“What gets measured gets done.” – Peter Drucker
Using data in today’s businesses is crucial to evaluate success and gather insights needed for a sustainable company. Identifying what is working and what is not is one of the invaluable management practices that can decrease costs, determine the progress a business is making, and compare it to organizational goals. By establishing clear operational metrics and evaluate performance, companies have the advantage of using what is crucial to stay competitive in the market, and that’s data.
We have written about management reporting methods that can be utilized into the modern practice of creating powerful analysis, bringing complex data into simple visuals and employ them to make actionable decisions. Now we will focus on operational KPIs and metrics that can ultimately bring the indispensable value out of the overall business performance, by concentrating on the most important business question: what can I do to perform even better?
But let’s start with the basics of business operations, and provide foundations for analyzing your own metrics and KPIs while focusing on industry and company department-specific examples which a business can use for its own development. We will discuss Marketing, Human Resources, Sales, Logistics and IT Project Management examples that can grow the operational efficiency and decrease costs.
What Is An Operational KPI?
An operational KPI is a quantifiable value expressing the business performance in a shorter time-frame level. They are used in different industries to track organizational processes, improve efficiency and help businesses to understand and reflect on the outcomes.
By analyzing KPI examples for a specific industry or function, a business can reduce the amount of time needed to evaluate the overall performance. An additional important thing to consider is which one business should implement in order to gain sustainable success and maintain its competitiveness on the market.
How To Select Operational Metrics And KPIs?
Since every business is different, it is essential to establish specific metrics and KPIs to measure, follow, calculate and evaluate. As mentioned earlier, both are used to measure a business performance, so we will discuss which should be used in which scenarios and what to be careful about when selecting the right one for your business.
Key performance indicators in a business management environment should be constituent of 4 primary parameters that need to be taken into consideration:
- What exactly needs to be measured?
- Who will measure it?
- What is the time interval in between measuring?
- How frequently the information is being sent to the management level?
Turning these datasets into a business dashboard can effectively track the right values and offer a comprehensive application to the entire business system.
The analysis of operational KPIs and metrics with the right KPI software can be easily developed by turning raw data into a neat and interactive online dashboard, providing insights that can be easily overlooked when creating traditional means of reporting and analysis, like spreadsheets or simple written reports. Operational KPIs and metrics can be immense and boundless if not defined and used properly, so taking care of the mentioned basics we have outlined, should be one of the top priorities when deciding on which one to use. Later we will discuss examples, so that a clear overview is made on which one to identify and utilize – on an industry and function level.
When a business is measuring the effectiveness of a process, often metrics and KPIs are established to perform the evaluation and analysis. The key factor to consider is also to employ a holistic view of operational metrics that are being identified and used. A business cannot track only one and expect to obtain sustainable development. By using multiple types of metrics, companies can leverage more data and acquire insights needed for success.
Top 10 Operational Metrics Examples
While there are numbers of operational metrics to choose from, a company needs to be careful which one will be of utmost importance and value. That being said, we will discuss operational metrics examples that can be used in business processes and outline the most prominent ones, while using business analytics tools as our invaluable assistance.
1. Marketing: CPC (Cost-per-Click)
The need to establish specific operational metrics and track their efficiency creates invaluable results for any marketing campaign. Let's see this through an example.
The CPC (Cost-per-Click) overview of campaigns is an operational metric that expounds on the standard pricing model in online advertising. While comparing different campaigns into the CPC section of the overall strategy, you can easily spot which one had the lowest price and tackle deeper into the details. While this marketing KPI is priceless when it comes to advertising, it should be viewed in relations to other important operational metrics. Below in the article you can find a holistic overview of different kinds of KPIs that are used in a standard marketing practice.
2. Marketing: CPA (Cost-per-Acquisition)
Another example we could analyze is the CPA (Cost-per-Acquisition) in correlation with the specific marketing channel, as presented in the visual above. The CPA metric is even more performance-based since it's concentrated on the price of acquiring a customer, not clicks made to a website. Using these indicators to reflect on the outcomes of a campaign and establish future processes can be of invaluable significance.
3. Human Resources: Absenteeism Rate
Another example comes from the HR industry, and considers the engagement of the employees. This is an extremely important HR KPI since it concentrates on the main workforce actions needed to establish a successful HR strategy - the number of employees calling sick, missing work or skipping, can tell the organization what kind of impact it will have in the long run.
4. Human Resources: Overtime Hours
The workload of employees is an operational KPI that can impact the Absenteeism Rate, if the workforce is understaffed and deals with higher amounts of pressure. This performance indicator should be monitored in detail since it can be interpreted differently, according to the context (for example, is the economic growth or high volume of orders causing overtime hours, or something completely different?).
5. Sales: Lead-to-Opportunity Ratio
In this sales example above, the Lead-to-Opportunity ratio provides insights into the number of leads a sales professional or manager needs to stay on target with revenue goals. Since this is the first part of the sales funnel, you can easily spot which leads have turned into qualified ones and easily calculate the ratio. It would make sense to dig deeper into the exact source of qualified leads so that you can guide the marketing and sales team even better.
6. Sales: Lead Conversion Ratio
One of the most important sales KPIs is the Lead Conversion Ratio - it defines the number of interested people that turned into actual paying customers - a magic sales number indeed. After finding your baseline, you will understand how many leads you need to obtain for a healthy sales pipeline. If the conversion rate is low, you can be sure that the pipeline needs additional adjusting.
7. Logistics: Delivery Time
A standard logistics KPI, Delivery Time, measures the time between an order is placed to be shipped, and the moment it is delivered to the customer or the post office. The average amount will then show you where you need to decrease these values and provide a base for specifying the exact time your customers can expect their package.
8. Logistics: Transportation Costs
All the costs related to the transportation process can be seen in this example above: the order processing, administrative costs, inventory carrying, warehousing and, finally, the actual transportation costs. This will help determine the average numbers and the distribution expressed in percentage. The final goal is to decrease the costs while maintaining a high-quality delivery process.
9. IT: Total Tickets vs Open Tickets
The overall progress of the project is one of the top IT KPI to measure. When visualizing the overall progress in the correlation of the launch date, the management can easily spot if there are issues across the system. That's why it is also important to monitor the workload of staff and their deadlines, as displayed in the example above. Measuring the open tickets vs completed ones can set benchmarks for the project management and help in the optimization of the overall ticketing system.
10. IT: Average Handle Time
Another example from the IT project management function is the Average Handle Time of tasks. It helps in the process of monitoring planned projects, tasks and/or Sprints. By evaluating each member of the team, alongside the overall average handle time of tasks, you can easily spot if any deficiency is occurring in the system, and, therefore, adjust accordingly.
Interconnected Operational Metrics And KPIsAfter we have provided specific KPIs from industries and functions, now we will focus on a holistic overview, and how they are interconnected into an overall operational process. Let's analyze this through examples.
Marketing: Is my budget on track?
**click to enlarge**
The operational metrics and KPIs example presented on the dashboard above focuses on the marketing performance of specific campaigns on an operational level. The significance lays within the fact that this clear overview can help marketing managers and professionals to develop a comprehensive data driven marketing strategy. Changes will alert the marketing team which can then optimize the campaign and make sure the budget stays on track.
Human Resources: Is our productivity on track?
The second of our operational metrics examples we will focus on is the employee performance, shown through an HR dashboard presented below.
**click to enlarge**
This interactive dashboard example shows relevant metrics to keep under closer consideration while analyzing employees’ performance and behavior. The absenteeism rate metric should be monitored since it can affect the financial state of a business (holistic view, remember?), but, most importantly, it can provide insights into the potential causes and reasons of absence. This can be used then to improve business operation, productivity, and subsequently reduce costs.
Another interesting metric to take into account is the overtime hours. That way is easy to spot if employees are understaffed or lack training, that can also affect productivity. The main focus is not to put workers under pressure which can lead to demotivation. A comprehensive HR report can utilize all the effectiveness needed to develop and maintain a sustainable workforce in a company.
Sales: What details should I keep an eye on?
One of our operational metrics examples we will focus on next is sales. When considering the sales cycle process, it is of utmost importance to compile a succinct operations’ monitoring process to ensure all the sales stages, leading to conversions, are covered.
**click to enlarge**
Metrics shown in the example above provide operational details needed to compile a holistic overview of the sales conversion rate cycle. Leads don’t always turn into opportunities, and proposals don’t always yield wins, but the monitoring process of your metrics can easily identify if the overall performance is on track and developing as planned. The magic is in the details, and this dashboard presentation can effectively round up the data-story you need.
Compiling information into a visual narrative can help organizations decipher all the raw waves of data, since 90% of information transmitted to the brain is visual, which can then enable to connect the multidimensional relationships between operational metrics, KPIs, and make sense of interdepartmental and different organizational levels.
IT Project Management: Is my project on target?
**click to enlarge**
By gaining insights into the project management of the IT performance, this IT dashboard example above provides a holistic view of the KPIs and metrics needed to obtain a sustainable level of efficiency. The overview of the project management can deliver fast and accurate data to establish a smooth operational performance. Consequently, it will reduce costs since any changeability will be clearly visualized in this simple interactive dashboard.
Logistics: How efficient is my transportation process?
Our final example we will discuss concentrates on the logistics level of operating transportation. Monitoring the fleet efficiency on a detailed performance level – how much is on the move, and how much in maintenance, will help you collect data needed to create a sustainable strategy, or to monitor if the KPIs are on track.
**click to enlarge**
The loading time and weight viewed over a set time-frame will provide you with insights on the average amounts and controlling points of the transportation process and the efficiency you are running your operations.
To conclude, the aspects of operational metrics and KPIs, viewed from different industries, levels of operations and specific processes needed to establish a sustainable development, can be effectively managed if you set valuable indicators to track the performance of a company. It is not just about collecting data, it is also about interpreting them into the right context and organize them to complement the companies’ intelligence performance.
To put things into perspective, here are the Top 10 operational metrics from different functions and industries:
1. CPC (Cost-per-Click)
2. CPA (Cost-per-Acquisition)
3. Absenteeism Rate
4. Overtime Hours
5. Lead-to-Opportunity Ratio
6. Lead Conversion Ratio
7. Delivery Time
8. Transportation Costs
9. Total Tickets vs Open Tickets
10. Average Handle Time
To get started with your own operational data-story, try our software for a 14-day trial completely free!