30 Business Performance Indicators You Can (and Should) Measure

Thank you Kristi for prodding us to create a concrete, analytical way to measure ourselves. Many good business decisions come from 'hunches' and intuition. But without objective means to evaluate, we cannot form the wisdom from our expereince to be able to trust our intuition.

Kristi is quite right in her concluding paragraph, 'Choose a few indicators to start off with...' But which ones? This is the same issue that I have with a 'Balanced Scorecard': each 'score' is valid, but there are so many, you can feel good about some while simultaneously be discouraged about others...

So how do you pick the right ones? I have appended the list with a few suggestions:

Sales
1. Bookings - Use this one if the gross margin of your orders is common.
2. Number of orders - Use this one if order size/type is consistent.
3. Sales qualified leads. If considerable fallout or cancellations occur, use this. But it may require more effort to categorize.

Finance
4. Revenues The gross number appears in most reports and totals. If you are maintaining growth, breakout those critical porducts/customers. If you are struggling to survive, breakout those essential core categories.
5. Expenses Same as overall revenues, it is a large number and the details get lost in the total. Many expense numbers are fixed and you affect immediate change on rent, insurance, loans, etc. Isolate those that you can quickly affect and measure those a a percentage of the whole.
6. Profits. This is why you exist - a business is supposed to be a money-making machine. So use two perspectives: a) What will EVERY decision made due to affect the bottom line; b) How can I improve it 'now' AND for the 'future'?
7. Operating margin. Cost accounting methods are highly subjective and NEVER accurate. They are only theoretical estimates and cannot be taken out context of the whole. Be sure you are ALWAYS looking at this from a 'cash' perspective: "Is this a cost reduction that does not curtail my capacity to deliver".

Technical Support
8. Number of support calls - Use this if it is your barometer of quality.
9. Resolved Cases - Use this if you have repeated call-backs to complete support.
10. Average waiting time - Use this if calls have extremely high success rates and overall volume is consistent.

Manufacturing
11. Number of units manufactured - Use this when: 1) if product mix is very small and simple. Compare against history and estimates. 2) Production rates is highly dependable and fluctuations are signs of trouble.
12. Manufacturing times - Use this when: 1) product mix is inconsistent and estimates/budgets are inaccurate. Compare against 'standard' - use to improve 'standard'. 2) Cycle are extremely predictable and will variations will expose problems.
13. Number of defects - Use this when: 1) Quality is an issue and you need to get to root causes. 2) Quality is very good OR defects are extremely expensive.

Fulfillment
14. Number of days to ship. There are a number of ways and places to measure. Few employees are responsible for more than a small section of the entire time-line. So be sure that there is control over the section you are measuring.
15. Inventory levels. There are sooo many ways to measure this. Probably the most critical parameter is a mfgr's success. Is inventory a 'good' thing? Use metrics that control its excess. Is inventory a 'bad' thing? Use metrics that prevent shortages.
16. Return rates. Use this if you have fickle customers or quality/satisfaction issues - at either extreme.

Marketing
17. Marketing funnel: for example – Inquires - Marketing qualified leads - Sales qualified leads - Opportunity Pipeline Unless you have scientific methods for making changes in your business, use these metrics to chart trends for future analysis.
18. Customer demographics - Same as #17. Unless you already have scientific reasons for making changes, use this to learn about customers and understand their needs.
19. % Revenue sourced by marketing - This is an extension of understanding your customers and the effectiveness of your methods to reach them, use this to adjust/direct future efforts.
20. Referrals - Another aspect of meeting customer needs, use this if you are looking to foster loyalty and improve customer satisfaction.
21. Social media mentions - Use this if you depend on reaching customers indirectly.

Human resources
22. Employee satisfaction - This is a highly subjective question - use this if you have specific issues or criteria to measure. Ask yourself, is this a measurement of business success?
23. Employee turnover - Turnover consumes resources to replace/retrain and has quality implications. Use this if you have extremely high labor force/content to generate root cause analysis.

Information Technology

24. Network downtime - Rarely is the 'network' down, but 'resources' may be unavailable. Find specific, relevant measurements and use them if they impact your mission critical operations.
25. Fixed application bugs - Use specific instances of these as measred against the improvement in productivity or delivery. ("This saved X hours in corrections" or "This prevented XX mistakes from happening again")

Web Services
26. Number of visitors Use this for historical analysis unless you know that you need a specific volume for conversion.
27. Click through rate Similarly, use this if your business success depends on retaining a specific number of visitors.
28. Conversion rate (e.g. number of product registrations). Use this if your business model depends on customers drawn through your site.
29. Average time per visit Use this measurement if your product/service is an 'impulse buy' or requires significant 'configuration'.
30. Bounce rate - As with all of these web based metrics (web-trics?) define these measurements as part of a scientific justification for changing your business processes. Otherwise, generate them for analysis so that you can possibly use them to understand your customer needs as part of a scientific measurement in the future.

Thanks again, Kristi for putting this list together. I hope that the readers can wade through them to find the few critical parameters for their business that should promote behavioral changes based on the results. Otherwise, so many reports creates information overload that obscures the facts that require action.

Hope this helps!
Jim Scott