Thanks to automated software, we have a wealth of realtime business data right at our fingertips.
By Gerhard Hartman, vice-president: medium business at Sage Africa & Middle East
The result is that it’s all too easy for a medium business or scale-up to become too obsessed with the wrong metrics, and often at the expense of measuring and managing the things that really matter.
For a starting point, traditional key performance indicators (KPIs) are sometimes narrow in their focus. They might not catch the real issues that are affecting business performance, may focus only on one dimension, or might not be useful for making predictions about the future.
For example, many marketing departments place a heavy emphasis on net promoter score (NPS). This can be an invaluable metric, but could there be other metrics that are just as important, such as predictive data about customer churn? Or if a sales KPI is down, can the business look at the problem from fulfilment perspective, or a customer service perspective to understand where the issue originated?
KPIs can be demotivating, too.
Let’s say sales has a KPI for a particular product line. A competitor drops the price of their similar product. As quickly as the sales team responds, their top-line will be affected. When the negative data is fed back to the sales team, they’re hardly going to feel encouraged.
Making KPIs work for you
To get the most from KPIs, companies should shift from a measurement culture to a growth culture – looking beyond metrics for their own sake towards how they can help the company’s people to do better. This starts with focusing on the growth of employees and the real needs of the customer rather than on the KPIs on a dashboard.
With this in mind, you can start to gather the right data and use the correct benchmarks for your business goals. Rather than drowning yourself in data points, you will make good, fast decisions based on actionable information. The key is to avoid analysis-paralysis and to align your metrics behind your strategy – rather than doing it the other way around.
Another success factor is responding to information in real-time. Many businesses continue to act on historical reports about what happened days, weeks, or even months ago. Instead of responding to today’s trends, they are reacting to old events. The fresher the insights, the better the potential for making the right decisions.
It’s also important to break down organisational siloes. Different departments may run systems that have different approaches to data and KPIs. Such data might not catch issues that are affecting business performance, may focus only on one dimension, or might not be useful for forecasting.
Run a smarter, faster, more connected business
Evolving the finance function to be able to gather and benefit from real-time insights starts with putting the right technology and processes in place.
An integrated business solution can provide specialised, accurate reporting based on a holistic view of the business. This enables decision-makers to identify trends and opportunities and to track, analyse and manage customer and supplier interactions for fast and effective decision-making.