The 3 most important methods of determining performance indicators
Finding the right set of indicators (relevant, able to be directly influenced, not too many or too few) isn’t easy. We’ve developed three effective methods that can help you speed up the identification process:
- The strategy-driven method: close in on measurable indicators in small steps using the mission, vision, and goals. This method ensures that your performance indicators will show strategic performance, so your company stays on track.
- The process-driven method: use the company process and its various steps as the stepping-off point. This ties in your indicators directly to the tasks and responsibilities of employees. That’s how you optimize your processes.
- The data-driven method: use data science to collect data from your systems, sensors, or external data sources and combine and visualize them into useful insights. This leads to all kinds of performance indicators and continuous data-driven improvement.
Aligning strategy, processes, and data
A combination of these methods works best so that you can perfectly align your strategy, processes, and data. This is where many companies fail. It’s a complex process but it makes management not just simpler, but also more effective.
Examples of performance indicators per function
Marketing indicators
- Market share
- Market share per product group
- Growth of market share
- Number of respondents to mailing
- Newsletter sign-ups
- Number of website visitors
Sales indicators
- Number of outstanding bids and quotations
- Number of lost bids and quotations
- Success ratio of bids/quotations
- Number of new customers
- Number of lost customers
- Revenue and revenue growth
Production indicators
- Production orders per hour
- Orders in backlog
- Number of product returns per reason
- Hours of inactivity per machine
- Supply per product
Purchasing indicators
- Purchase price
- Purchase margin
- Amount purchased
- Number of suppliers
Financial indicators
- Number of sales invoices
- Invoices over payment term
- Average invoice amount
- Average discount
- Gross margin
- Net margin
More about financial indicators
In the literature, you will find many advantages of using non-financial indicators.
Which indicators are genuinely important?
The above list of indicators is, of course, incomplete or only partially applicable to your company. They’re just examples that can help you find the right indicators for your company. The biggest challenge is always that less is more. Whichever method you use, you can end up with a list of hundreds of (performance) indicators before you know it. And it’s extremely hard to monitor and manage performance using a cluttered dashboard. Which indicators are genuinely important to achieving better performance?
Select the right KPIs quickly
Do you want to select the right key performance indicators quickly and achieve a dramatic improvement in the performance in multiple areas? The SMART KPI Toolkit is a very powerful tool for both directors and staff.
The genuine performance indicators
The answer is clear: the Key Performance Indicators. They show you what is truly critical to achieving a performance breakthrough. They’re also recognizable to all stakeholders and they instantly expose the processes that need to be adjusted. Our quick-start performance management training course helps you identify and classify the genuinely important performance indicators and high-impact insights. And you’ll learn how to drive them.
Examples of indicators from everyday life
Everyday life is filled with indicators, for example, the fuel gauge in your car, or your body temperature.
How our daily management works
These practical examples demonstrate how our daily management works. You have to pay attention to what’s important in the given situation (focus). And you have to develop a limited number of performance indicators that can provide information about the situation. That’s how you can determine the good/bad limits.
We focus on feedback using indicators that are important to your company. Just like in daily life, the appeal is that there’s a lot of information stored in just a single indicator. This isn’t just something that managers need, but everyone involved in the company benefits from it.
Advantages of working with performance indicators
- Clarifies the performance of the entire department or organization at a glance.
- Quick insight into positive or negative developments.
- Focuses attention on the main subjects.
- Indicates where the process can be improved or corrected.
- Displays the results of quality improvement projects quickly.
Working with and driving on indicators
Have you determined the right performance indicators, clarified your definitions, and is the underlying data correct? Then you can work with indicators and drive them. But how do you organize that effectively? The top 3 critical success factors are:
- Determining norms and targets and evaluating and adjusting them periodically.
- Using the indicators deliberately for analysis, action, and process improvement.
- Consistently discussing the numbers, both negative and positive scores.
When is an indicator usable?
The examples are deceptive in their simplicity. They seem very obvious. So are they up for grabs? In reality, finding the right KPIs usually involves a lot of searching, choosing, trying, and adjusting. Why does it take so long to make a set of indicators?
The reason for this is that finding the right indicators is about building an effective performance management system. That’s why the indicators have to fit the company strategy and measure its success.
Furthermore, the indicators have to be provided with a target value. The selected indicators have to be reported on efficiently. The reports should stimulate the planning of performance improvement.
To achieve this, managers and employees have to be involved in setting up indicators: the ownership principle. All these factors complicate the formulation of KPIs. However, they also make designing a performance management system more interesting, and the result is a tool that heavily influences performance improvement.
Hallmarks of good indicators
- Simple: easy to acquire, when possible building on what’s already there.
- Visible and informative: insightful, shows the achieved results and trends at a glance.
- Motivational and can be influenced: comparable, mobilizing, and within own area of responsibility.
- Part of policy: connects to company objectives or urgent quality problems.
- Stimulates customer focus: measures the satisfaction of the internal or external client.
- Drafted with stakeholders: top-down and bottom-up. Acceptable thanks to input in what and how it will be measured.
Get started using the right performance indicators
Contact us freely for a discussion with one of our consultants. Find out what we can offer your organization.
About Passionned Group
Passionned Group is a leading expert in KPI management and performance improvement. Our experienced consultants assist many companies in selecting the right indicators and million dollar insights. Every two years we organize the award for the smartest company in the Netherlands. 
