I have written about the fact that big data is nothing without it’s little brother. Small data or traditional performance metrics are vital to the success of any big data initiative. They help to identify the true objectives of any big data initiative and allow you to triangulate your traditional Key Performance Indicators (KPIs) with new data forms that big data brings such as unstructured data.
Without good KPIs it is difficult to create good big data initiatives. I spend my work life helping companies around the world with their big data and KPI initiatives and have developed a list of top level metrics I consider global best practice examples. The Financial Times has recently asked me to put my 25 top ones into a new book, and ’25 Need-to-Know Key Performance Indicators’ is now complete and about to be published. It describes in detail the 25 metrics I consider the most important and informative.
So here’s a brief rundown of the 25 Need-to-Know KPIs, organised across four business perspectives: customer, finance, internal processes and employees.
Measuring and understanding your customers
1 Net promoter score (NPS) – How likely is it that a customer will recommend your business to a friend?
2 Customer profitability score – How much profit do individual customers bring your business, after deducting the costs of attracting and keeping them happy with advertising, customer services etc?
3 Customer retention rate – How many of your customers are going to come back for more? And how loyal are they to your brand, organization or service?
4 Conversion rate – How well do you translate enquiries, sales calls and web page views into paying customers?
5 Relative market share – How big your slice of the pie is, compared to your competitors in the same market.
Measuring and understanding your financial performance
6 Revenue growth rate – The rate at which you are increasing your company’s income.
7 Net profit – Income minus expenses – the bottom line, but certainly not the only metric you need to worry about!
8 Net profit margin – The percentage of your revenue which is net profit.
9 Gross profit margin – The percentage of your revenue which is gross profit.
10 Operating profit margin – Operating income divided by revenue – another measure of a company’s profitability.
11 Return on investment (ROI) – The revenue generated by investing money into an aspect of a company’s operations, in relation the cost of that investment.
12 Cash conversion cycle (CCC) – How long does it take for money invested in the business (for stock etc) to come back to the company in the form of increased revenue.
Measuring and understanding your internal processes
13 Capacity utilisation rate (CUR) – Are you meeting your potential in terms of amount of work you can carry out, with the resources you have available?
14 Project schedule variance (PSV) – Are your projects reaching completion on time?
15 Project cost variance (PCV) – Are your projects coming in without going over budget?
16 Earned value (EV) metric – Value generated by your company’s ongoing projects.
17 Order fulfilment cycle time (OFCT) – The time that it takes from a customer placing an order, to the product or service being delivered.
18 Delivery in full, on time (DIFOT) rate – Customer orders filled in full, and on time, compared to total number of customer orders.
19 Quality index – Is the quality of your goods or services as high as your customers are expecting?
20 Process downtime level – How much time is wasted due to downtime, technical breakdown or staff sickness.
Measuring and understanding your employees
21 Staff advocacy score – How likely are your staff to recommend you as a company to work for?
22 Employee engagement level – How does your employee’s behaviour contribute to the business’s overall goals?
23 Absenteeism Bradford factor – How much is unauthorized staff absence costing your business?
24 Human capital value added (HCVA) – The financial value added to the business by individual members of staff.
25 360-degree feedback score – How staff rate each other – as well as themselves.
I very much hope that you find this list useful. As always, let me know your thoughts. Are there others you would add? Or do you have wider comments on KPIs and how they are used?
If you would like to learn more about these KPIs (e.g. how to measure them, what to look out for, etc) then have a look my book ’25 Need-to-Know Key Performance Indicators’ as well as my free online KPI Library.