Achieving strategic objectives in any organization is highly dependent upon defining and monitoring critical measures of business performance: marketing results, pipeline and backlog trends, costs and employment trends.
“By defining the key performance indicators that relate to critical elements of the corporate strategy, management teams can ensure the timely identification of issues impacting the achievement of objectives as well as the timely development and execution of contingency plans needed to meet those objectives,” says James M. Pippis, a director in the Audit & Accounting Group at Kreischer Miller.
Smart Business spoke with Pippis about how companies can use business analytics to achieve strategic objectives.
Why are analytics important to a business?
The days when executives could make decisions based solely on instinct are gone — today’s business environment is simply too complex, dynamic and competitive. The data contained in traditional financial statements is often stale by the time it is disseminated or omits nonfinancial metrics that might help paint a clearer picture of causes and effects.
The identification and monitoring of key performance indicators can help management teams gain access to the real-time data necessary for rapid responses. When properly constructed, the resulting information not only mitigates risk, it can also provide companies with a competitive advantage. For example, there are many companies that have achieved substantial increases in revenue and profits by rapidly refining marketing efforts based on the results of real-time monitoring of customer response rate metrics.
How can companies implement effective analytical techniques?
The first step is the development of a business plan or strategy. Next, key performance indicators associated with critical objectives must be identified. If these metrics are not evident, analysis of third-party industry research or consultation with outside advisers can help companies select meaningful measures of business performance.
After identifying these metrics, it is important to determine whether the current infrastructure facilitates timely and accurate reporting of these measures and, if not, implement processes to address this problem. Finally, management teams must determine which decision-makers within an organization will get the data and create formal reporting mechanisms to make sure the information gets to the right people at the right time.