Key Results Indicators (KRIs) are lagging metrics that summarize the final results of past actions, providing confirmation on whether goals were met or missed.
Primary Implication
Failure to use Key Results Indicators is a failure to use your financial statements. A wealth of valuable information is waiting to be used to identify what changes need to be made based on the results reported in your P&L Statement and your Balance Sheet.
The failure to use KRIs is like the failure to slow down and pull over because you didn’t see the Highway Patrol officer coming up on you. Nothing worse than that sick feeling when the lights go on, indicating you have to pull over.
Just like attending a sporting event is enhanced by its scoreboard, having a scoreboard for your business to realize the benefits of knowing what’s working and what isn’t in your business is how you keep everyone in your business pulling together to achieve planned results.
Overview
KRIs: The Ultimate Measure of Business Results
What are Key Results Indicators (KRIs)?
KRIs are measurements that tell you the end results of your business activities. Think of them as the scorecard for your business, showing you whether you achieved your goals.
KRIs focus on outcomes—the final results of your efforts. They measure things like:
- Revenue
- Profit margins
- Customer churn rate
- Market share
Why are KRIs Important?
KRIs help you:
- Assess performance: See how well your business is doing overall.
- Identify trends: Spot patterns and make predictions about future performance.
- Make strategic decisions: Use data to inform your long-term plans.
- Drive improvement: Identify areas where you need to make changes.
KPIs vs. KRIs
KPIs (Key Performance Indicators) track the actions that lead to results, while KRIs track the results themselves. Both are essential for effective business management.
The Power of Regular Review
One key difference between profitable and unprofitable businesses is how they use their financial statements. Profitable businesses regularly review their Profit & Loss (P&L) statements to track KRIs and identify areas for improvement.
KRIs and Your P&L Statement
A quick monthly review of your P&L statement, focusing on key KRIs, can reveal a lot about your business performance. KRIs can help you assess how effectively you’re:
- Getting work: Attracting customers and generating sales.
- Doing work: Delivering products or services efficiently.
- Enabling work: Supporting your operations and employees.
