Getting an idea of where you are going through your business plan is one thing, but knowing whether you have arrived at your destination and whether it is the right destination is certainly another! While most people do plan their journeys, they ensure that there are landmarks and milestones along the way which helps them to keep on track.
In today's complex world, there are plenty of competitors whose mission in life is to knock you off course. To recognise when this may be happening, it is important that someone has prime responsibility for collating management information, and helping to analyse and interpret this information.
How you are going to monitor your performance will be set out in your business plan.
You must also remember to adjust your monitoring indicators if and when you adjust your business plan.
Successful business plans must be adaptable due to the unpredictability of our business environment and changes that may come along the way.
Tracking the performance of your business plan can be divided into lagging key performance indicators and leading key performance indicators.
Lagging KPI's include:
- Total income – broken down by products, divisions and individuals.
- Total profit – broken down by products, divisions, individuals and clients.
- Total costs – broken down by type division.
- Brokerage per employee.
- Cash flow.
- Strength of the balance sheet.
- Retention rates.
- Business split between new and existing clients.
- Referral rates.
Leading performance indicators are ones that occur or are predicted to occur as a result of the direct activities from your business plan. They include:
- Total value of new business prospects.
- Timing of new business prospects.
- Percentage likelihood of new business prospects.
- Expected value of new business.
- Rolling 12-month forecast.
- Training requirements.
A regular package of information containing the above indicators, should be available on a regular basis, for example monthly, to the board to enable effective cracking. It is important not to convert this into an industry in itself, but to ensure that it is actually the key performance indicators that are recorded. Decisions can then be made based on these indicators or there may be pointers for further analysis of business performance either to capture good performance or correct under performance. In particular these sorts of indicators help during particular marketing campaigns or other initiatives.
It is also important that your staff are fully aware of the key performance areas of the business. They are particularly interested in the special initiatives, and the overall welfare and direction of the organisation. It also helps them to focus on the most important issues that are facing the business.
Finally, the key performance indicators are a measure of accountability that not only help the overall business performance but individual performance as well. The monitoring of these key performance indicators is vital as a way of ensuring that business is on the right road and arrives at its destination.
This article was taken from CGU's Business Intelligence Report, The Cutting Edge. Copies are available from your local CGU branch.