December 12, 2011 at 1:23 PM

Key Performance Indicators (KPIs) are a quantitative measure of the critical success factors (CSFs) in a business.

Here's a way for you to determine some of your different types of KPIs:

CSF based KPIs

Once you have identified your CSFs, you'll need to determine what KPIs you will use to measure those processes, eg. Cash Flow will inevitably be one of your CSFs.

Some KPIs for Cash Flow may be ‘days in receivables’ or ‘receivables turnover’. You may balance this with a KPI for the number of clients lost due to aggressive collections polices. Gross Sales will inevitably be another.

In this case you may want to balance this KPI with your KPI that measures gross and net margins.

Sub-System KPIs

For each of the processes you have identified as CSFs and determined appropriate KPIs for, there will be sub-systems.

For instance, a sub-system to your sales process may be generation and conversion of leads.

For each of these sub-systems that directly impact the CSF system, you will invariably develop KPIs. In this example, your sub-system KPIs might be ‘leads generated’, ‘conversion ratio’, or ‘average cost per sale’.

You will want to go through the same scrutinising process with KPIs as you did with the CSFs, as there’s no point in doing well that which shouldn’t be done at all!