Choosing the right Key Performance Indicators (KPIs) may seem overwhelming, but the right metrics, and subsequently the measuring and reporting of those metrics, can provide enormous value to not for profit leaders and their boards.
The right KPIs can have the ability to provide meaningful insights at a glance, which is particularly useful for stakeholders that are not involved in the organisation on a daily basis.
With that said there are a number of key areas to take into account when considering which KPIs to select.
Your KPIs’ key purpose is to provide insights into your organisation’s progress (or lack of) towards its strategic goals, financial performance and financial health.
Having clear, well defined strategic goals will greatly assist in the KPI creation process. If your organisation is struggling to create a KPI or set of KPIs that accurately provide insights into the achievement of your strategic goals, it may be a sign that your strategic goals are not clear enough and need to be better defined.
Your organisation will go through different stages. It may have periods of growth, a period of decline or may be stable for a period of time.
Understanding which stage your organisation is at will help in selecting the right KPIs as you will have different needs and objectives in each stage. For example, in a growth stage your organisation is likely to go with financial metrics that provide insights on sustainable growth.
The stage which your organisation is at will of course change over time and it is therefore important to review which stage your organisation is at on a regular basis and subsequently ensure that your KPIs are aligned.
In a perfect world we would be able to measure and report on any metric we want to in an instant. Ideally this data would even be live and updated in real time. The reality is that for metrics to be evaluated and reported on, they must be measured in a reliable and timely manner. If stakeholders are reviewing KPIs driven by outdated data then the opportunity to act quickly on the insights obtained may be lost.
There will be a cost involved to measuring and reporting KPIs in terms of time and/or money. This cost will vary depending on your organisations systems, processes and staff expertise. When selecting KPIs it always worth reviewing whether or not the value of the KPI is worth both the time and effort. Although a KPI may be useful, the practicality of measuring the required data and the time taken to collate and analyse data, may mean that the KPI is too difficult to implement.
The right KPIs can have the ability to provide meaningful insights and improve decision making however if those reviewing the reported KPI results are not confident in data behind the KPIs, the data driven, objective insights can be quickly lost.
It’s important to consider whether or not your organisation has the systems and processes to accurately collect and measure the data that drive the key metrics.
Current and Future Challenges
KPIs based on the challenges that your organisation is currently facing can provide insights into how well your organisation is handling and addressing those challenges. Furthermore challenges may not necessarily be current and your organisation may foresee challenges in the future that either need action or closely monitoring.
Consideration of current and future challenges will assist in determining if particular KPIs are required to address these and, if so, which KPIs would provide the most meaningful insights into these challenges.
When deciding on KPIs, identify which KPIs and key metrics will provide meaningful insights into your organisation’s strategy, lifecycle and challenges/opportunities. Review these KPIs to ensure that the data can be measured and reported accurately and in a timely and cost effective manner.
Examples of KPIs include:
- Net Sales – Dollar or Percentage Growth
- Growth in Revenue
- Net Profit Margin
- Gross Profit Margin
- Operational Cash Flow
- Current Accounts Receivables
- Number of Customers Retained
- Employee Satisfaction Rating