“Every line is the perfect length if you don’t measure it.”
― Marty Rubin
If you don’t have any data it’s very difficult to pursue objective moves. Without data, it stands to reason that every decision becomes emotional and reactive. Every business, especially professional practices, will have difficulty managing without measuring against the industry’s key performance indicators.
Using Key Performance Indicators (KPI’s) is the difference between growing a business by design versus a business by default. A business by design has control over performance despite uncontrollable circumstances. A business by default simply reacts to the uncontrollable circumstances, which often leads to failure.
I love what Marty Rubin says about every line being perfect if you don’t measure. How will you know if you are making progress towards fulfilling your purpose if you don’t measure and have tangible references for success and failure?
In other words, if you don’t measure your progress, it doesn’t much matter where you are headed. It’s just like the scene from Alice in Wonderland when Alice asks the Cheshire Cat which way she should go. The Cheshire Cat says it depends on where she wants to get to, but Alice says she doesn’t care. Do you remember the Cheshire Cat’s response? He says, “Then it doesn’t much matter which way you go.”
I have two methods to measure performance–Benchmarks and Trends
The benchmark measurement is compared to a specific performance standard. These types of measurements can either be evaluated as a dollar amount or as a percentage. Wages are a great example. You create a specific monthly budget for wages that you benchmark or measure your wages as a percentage of revenue, for example no more than 25%. Wages will include all bonuses, benefits, incentives and payroll (salaried and hourly, regional variations apply).
Trend performance measures are tracked over time and are used to compare different time periods. These measures tell you how well your business is improving or identify areas that need attention. When you look at your bank statement at the end of the month and you don’t have enough money left over to do payroll, you probably ought to take just a weekend to determine where all this money is going so you can make a course-correction.
Here is a list of just a few important Key Performance Indicators you should measure in your practice: