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Revealed: The importance of measurement and target-setting for your business and your employees

by , 20 May 2015
If you want to see your business grow, you need to be aware of how important performance measurement and target-setting is. This applies regardless of whether you want to have a bigger business or you're confronted with the situation of a business in full development.

Here's why...

Let's look at the benefits of performance measurement

In general, entrepreneurs know how different areas of their business are performing and while this is important to know, it's also essential you have an efficient measurement system that will allow you to examine the triggers for any changes in performance.

In this way, you can manage your performance proactively. According to Infoentrepreneurs.com, selecting what to measure is a key challenge when it comes to performance management.

You have to focus on quantifiable factors that are clearly linked to the drivers of success in your business and your sector, states the source, explaining that these are known as key performance indicators (KPIs).

You should nevertheless know that there's a clear distinction between quantifiable and financial. While most business care most about financial measures of performance, the nonfinancial measures can be just as important, according to the previously mentioned source:

"For example, if your business succeeds or fails on the quality of its customer service, then that's what you need to measure – through, for example, the number of complaints received.

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Let's see what are the benefits of target-setting

Assuming you've identified the key areas that drive your business performance and found a way to measure them, the next step is to start setting performance targets to give everyone in your business a clear sense of what they should be aiming for.

As Infoentrepreneurs.com explains: "Strategic visions can be difficult to communicate, but by breaking your top level objectives down into smaller concrete targets you'll make it easier to manage the process of delivering them. In this way, targets form a crucial link between strategy and day-to-day operations.'

To decide what to measure, you have to know what areas of your business are the most important.

These are the key business drivers: "Your performance measurement will be a more powerful management tool if you focus on those areas that determine your overall business success," explained the same source.

Pay attention to the fact that you have to "tailor your measurement to your specific circumstances and objectives" and the key business drivers should be measured in the most proper way:

"For example, you may decide that customer service is a strategic priority for your business and to therefore start measuring this. But there are many ways of doing so.

You might consider measuring the following KPIs in your business

    The proportion of sales accounted for by returning customers
    The number of customer complaints received
    The number of items returned to you
    The time it takes to fulfil an order
    The percentage of incoming calls answered within 30 seconds.

At the end of the day, it's important to identify what specific measure is best for your business. The measurement unit in this field is called a key performance indicator (KPI). While choosing them, keep in mind that they have to be quantifiable and that they should directly capture a key business driver.

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