As June fades into July, 2023 will reach its halfway point. That means it's about time to check in on your key performance indicators.
KPIs are metrics used to measure business objectives and therefore a company's overall progress. Many revolve around financial performance--such as revenue, gross profit margin, and market share--while others concern areas like marketing, sales, and customers. Measurability is paramount across these metrics.
"You can't manage what you can't measure," says Joe Galvin, chief research officer at the executive coaching organization Vistage, quoting the adage often attributed to famed management consultant Peter Drucker.
Instead of waiting until the end of the year to take stock, business leaders can scrutinize their KPIs at the midway mark to gauge what's working and what needs improvement. Here's how.
Crunch the numbers
Financial indicators are, clearly, a focus for businesses hoping to grow. But small-business leaders have various other metrics to manage, oftentimes with little support, says Lilac Bar David, co-founder, and CEO of the small-business banking platform Lili. In particular, David says these leaders should focus on cash flow.
"They have to understand if the cash that is coming from their business is sufficient. Do they need additional working capital? Do they need an additional cash flow product, whether it's credit or any other product?" David says. This may lead small-business leaders to realize that they need to renegotiate terms with customers or suppliers to expedite cash flow.
Or, if the business is doing well, they could consider investing that money back into the business, David adds.
Small businesses should also think about reforecasting--refreshing predictions for how financial trends will impact KPIs--says executive coach Alisa Cohn. "What's their base case? What's their optimistic case? And what's their bear case?" she explains. Leaders should then have conversations at an executive level to make any adjustments, Cohn adds.
Look beyond the dollar signs
Numbers matter, but particularly now, leaders should not overlook KPIs related to personnel, Galvin says. Finding talent is a top concern for small businesses. Leaders can use the year's halfway point to evaluate head count needs, employee performance, and engagement, Cohn adds--the last of which declined for the first time in a decade in 2021 and then again in 2022, according to Gallup data.
"A midyear check-in is also a good opportunity to reenergize everybody by asking the question, 'Where are we? How are we doing toward these goals?' and refocusing and reinvigorating people," Cohn says.
Both Galvin and Cohn recommend making KPIs understandable and accessible to each employee now and throughout the year, and clarifying the part they play in their execution. "Workers want, fundamentally, two things: to know that their work is valued and important and that they're contributing to something bigger than themselves. And that's where those metrics come into play," Galvin adds.
Resist the fear to shift gears
Revisiting their KPIs, leaders may find that what they decided to measure at the start of the year needs to be altered or expanded. And if they see an opportunity to add or change a KPI, leaders shouldn't be afraid to do so, Galvin says.
Though there's value in "stepping on the same scale year over year" to gather historical data, he adds that tracking something new could elicit new, useful insights. And, in adding or altering a KPI, leaders will "draw attention and focus to that item ... it forces and drives that level of thinking down through the organization," he says.
Like all KPIs, any new additions should be specific, measurable, relevant, and achievable, and they should connect directly to the company's overall strategic plan, Galvin adds. "Ultimately, it's the leader who has to decide what he wants--what she wants the business to be focused on and where she wants to take it," he says.
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