only be to make sure your key people understand the keys to a good performance. These may be the department heads or the so-called team leaders and influencers in your company that help others in the team make their tasks happen to fulfil the bigger picture.

No manager wants to oversee each person in their department. It sure sounds like an exhausting idea. Inversely, when you prioritise making sure that these managers, in turn, make sure that everyone under their supervision is well-versed about their own KPIs, the focus will be on the end goal. The teams will be working dispersedly but collectively.

3. ‘Our current budget doesn’t look like we can afford a quality assurance team’.

Defining KPIs for your company is probably the cheapest way to maintain a standard and keep score. Sure, hiring a quality assurance team will probably be a good idea. However, let me tell you they will also eventually need KPIs to do their job. I cannot promise that learning more about how to set KPIs will be expense-free.

But I do know that it is way more budget-friendly than skipping it in the entire business process thinking you don’t need it and consequently finding out in the end that you wasted not only money but also a lot of time. And I think you would agree that the latter is far more valuable. After all, time is of the essence. Invest in education, and you can never go wrong. You are your company’s best investment.

4. ‘You’re crazy! A start-up company like mine will never attain that standard of quality’.

I would say that discovering the importance of KPIs at the exact time you are reading this is the best and perfect time for you and your business to start applying them. There is no sense to hold your company back from learning how to define KPIs this early.

You will gain all the advantages. If you are still building your company, it will be pure pleasure for you and the principal persons working for you to establish them. The smaller the team is, the simpler the task will be. But if your company is already in the brink of superb growth, it’s not yet too late. Quality is a universal goal that should be in the list of every company owner, no matter what size, industry, culture, or orientation.

Okay. So, How Do I Start Defining Our KPIs?

As I have mentioned previously, KPIs can be and should be tailor fit according to your very own company—its needs, its goals and its quest for solutions. To each his own. What I will share below are some fundamental ways to start formulating yours. You may use this as a simple guide to get an initial idea of how to apply it to your business.

The following are the keys to defining your KPIs:

  • What is your company’s objective?
  • Who are the key persons who can help you achieve this objective?
  • List at least ten broad goals plus how you can measure each, how often will you review measurement and who is accountable for each specific target.
  • Why do these goals matter?
  • Which specific steps must be taken to achieve the general goals?

I would love to discuss KPIs more in-depth with you. My passion is to inspire, equip, and prepare business owners like you to take on more action towards growth and development. Leave a message below or sign up to get our free newsletter through email. You may also gain access and notifications to my webinars and podcast. Let’s talk! Can’t wait to hear from you.

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