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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 in 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 that a business can use for its own development. We will discuss marketing, retail, human resources, sales, logistics, IT project management, and customer service examples that can grow operational efficiency and decrease costs. But first, let's begin with a general understanding of key metrics and their usage in business.
What Are Metrics And Why Are They Important?
Business metrics are used to evaluate performance, compare results, and track relevant data to improve business outcomes. They are commonly used by operations managers, strategic leaders, financial professionals, or analysts to tackle insights and improve performance. In essence, they can learn from historical data and adjust for present and future operational and strategic performance.
To understand what is a metric, it's important to keep in mind that they come in many varieties, depending on the industry or function where they are needed. In other words, 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 to gain sustainable success and maintain its competitiveness in the market.
In practice, that means that executives will focus on strategic performance and longer time periods of analysis while operational efficiency metrics and KPIs have a focus on shorter periods.
A metric is important for multiple reasons; it helps professionals and leaders to optimize online analysis, monitor closely day-to-day business management, and see where the team stands in terms of reaching and exceeding business goals:
- They reveal the true state of your performance: As we mentioned, performance is one of the pillars of succeeding in our cutthroat business environment, and you need to identify what works and what doesn't. By setting operational performance measures, you will know what is happening at every stage of your business.
- They help in making the right decision: To ensure positive business results, data-enabled decisions are critical. What are key metrics in this case enabling - is an environment that focuses on making the right decision at the right time since they will present the data, and help you derive insights.
- They help you monitor your financial health: To safeguard the financial performance of your company, monitoring financial metrics is essential. Every business needs to focus on finances, and by doing so, you will have the opportunity to keep your cash flow steady and sustainable.
- They keep your operations on schedule: While some metrics examples focus on strategic initiatives, as we mentioned, they will also help you in measuring day-to-day or weekly activities, which, in turn, will help you in keeping your operations on schedule and optimize them to improve results. Operations KPIs are the backbone of any successful business, and you need to focus on them to ensure sustainable business development.
We have expounded on the meaning of metrics, but let's examine this last notion in more detail through the operational metrics definition, examples, and key takeaways.
What Are Operational KPIs?
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.
For example, retail KPIs that fall under operational, such as the order status which we will cover in more detail later in the article, are critical to monitor daily since you will have deeper insights into a real-time update on the different status of your order - is it shipped, canceled, received or still in the packaging process. Depending on the industry and function, you will want to track the right KPI at the right time.
Top 16 Operational Metrics Examples
While there are a number 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 relation to other important operational metrics. Below in the article, you can find a holistic overview of different kinds of KPIs that are used in 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.
This is one of the KPIs for operations that can directly affect the general well-being of your company and it makes sense to compare with historical data to evacuate whether the absenteeism rate is specific for one department or the company as a whole. That way, you will be able to incorporate measures and improve the overall situation.
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?).
This is one of the metric examples that can also help in recruitment processes since you will know what kind of atmosphere is present in the company and use this as an argument for hiring negotiations with potential candidates. If you want to tackle deeper into HR topics, you can read our comprehensive guide on recruitment metrics.
5. Retail: Order Status
In retail, every order counts and that's why it's important to track during shorter periods the status of your orders, whether it's shipped, received, in the packaging process, or canceled. This kind of ad hoc analysis will tell you whether you risk customer complaints if they never received their package, or if you need to push up your supply chain game. In case of slow processing, you will immediately know which part of your chain needs further adjustments and whether you need to expand your business in case you don't have the operational means to follow the high amounts of orders. This is one of the operating metrics critical for ensuring your customers are satisfied but it also gives you an idea of whether your business is growing and if you need further assistance. Keep in mind that in case of growing orders, you should be able to see revenue growth as well, and then connect these operations KPI with strategic ones.
6. Retail: Sales by Region
One of the operations metrics essential to establish great sales processes, the total sales by region will help you determine which locations have the best performance. This is one of the operational excellence metrics that should be tracked both on an operational and strategic level since it's important to know whether your sales activities bring results or you need additional adjustments. But let's focus on operations.
If you track this operation KPI in shorter time periods such as daily or weekly, you will have an idea of how your specific campaigns are doing and whether they continue bringing positive results. Moreover, your sales managers will have better chances to optimize their future targeting and deliver better performance. Speaking in more detail, you will have the possibility to evaluate which locations perform the best, where your products are considered most valuable and compare between locations to understand what works and what doesn't. For example, if you see a certain spike on Fridays across different states, you can investigate further and see if you can implement the same strategies in other locations as well. Keep in mind the differences and particularities of each location.
7. 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. To fully understand operational performance indicators in sales processes, you can take a look at our comprehensive article on sales graphs and charts.
8. 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 and your target metric needs additional adjusting.
9. 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. This is an important performance metrics template that you can incorporate into your logistics operations to ensure the best possible performance of your company and establish a lucrative rapport with your customers.
10. Logistics: Transportation Costs
All the costs related to the transportation process can be seen in the 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, a critical component of successful logistics analytics process optimization. The final goal is to decrease the costs while maintaining a high-quality delivery process. Industrial operational metrics such as the logistics ones will help you determine the health of your supply chain, transportation, and warehouse performance.
11. 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 one of our key metrics examples 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.
12. 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. This is one of the metrics examples that are critical for project managers as well as the whole team since you will have details about how well people assigned to the project handle their workload.
13. Manufacturing: Production Volume
The first manufacturing KPI example for operational metrics is the production volume. This metric gives you an overview of what your factories are able to produce in one month, semester, or year, depending on the data you need to visualize. By tracking this operational KPI you can understand if a machine is underperforming and slowing your production processes or identify which machines are performing in the most efficient way and plan your production strategies accordingly. A good benchmark for your production volume should satisfy demand but don't leave a lot of inventory in stocks.
14. Manufacturing: Production Downtime
Next, we have the production downtime. This is one of the most relevant operational metrics to track in the manufacturing industry as a production downtime means your business is making less money. To keep your downtimes as low as possible, you need to constantly monitor the performance of your machines and find any inefficiencies before they become bigger problems. Your production downtimes can also be scheduled in order to prevent any surprises that affect the overall production process.
15.Logistics: Picking Accuracy
Next in our list of operations metrics aims to monitor the percentage of orders picked without errors from your total number of orders. And it is calculated with this simple formula: (Total orders – Returns due Wrong Item) / (Total orders). This is an important metric to track since a low picking accuracy means your customers will receive the wrong item and be unsatisfied with the service offered by your company. For this reason, you should always have in place picking strategies that will also save costs in relocating wrong shipped items.
16. Pick & Pack Cycle Time
Last but not least in our operational KPIs is the pick & pack cycle time. This logistics metric monitors the time it takes an employee to pick and pack and order from the time an item is picked from the shelf to the time it is packed and ready to be shipped. In the example above we see that the cycle length is tracked in 3 different lines of work based on a target of last month’s performance. Tracking each line of work separately enables you to implement different picking and packing strategies on each line and test which one is most time-efficient.
Interconnected Operational Metrics And KPIs
After 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?
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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 makes 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.
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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 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, which 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.
Retail: How is my online sales performance?
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Our next example was created with retail analytics software and it focuses on online sales. Full of operational metrics, this visual tool gives you an overview of aspects such as your total orders for a year, paired to a perfect order rate so you can assess the success of your entire sales and delivery process. A lower perfect order rate, means your customers are facing issues at some point in their ordering process affecting your business reputation.
Paired to this, you get other retail metrics related to returns and top-selling items. On one hand, taking a deeper look into the reasons for returns can help you spot any inefficiencies in your processes and tackle them to avoid unhappy customers and extra costs. And on the other hand, having a clear understanding of your top-sellers can help you plan inventory according to the expected sales and plan publicity strategies to take advantage of the hottest selling products.
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.
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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 the human brain can process visuals 60.000 times faster than numbers, which can then enable to connect the multidimensional relationships between operational metrics, KPIs, and make sense of interdepartmental and different organizational levels.
Logistics: How efficient is my transportation process?
The next example that 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 is in maintenance, will help you collect data needed to create a sustainable strategy, or to monitor if the KPIs are on track.
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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.
IT Project Management: Is my project on target?
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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.
Customer service: How is my team performing?
The team's performance in a customer service setting is critical in delivering business growth for companies that want to survive in our competitive economy. The importance of understanding what are metrics in business, especially customer service, lays within the ability to react swiftly, access information immediately, and that each person has the right information at the right time. That's why a customer service dashboard is a critical tool in assessing multiple touchpoints of sales, orders, and overall operational performance metrics.
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Such business intelligence dashboards empower teams to have a clear overview of the most important metrics for operations managers and streamline resolutions and response time. From essential data metrics such as the first call resolution, unresolved calls, response time by weekday, and best day to call, operational teams have the power to monitor and optimize their processes in order to increase customer satisfaction levels.
Manufacturing: Ensure an efficient production process
In the manufacturing industry, operational efficiency is key. Getting a bigger picture of metrics such as the production volume paired to the quantity order and your machine's capabilities can help you understand how prepared you are to face your production goals and implement strategies to be as productive as possible.
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Inefficiency is the biggest enemy of a manufacturing business, for this reason, monitoring these operational metrics together in a professional manufacturing dashboard can help you optimize processes, spot any hidden trends or inefficiencies and keep everyone in the business informed about the status of production. Next to all the production metrics, this dashboard also tracks the returned items by reason, this will help you delve deeper into the causes and find solutions to lower the number of returns and save significant costs on dealing with damaged items.
Logistics: How efficient is your picking & packing process?
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Our final example is a logistics dashboard that focuses directly on the operational efficiency of the picking and packing process. With operational KPIs divided into 4 big categories of financial, effectiveness, utilization, and quality, this dashboard gives you a bigger picture of the performance of all relevant areas related to orders processing.
On one hand, tracking metrics like the use of packing materials or the costs of return can help you implement strategies to keep costs at a minimum. On the other hand, tracking the equipment utilization as well as the pick and pack cycle length will help you find any inefficiencies that might be affecting productivity and find efficient solutions in time. In the long run, you will be able to optimize all relevant processes and lower your costs while still delivering a quality service.
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 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 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 and professional operational reporting tools, companies can leverage more data and acquire insights needed for success. To successfully define metrics, we will focus on 16 examples and show what does a metric report looks like on an operational level.
Metrics Meaning In Business - Key Takeaways
We have presented the key metrics definition, focused on operations management metrics, and delivered visual examples followed by their interconnectivity in certain use cases. Now you have the means to select from multiple examples of metrics, adjust based on your function in a company, and create an operational metrics dashboard that will contain all important information to generate long-term business success.
By collecting the right data, visualizing, taking advantage of real-time updates, and sharing insights with relevant stakeholders, each member of the team has the opportunity to outperform their goals, immediately act on inefficiencies, and establish a positive, data-driven culture that will benefit the company as a whole. A KPI for operations manager is an invaluable tool that will ensure the operating level of a business is functioning in a healthy way, and each part of the business puzzle has the means to monitor, analyze, evaluate, and generate actionable insights. That way, the company can grow, the team can know exactly what to focus on, and the results such as increased productivity and efficiency will follow.
To conclude, the aspects of operational metrics and KPIs, viewed from different industries, levels of operations, and specific processes needed to establish 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 in the right context and organize them to complement the companies’ intelligence performance to deliver positive results and growth. To successfully define metrics, you need to take a closer look into your business, and
To put things into perspective, here are the top 16 operational metrics from different functions and industries:
- Overtime Hours
- Absenteeism Rate
- Order Status
- Sales by Region
- Lead-to-opportunity ratio
- Lead conversion ratio
- Delivery Time
- Transportation costs
- Total tickets vs open tickets
- Average Handle Time
- Production Volume
- Production Downtime
- Picking accuracy
- Pick & Pack cycle time
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