What does managing mean? What should a manager pay attention to? I decided to share my vision of management in this post.
From a theoretical standpoint, managers are in charge of the implementation and following up of operational tasks. This is typically done through the definition and effective measurement of key performance indicators (KPIs). KPIs are commonly used by an organization to evaluate the success of a particular activity in which it is engaged. KPIs are important since they help managers put their attention to strategic issues.
The definition of KPIs is, ultimately, about the identification of a small number of financial and non-financial measures. By attaching targets to them, it is possible to determine whether the current performance 'meets expectations'. The idea behind this is that by alerting managers to areas where performance deviates from what was planned, they can focus their attention on these areas. It is hoped that this will improve the performance of the activity that they are managing.
Performance indicators differ as a function of the business drivers and/or goals. A school might consider the success rate of its students as a key performance indicator, which might help the school understand its position in the educational community. A business manager would probably consider the percentage of income from returning customers as a potential KPI.
No matter what the KPIs are, they should follow SMART criteria. This means that every KPI should have a Specific purpose for the business. It needs to be clearly Measurable. The defined KPI has to be Achievable. The improvement of a KPI has to be Relevant for the success of the organization. Finally, it must be Time phased, which means the value or outcomes are shown for a predefined and relevant period.
Some examples of effective KPIs currently used in business situations are:
- Income since the beginning of the year (by segments if possible).
- New customers acquired.
- Profitability of customers by demographic segments.
- Total number of clients.
- Duration of a stock-out situation.
- Customer order waiting time.
- Outstanding balances held by segments of customers and terms of payment.
Some examples of KPIs more related to production and manufacturing are:
- Cycle time: this is the total time from the beginning to the end of your process.
- Utilization rate.
- Rejection rate of a final product.
- Mean time between failures of a specific piece of production equipment.
- Mean time to repair the equipment.
Some examples of KPIs specific to digital startups are:
- Bounce rates on landing pages.
- Exiting rate from specific pages.
- Total number of people visiting in a specific timeframe.
- Number of transactions made on the site.
- Number of returning users.
- Total number of users.