Practice Management – Key Performance Indicators

Pie Chart

In order to properly utilize your Critical Success Factors (CFS’s) you need to have a way to measure your progress. How specific, and the accuracy of your CSF’s, will determine what to measure, how to measure it, and what part management plays on the outcome.

The measurement tool most widely used is Key Performance Indicators (KPI).

They answer such questions as:

    • Are you close to success?
    • Are you moving toward your goals?
    • Are you at your goal?
    • Is the staff deserving of a bonus this year?
KPI’s will be very different for every business. Even two seemingly identical accounting firms will have different priorities and therefore will have different Critical Success Factors. Each department or division within a company will have distinct KPI. For example, the marketing team will have different KPI’s than data importers.

Proper KPI selection is crucial to ensuring that you’re focusing on effectiveness and efficiency.

Efficiency is completing a specific task in the best way possible to achieve a result. While, effectiveness, is completing the correct tasks in order to achieve a higher outcome. Business can be efficient and yet not effective, which means fairly certain failure. A business that is effective but not efficient can be easily turned around. When selecting KPI’s make sure that you focus on effectiveness first and then look at efficiency.

It is very important that business owners be cautious with KPI’s. Far too many business owners make the same mistakes with KPI’s, realizing they have not been achieving the results that they wanted to. They decide to go overboard and implement too many. This generally creates conflicting KPI’s and overwhelms the staff. The best results can be seen by starting out with a few very well-thought-out KPI’s.

In Jeff Borschowa’s book, 8 Pillars for Exponential Business Growth, Mr. Borschowa lists the key stages to creating KPI’s.

    • Define your business processes
    • Set requirements for each business process
    • Use quantitative and qualitative measurements to compare current results with goals
    • Investigate variances and refine processes (or redistribute resources) in order to achieve goals
Take your time when creating your KPI’s. You really want to customize them to your businesses goals. The better your KPI’s are the more improvements you will see. The time spent planning your CSR’s and KPI’s will be paid back to you in long-lasting improvements.