A performance indicator or key performance indicator (KPI) is a type of performance measurement that allows a company to evaluate the success of the organization or a particular aspect of the company. KPIs provide direction for how a company progresses towards its business goals.
Understanding and identifying crucial KPIs is the first step to being able to gather data. KPIs are objectives to be targeted that will add the most value to the business. Some industries have identified standard KPIs. For example, KPIs for restaurants such as Little Caesars and Marcos Pizza include food costs, labor costs, weekly sales, average order per customer, and employee turnover. KPIs for retail business such as Pearl Vision and Snap-on include sales increase, gross margin, inventory turnover and repeat customers. However, if your franchise industry does not have standard KPIs, then you must identify the indicators based on your business objectives.
Experts, such as ProfitKeeper help identify KPIs for large franchisors by using proven methods, such as a balanced scorecard. The balanced scorecard is a strategic planning and management system used to align business activities to the vision and strategy of the organization¹. KPIs should be associated with an action or activity within the organization which makes the improvement easier to target. Because KPIs are often associated with key activities, they are sometimes referred to as “performance improvement.” This allows for the organization to not only have attractive graphs to boast about, but have an actionable plan and potentially see immediate results.
Once the KPI is identified and the data is gathered, checking the data and business reports daily, weekly and monthly allows you to stay current on business performance and make timely and crucial adjustments to activities.
Luckily, the tedious task of shifting through invoices, creating charts and graphs, and number-crunching is long-gone. Partnering with data collections experts provides analytics at your fingertips in presentable graphs and easy to read charts. Having crucial KPIs literally in the palm of your hand frees your time and resources so you can focus on running your business. Examining key performance indicators provides a pulse of your business and creates baseline for evaluating where and when change is necessary.
¹Citing Sources: [http://balancedscorecard.org/Resources/About-the-Balanced-Scorecard] para.1: [April 27, 2016]